What Is an Admeasurement Contract?
An admeasurement contract is a type of construction contract where the contractor is paid based on the actual quantities of work performed, rather than a fixed price agreed upon at the outset. This falls under the broader umbrella of contract law and is particularly common in civil engineering projects where the exact scope of work may be uncertain at the time of tendering. In an admeasurement contract, rates for different work items are established, typically through a Bill of Quantities or a Schedule of Rates, and then applied to the quantities of work physically measured during or after construction. The final contract sum is therefore determined by measuring the completed work.
History and Origin
The concept of admeasurement contracts has deep roots in large-scale infrastructure and engineering projects, where unforeseen ground conditions or project complexities make precise upfront cost estimation challenging. The term "admeasurement" itself is believed to have originated from the measurement clauses found in the Conditions of Contract published by the Institution of Civil Engineers (ICE). These clauses were designed to account for the difference between the initially anticipated quantities of work and the quantities ultimately carried out.4 This approach acknowledges the inherent uncertainties in projects like excavation, tunneling, or road construction, allowing for a flexible payment mechanism that adapts to the realities encountered during project execution.
Key Takeaways
- An admeasurement contract bases payments on the actual quantities of work completed.
- It utilizes pre-agreed rates for various work items.
- This contract type is frequently employed in civil engineering and infrastructure projects where initial quantities are difficult to ascertain precisely.
- The final project cost is not definitively known until the work is measured.
Interpreting the Admeasurement Contract
Interpreting an admeasurement contract involves careful attention to the agreed-upon rates and the methodology for measuring completed work. Unlike a lump sum contract where the total price is fixed, an admeasurement contract requires ongoing measurement and valuation. The contractor submits invoices based on the quantities of work executed at the agreed rates, which are then verified by the client or their representative, often a quantity surveyor. This continuous assessment means that the final project costs can fluctuate from initial estimates, necessitating robust project management and regular reconciliation.
Hypothetical Example
Consider a hypothetical road construction project where a regional government enters into an admeasurement contract with a construction company for excavating and laying a new road. Due to geological uncertainties, the exact volume of rock excavation required is unknown at the outset.
The contract specifies a unit rate of $50 per cubic meter for rock excavation and $30 per cubic meter for earthmoving. Initially, engineers estimate 10,000 cubic meters of earthmoving and 2,000 cubic meters of rock excavation.
During execution, it is discovered that only 9,000 cubic meters of earthmoving are needed, but 3,000 cubic meters of rock excavation are actually performed.
The calculation for the excavation portion would be:
- Earthmoving: (9,000 \text{ m}3 \times $30/\text{m}3 = $270,000)
- Rock Excavation: (3,000 \text{ m}3 \times $50/\text{m}3 = $150,000)
The total payment for excavation would be ( $270,000 + $150,000 = $420,000 ). This demonstrates how the actual measured quantities, rather than the initial estimates, dictate the payment, allowing for flexibility in managing unforeseen ground conditions. This mechanism helps manage some aspects of financial risk for the contractor.
Practical Applications
Admeasurement contracts are widely used in sectors where the precise scope of work can only be determined as the project progresses. They are particularly prevalent in publicly funded infrastructure developments, such as road building, bridge construction, and utility installations. Government agencies, for instance, often engage contractors through frameworks that utilize this payment model, allowing for flexibility in addressing unpredictable site conditions. The U.S. General Services Administration (GSA) provides resources and guidance on various aspects of government contracting, which can include admeasurement principles for certain types of projects.3 This contract type enables effective procurement in scenarios where full design details are not available at the tender stage, which is common in many large-scale construction management endeavors. International bodies like FIDIC also incorporate admeasurement principles in their standard contract forms for engineering and construction works.2
Limitations and Criticisms
Despite their utility in uncertain environments, admeasurement contracts are not without limitations. A primary criticism is the inherent price uncertainty for the client, as the final cost is not known at the commencement of the project. While initial estimates are provided, the final payment can differ significantly based on the actual measured quantities. This can lead to increased contract administration effort, as frequent measurement, valuation, and agreement on variations are required throughout the project lifecycle.1 There is also a potential for disputes if the measurement methods are not clearly defined or if there are disagreements over the interpretation of the work performed. While providing flexibility, this structure can introduce complexity in contract negotiations and increases the administrative burden on both parties to meticulously track and verify quantities, impacting overall risk allocation.
Admeasurement Contract vs. Lump Sum Contract
The fundamental difference between an admeasurement contract and a lump sum contract lies in how the contractor is paid.
An admeasurement contract involves payment based on the actual quantities of work executed, with pre-agreed unit rates for each item. The total price is variable and determined by the final measurement of work. This approach is favored when the exact scope of work is difficult to define at the outset, as is often the case in underground works or projects with unpredictable site conditions.
Conversely, a lump sum contract fixes the total price for the entire scope of work upfront. The contractor agrees to complete the project for a single, predetermined amount, regardless of minor variations in quantities, assuming the scope remains unchanged. This contract type provides greater cost certainty for the client but places more quantity risk on the contractor. Confusion often arises because both contract types typically use a Bill of Quantities during the tendering phase. However, for a lump sum contract, the Bill of Quantities serves primarily as a basis for the contractor to arrive at their fixed price and is not usually re-measured for payment unless significant changes in scope occur.
FAQs
Q1: When is an admeasurement contract most suitable?
An admeasurement contract is most suitable for projects where the precise quantities of work cannot be accurately determined before construction begins. This often includes complex infrastructure projects like tunnels, earthworks, or drainage systems where underground conditions are uncertain.
Q2: Who bears the risk of quantity variations in an admeasurement contract?
In an admeasurement contract, the client typically bears the risk of quantity variations. If the actual quantity of work is more than estimated, the client pays more, and if it's less, they pay less. The contractor's unit rates are usually fixed, shifting the quantity risk to the client while the contractor assumes the risk of performing the work at the agreed rates. This is a key aspect of risk management in such projects.
Q3: How is payment typically made in an admeasurement contract?
Payment is usually made through periodic valuations. The contractor measures and submits invoices for the work completed during a specific period (e.g., monthly). These measurements are then verified by the client's representative, and payment is processed based on the agreed unit rates and the verified quantities. This process necessitates accurate record-keeping and mutual agreement on project costs.
Q4: Are admeasurement contracts common in all industries?
While admeasurement contracts can be adapted, they are predominantly used in the construction and civil engineering sectors, particularly for large, complex projects where the full extent of the work is difficult to foresee. They are less common in industries where the output or service can be precisely defined and costed upfront.