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Introduction Of Star Rates
Star rates play an important role in the construction industry as they enable proper assessment and settlement of variations in a project. In a unit price contract, a bill of quantities (BQ) provided by the employer’s consultants includes the estimated quantities, and the contractor a unit rate or unit price for each work included in the bidding stage, forming the total contract price. quotes.
During the execution of the works, the Engineer jointly measures and verifies the actual quantities for interim payment purposes. However, any variation from the original works or additional works, the rates of which are not agreed in the initial BOQ unit price contract, should be submitted as a variation order or rate analysis for approval by engineering and the client.
These new rates quoted by the contractor are known as star rates, which are mainly used in agreements with subcontractors and rarely in the case of an entire construction project. The difference between the estimated quantity and the executed quantity depends on the complexity of the structure and the unbiased judgment and experience of the party preparing the BoQ.
Proper assessment and settlement of star rates ensures proper compensation for additional works or project changes, which are often necessitated due to unforeseen circumstances or changes in project requirements. Therefore, evaluation of variations through star rates is essential for the successful completion of any construction project.
What Are Star Rates?
Star rates are the pre-agreed rates between the engineer and the contractor for the evaluation of any indicated variation from the contract quantity quoted in the Bill of Quantities (BOQ) during the bidding stages of the contract.
In construction contracts, variations are often caused by unforeseen circumstances, changes in design or specifications, or other factors. These variations can affect the cost and timing of the project, and hence the need for accurate pricing. The BOQ is usually prepared before the start of the project and provides a detailed list of quantities and rates for all items of work.
During the execution of the project, there may need to be some changes in the BoQ quantities, which were not anticipated at the bidding stage. These changes can be additions, deletions or changes to the quantities specified in the BOQ. In such cases, star rates are used to give importance to these variations.
The star rate is generally agreed upon by the engineer and the contractor during the bidding stage based on industry standards and past experience. They are usually expressed as a percentage or a fixed amount per unit of measurement. When there is variation, engineers and contractors refer to star rates to value the work. For example, if the variation involves adding additional steel to the concrete structure, the approved star rate for steelwork will be applicable to the additional steel quantity.
The use of star rates is beneficial as it provides a transparent and straightforward way of evaluating variations. It also avoids lengthy negotiations between the engineer and the contractor, as the rates have already been agreed upon. This makes it easier to manage variations and ensure that the project stays on track in terms of cost and time.
Star Rate is a key component of construction contracts which helps in price variation from the BoQ quantity during the bidding stages of the project. They are pre-agreed rates that provide a transparent and straightforward way of evaluating variances to help manage the project effectively and avoid disputes between parties.
Detailed Explanation
Star Rates are a way of pricing work in a type of contract called a Re-Measurement Contract. In this type of contract, the drawings and scope of the work are flexible and can be adjusted during the project, which helps to reduce disputes.
A Star Rate is a special type of price that can be used in situations where the work involved in the project changes significantly. For example, if the project involves installing a machine at a certain level, but then the level is changed during the project, making the installation more difficult, the contractor can use a Star Rate to price the work. The Star Rate is based on the original unit price, but takes into account the extra difficulty of the work.
In order for a Star Rate to be accepted, it must be a fair price based on the cost of materials, labor, and other expenses. It must also be close to the standard rates used by the government or other contractors, and cannot be more than 15% different. If the Star Rate cannot be assessed or approved using these methods, negotiations can be made and the final rate must be approved in writing.
The FIDIC contract guidelines provide guidance on how to value variations in the project. If there is a disagreement on the rates, the Engineer can fix the appropriate rates and notify the contractor and employer accordingly.
Final Words
I tried to explain Star Rates in a simple way. If you have any question, please comment below.
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