Measurement Contracts in Construction

Introduction

In the dynamic landscape of construction procurement, measurement contracts—also known as remeasurement contracts or measure-and-value contracts—represent a flexible and pragmatic approach to project delivery. Unlike lump sum contracts where the price is fixed at tender stage, measurement contracts allow for payment based on the actual quantities of work executed, making them particularly valuable when project scope uncertainty exists or when ground conditions cannot be fully assessed beforehand.

For quantity surveyors, understanding the nuances of measurement contracts is essential, as they play a pivotal role in accurate measurement, valuation, and cost control throughout the project lifecycle. This article explores the fundamental principles, applications, and best practices associated with measurement contracts in modern construction.

What Are Measurement Contracts?

A measurement contract is a procurement agreement where the contractor is compensated based on measured quantities of work completed, rather than a predetermined lump sum. The contract typically includes:

• Bill of Quantities (BoQ): A detailed schedule of measured work items with descriptions and estimated quantities
• Unit Rates: Agreed prices per unit of measurement for each work item
• Remeasurement Provisions: Procedures for measuring actual work completed
• Variations Mechanism: Framework for incorporating scope changes

The final contract sum is determined by measuring the actual work executed and applying the agreed unit rates, with adjustments made for any variations from the original scope.

Key Characteristics

1. Quantity-Based Pricing

Payment calculations are derived from actual measured quantities multiplied by pre-agreed unit rates, providing transparency and accuracy in cost determination.

2. Flexibility in Scope

The contract accommodates design development and unforeseen conditions without requiring extensive contract amendments, making it ideal for complex or evolving projects.

3. Risk Allocation

Quantity risk typically rests with the client (as they pay for actual quantities), whilst rate and productivity risks remain with the contractor. This balanced risk distribution can lead to more competitive pricing.

4. Role of the Quantity Surveyor

QS professionals are integral to measurement contracts, responsible for preparing the BoQ, conducting interim and final measurements, valuing variations, and certifying payments.

Common Applications of Measurement Contracts

Measurement contracts prove particularly advantageous in the following scenarios:

1. Civil Engineering and Infrastructure Projects

Examples: Motorway construction, bridge works, drainage systems, earthworks

These projects often involve significant ground-related uncertainties. Exact excavation quantities, rock classification, and foundation requirements may only become apparent during construction. A measurement contract allows for accurate payment based on actual conditions encountered, protecting both parties from the risks of over or under-estimating quantities.

2. Building Refurbishment and Renovation

Examples: Historic building restoration, commercial building retrofits, structural strengthening

Refurbishment projects frequently uncover hidden structural issues, asbestos, deteriorated materials, or unforeseen complications once intrusive works begin. Measurement contracts provide the flexibility to address these discoveries without protracted contract negotiations.

3. Enabling and Groundworks Packages

Examples: Site clearance, demolition, contaminated land remediation, utility diversions

Early-stage construction activities often face uncertainties regarding existing services, ground conditions, and extent of required works. Measurement-based pricing ensures contractors are fairly compensated for actual work required.

4. Repetitive or Linear Projects

Examples: Road resurfacing programmes, pipeline installation, fencing works, landscaping

Projects with repetitive elements over variable distances or areas benefit from measurement contracts, as unit rates can be efficiently applied to measured lengths, areas, or volumes.

5. Design-and-Build Projects with Evolving Scope

Examples: Fast-track commercial developments, design-build infrastructure

When design development continues during construction, measurement contracts provide a mechanism to accommodate design changes and refinements without constant contract renegotiation.

6. Projects with Client-Driven Changes

Examples: Retail fit-outs, bespoke residential construction, tenant improvement works

Where clients require flexibility to modify specifications, finishes, or layouts during construction, measurement contracts simplify the process of valuing and incorporating these changes.

Advantages of Measurement Contracts

For Clients

• Transparency: Clear visibility of what is being paid for through detailed measurement
• Flexibility: Ability to make changes without major contract disruptions
• Accuracy: Payment reflects actual work completed rather than estimates
• Competitive Tendering: Contractors can price with confidence when quantity risk is reduced

For Contractors

• Fair Compensation: Payment for actual work executed eliminates quantity estimation risk
• Cash Flow: Regular interim valuations based on measured work support project financing
• Risk Mitigation: Protection against unforeseeable quantity increases

For Quantity Surveyors

• Professional Engagement: Central role throughout project lifecycle
• Value Addition: Opportunity to provide cost certainty through accurate measurement and valuation
• Variation Management: Streamlined process for pricing and incorporating changes

Disadvantages and Challenges

Cost Uncertainty

The final project cost cannot be determined with certainty until completion, which can create budgeting challenges for clients and may affect financing arrangements.

Administrative Burden

Regular measurement, verification, and agreement of quantities require significant administrative effort from both quantity surveyors and site teams.

