A financier may instruct a Quantity Surveyor to prepare an Initial QS Report prior to funding. Elemental Quantity Surveyors follow the financier’s brief, certify the cost to complete, and comment on any risks associated with the project. The Quantity Surveyor may request the following documentation to complete the report and provide the bank with a better understanding of the project and its associated risks.
Architectural & Engineering Drawings (Consented)
The financier's QS brief requires the QS to prepare a detailed construction cost estimate for the proposed development to ensure the documentation is sufficient to allow the contractor to submit a price. We also ensure the contract sum is sufficient to complete the works.
Specifications (Contract Set)
We confirm whether the construction materials specified in the documentation and contract of sale or lease agreement align with the allowances made within the builders tender submission, and that the documentation is sufficient to allow the builder to submit an accurate price.
Building Contract
One of the most important documents is the construction contract. We review the executed construction contract and comment on the suitability of the agreement. We provide feedback on specific clauses in the contract, including the contract sum, programme, deposits, security (bonds or cash retention), early completion bonuses, delay damages, liquidated damages, cost fluctuations, and more. This contract must be executed prior to the first progress drawdown report. We recommend that a Tripartite Agreement be completed to give the financier step-in rights to the contract in the event the developer is unable to complete the project.
Construction Program (If Available)
Depending on the value of the contract sum and the type of project, we would expect to see a construction program with clear commencement and practical completion dates. This assists us in monitoring the progress on site each month and commenting within future progress reports. Typically, we allow a one-month contingency in the program to account for unforeseen delays.
Builder’s Cost Trade Summary
At Elemental Quantity Surveyors, we compare our construction cost estimate with the builder’s trade summary. This cost comparison allows us to identify and inquire about trades that differ significantly from our estimate. In our experience, some builders are aware that the terms of the contract do not allow for deposits or offsite materials. In the past, we have seen builders inflate their earthworks and substructure packages in order to ease their cash flow and cover deposit payments to their subcontractors/suppliers. While we understand that subcontractors may request deposits, we do not recommend paying for offsite materials, as this represents prepayment for work not yet completed and exposes the financier to additional risk should the builder be unable to finish the project.
Trade Lettings Schedule
If the developer is also the builder, we will review a trade lettings schedule to confirm that the percentage of trades let is reasonable, depending on the stage of the project (e.g., before site commencement, we would expect to see earthworks, slabs, services, windows, and carpentry trades let). This varies from project to project. We understand that in the current market, some subcontractors may not submit a fixed-price quote for works that may not commence for six months, and our commentary may reflect this.
Resource Consent & Building Consent
Our QS report comments on the resource consent and building consent. We are required to confirm that consents have been issued for construction and to review all mandatory inspection stages from the council and your consulting engineers. We monitor inspection reports throughout the duration of the project and ensure that the required documentation is appended to our reports. We do not recommend payment for restricted building work that has not been consented by the council.
Consultant Professional Indemnity Insurance (Certificates of Currency)
We confirm that all relevant consultants (architect, structural engineer, civil engineer, services engineer, geotechnical engineer, building surveyor, engineer to the contract) hold current professional indemnity insurance policies with adequate coverage. The construction contract may specify the required insurance limits for these consultants. We monitor insurance policies throughout the duration of the project and provide updates in future progress reports.
Certificates of Currency for Builder’s Insurances
This includes contract works insurance, public liability, motor vehicle insurance, plant and equipment insurance, etc. The Quantity Surveyor is required to confirm that the builder’s insurance policies are current before the first drawdown. We recommend that the contract works policy be site-specific, name the financier as an interested party, and cover the full contract sum. We also monitor the insurance policies throughout the duration of the project and provide updates in future progress drawdown reports.
Geotechnical Report
The geotechnical report is an important document for a Quantity Surveyor. We carefully review the geotechnical engineer’s report to identify any rock, soil contamination, or groundwater issues on site. For example, if rock is encountered, we confirm what allowances the builder has included for breaking up, excavating, and removing the rock. In the event no allowances have been made, we will request a schedule of rates for any variations related to latent conditions, to be used if such variations arise.
Land Surveyor’s Title Boundary Survey
We will request a survey and/or statement from the land surveyor confirming that the proposed building has been designed within the title boundary and does not encroach on neighboring properties.
Development Costs
Development costs play a crucial role in determining the total cost to complete. Depending on the financier's requirements, we may require a breakdown of any costs outside the building contract, including acquisition costs, professional fees, statutory fees, authority fees, legal fees, holding costs, marketing and sales commissions, and any works outside the contract sum (e.g., landscaping, swimming pool, client-supplied items).
Valuation Report
If the bank requires a valuation report, we will review it and compare it with the information we have received. We will confirm whether the valuation report aligns with the design documentation used to prepare our report.
Pre-sales / Lease Agreement
If finance is contingent upon pre-sales or lease agreements, we will review the agreement—similar to the valuation report—and comment on sunset clauses, specifications, and other information to ensure they align with the builder’s scope of works. Should you have any queries, don't hestiate to contact Elemental Quantity Surveyors Christchurch at daniel@elementalqs.co.nz or +64 20 493 6595.
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