Potential for Disputes

Disagreements can arise over measurement methodologies, classification of work items, or interpretation of BoQ descriptions.

Limited Contractor Incentive for Efficiency

Since payment is based on quantities completed, there may be less incentive to optimise work methods or reduce material usage compared to lump sum arrangements.

Best Practices for Quantity Surveyors

1. Preparation of Bills of Quantities

• Use standardised measurement methods (e.g., NRM2, CESMM4, SMM7)
• Provide comprehensive item descriptions that minimise ambiguity
• Include adequate preambles explaining measurement conventions
• Ensure quantities are as accurate as possible based on available information
• Include provisional sums and prime cost items where appropriate

2. Measurement and Valuation

• Establish clear measurement protocols at project commencement
• Conduct regular site measurements and maintain detailed records
• Use digital measurement tools and technology where appropriate
• Verify quantities with site teams and cross-reference with as-built drawings
• Prepare comprehensive measurement sheets that provide an audit trail

3. Change Management

• Implement robust variation procedures from project outset
• Ensure all variations are properly instructed and documented
• Price variations consistently with contract rates and methodologies
• Maintain a variations register tracking status and cumulative impact

4. Communication and Collaboration

• Establish regular measurement meetings with contractors
• Agree quantities progressively to avoid end-of-project disputes
• Maintain open communication regarding measurement interpretations
• Document agreements and clarifications in writing

5. Technology Integration

• Utilise building information modelling (BIM) for quantity extraction
• Implement digital measurement and valuation platforms
• Use photographic records and drone surveys for site verification
• Leverage cloud-based collaboration tools for real-time quantity sharing

Sample Measurement Contract Framework

Whilst contract terms vary based on project specifics and jurisdiction, a typical measurement contract includes:

1. Scope of Works

Detailed description of the project, including drawings, specifications, and the Bill of Quantities defining all work items and estimated quantities.

2. Contract Sum

Provisional contract sum based on estimated quantities and tendered unit rates, subject to remeasurement upon completion.

3. Measurement Methodology

Reference to applicable standard methods of measurement (e.g., NRM2 for building works, CESMM4 for civil engineering) and any project-specific measurement rules.

4. Unit Rates

Comprehensive schedule of rates covering all anticipated work items, including materials, labour, plant, overheads, and profit.

5. Interim Valuations

Procedures for monthly or stage-based valuations, including measurement protocols, certification timelines, and payment terms (typically 14-30 days from certificate issuance).

6. Variations

Mechanism for instructing, measuring, and valuing changes to the works, with provisions for:

• Valuation using contract rates where applicable
• Star rates for new work items
• Daywork rates for unmeasured work
• Adjustment of preliminaries and time-related costs

7. Final Account

Process for preparing the final measured account, including:

• Final measurement procedures and timelines
• Reconciliation with interim valuations
• Resolution of any outstanding measurement disputes
• Final account agreement and final certificate

8. Retention

Typically 3-5% retention held from interim payments, with half released upon practical completion and remainder upon final certificate or end of defects liability period.

9. Dispute Resolution

Tiered approach to resolving disagreements, potentially including negotiation, mediation, adjudication, arbitration, or litigation as appropriate.

Comparison with Other Contract Types

Understanding when to recommend a measurement contract versus alternatives is crucial for quantity surveyors:

Contract Type	Best For	Quantity Risk	Cost Certainty
Measurement Contract	Uncertain scope, ground conditions	Client bears risk	Lower at outset
Lump Sum	Well-defined scope	Contractor bears risk	High at outset
Cost Plus	Highly uncertain projects	Client bears all risk	Very low
Target Cost	Collaborative projects	Shared risk	Moderate

Conclusion

Measurement contracts remain a cornerstone of construction procurement, offering flexibility and fairness when project uncertainties exist. For quantity surveyors, these contracts provide opportunities to demonstrate professional expertise through accurate measurement, diligent valuation, and effective cost management.

Success with measurement contracts requires thorough preparation of contract documents, rigorous measurement practices, proactive variation management, and clear communication between all parties. By applying best practices and leveraging modern technology, quantity surveyors can ensure measurement contracts deliver value and minimise disputes.

As the construction industry continues to evolve with digital tools, BIM integration, and collaborative procurement approaches, the fundamental principles of measurement and valuation remain as relevant as ever. Quantity surveyors who master measurement contracts position themselves as indispensable advisers in delivering successful construction projects.

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About the Author
This article was prepared for quantity surveying professionals seeking to enhance their understanding of measurement contracts in contemporary construction practice.

Further Reading

• RICS New Rules of Measurement (NRM2)
• Civil Engineering Standard Method of Measurement (CESMM4)
• JCT Standard Form of Building Contract with Quantities
• ICE Conditions of Contract Measurement Version