Construction Tips

"PAKYAWAN" O "ARAWAN"

Hello everyone. Welcome to Tips Topics and Talks. And today we will journey a very interesting and timely topic that may be relevant to you at this particular moment.

so this is PART 1, an introduction to one of our Topic for sharing which is Pakyawan or Arawan.

So let’s get into this.

Hi everyone, Every minute of the day construction of Small to Mega Projects are going on all over the world.

In the Philippines, we are experiencing construction boom in the rural, suburban areas, and most particularly in the urban areas for a number of years now.

Project owners and contractors in all levels be it a general contractors to specialized contractors and whether it is Big construction firm or Small construction firm, get into business arrangement.

And the most popular questions, specially in applying it to small projects or on some occasions medium projects, the question of whether they will have their construction be on a Pakyawan basis ? or Arawan basis.

We thought that this is a very interesting subject to talk about. It is also good to educate others on the pros and cons of having these kinds of arrangements. And besides this is the first act prior to doing a construction project.

So, our Company, Modcontech Builders Inc., aside from being a design and construction company, we would like to share our knowledge and experiences to the public, as our form of appreciation for the trust given us.

So, if you wish to get deeper on this topic Pakyawan or Arawan please visit us at www.modcontech.com. see you there .

The word “Pakyawan” is a Tagalog word that means contractual in English. And the Tagalog ward “Arawan” means Daily in English.

These two (2) words are the two (2) most commonly used ways or methods in rendering into an agreement between two or more parties. And both methods are recognized in almost all industries, as one of the commonly best practices here in the Philippines.

There are other available instruments, ways or methods of having valid agreements by parties to get their acts together in attaining a common project.

Applying it in the building industry in the Philippines, these two methods are mostly used by the general public, amongst the other available and accepted methods of getting into an agreement. Both methods have their own advantages and disadvantages features.

The factors of successes and failures of any of these methods are dependent on many factors. Here are some few important questions to note.

Does both the project owner and the contractors know or agree on what to do?

Does the project requirement has a clear picture on how, what, who, and when to do it?

Is the project funding sufficient to sustain the project’s operation in a given and agreed time line?

There are also many other parameters which I have not mentioned but vital to the successes and failures for both “Pakyawan” or “Arawan”.

These are some reasons why projects need to have a non-bias professional advises and consultants that would make the project a success.

This topic is so rich and has multiple faucets that we can open.

I tried giving justice to the topic and had it in three (3) parts so that we are able to directly focus on each subject.

Advantages of having your project in a Pakyawan or in a contract method.

Documentation.

All information and agreements must be placed in documents. This is vital in any construction project. It is always advantageous to have those documents as crystal clear as possible to avoid other opposite interpretations that may come in.

This is the reason why we encourage parties to review, understand, and agree on all the items in the available documents, without of course maliciously keeping any vital information to each other. Because understanding the plans, specifications, commitments, obligations, roles, duties and the responsibilities will make the relationship between the project owner and the contractors harmoniously healthy from the start to the finish.

The project will surely benefit if both parties are prepared on what was written in the documents.

2. Team Work.

Team work is one of the many advantages that this method of agreement can have. Because sharing tasks with others can lighten it. We all know the burden of doing the nitty gritty of a project.

It is very challenging and stressful. In common practice, there are two (2) shared main areas in this method in doing a project.

1. The project owner’s primary task is to focus on the funding aspect and the administrative growth of the project.

2. While the contractors’ primary task is to dedicated his effort to the daily operations on implementing the design of the professionals, the quality control of the construction, the welfare of the workers and the proper management of the materials.

Through this joint efforts, all parties involved in the project would contribute to the success of the project.

3. Efficiency.

Efficiency is magically seen when players of a particular field of expertise are very knowledgeable on that field and has a small possibility of redoing it again. Efficiency is always a plus factor in a project because this saves, time, money and energy for both the project owner, the contractors and the project itself as a whole. Having said that, both parties would be able to productively focus and do other areas of concerns they need to attend to.

Disadvantages of having your project in “Pakyawan” or in contract basis.

Vagueness.

Since the contract method of agreement relies heavily on documentations, the documentation must be crystal clear on who, what when and how things are done. Without the documentation properly and accurately done and spelled out, chaos is just around the corner ready to destroy the project and the relationship of both the project owner and the contractors.

One of the reasons behind a vague, insufficient, or worst of all, having a wrong information in any of those documents is because the project owner and the contractors has written vague statements in the contract between them. Or maybe the documents provided by the professionals may have insufficient informations and details in their documents.

2. Unfamiliarity.

In many cases, both parties does not know each other well and that may make the relationship unstable. Here are some scenarios why I say that.

1. In many occasions, the contractors are recommended by others to the project owner.

2. Maybe, the project owner just happened to pass by an on-going project of the contractor and inquired,

3. Another scenario, may have accidentally bumped each other elsewhere.

This means that the element of unfamiliarity is present and that makes the relationship very vulnerable. The project owner may encounter a good salesman-contractor where the contractor has the ability to sweeten their project presentation for the upcoming project scenario and put to the mind of the project owners a bed of roses project scenario but failed to mentioned the thorns attached to the stem of the roses. If this things happens, most likelihood the project is at the brink of falling down.

On the other hand, the project owner may also not able to present to the contractor the real scenario of the proposed project where some issues are kept from the contractor.

3. Money, Money Money.

This particular item is where everything evolves, from pre conceptual to post construction. Normally, the initial payments may not be a big issue to both parties since this is just the start up, but the main issue may arise and start to widen the relationship apart between the project owner and the contractors are when both parties feel that they deserve a fairer dealing on the financial matter they invested.

If the project does not have a professional who can play the role of a non-bias middle-man between the owner and the contractors. Arguments may end up a sour relationship between the project owner and the contractors and may end up a split up relationship between the two and litigations against each other may happen.

Advantages of having it in an Arawan or Daily

Economy.

Many of the project owners are budget conscious. The project owner wanted to directly buy the materials needed for his project and pay all the labor payroll directly. They believe that once they do “Arawan” Daily method this may save them the contractors’ profit, government taxes and administrative expenses of contractors. Easily they can save as much as 25% of the cost of the contract.

2. Own Phase.

There are two (2) major areas where the project owner can take control on the phasing of the project. How fast or slow the exposure of money be given for the project. Since the releases of the budget is under the control of the project owner, the project would run on its phase on how the project owner injects their funds on it. Another area that we could see in this section is Time that the project owner would give to the project.

3. First Hand Project knowledge and Self learning.

I am so amuse by some project owners would like to put their fingers in the administration and operations of the project even their knowledge in construction is limited. I would not blame them in taking part of it because in many occasions it is their life-time savings is placed. You would see project owners supervising, buying the materials needed in the project and paying on the workers every paydays. Because after all the construction work they would like to boast that they led in the construction of their project

Disadvantages of having the construction of your project on “Arawan” or Daily.

Economy.

One of the main reasons why project owners turn to “Arawan” or Daily, is because the budget is their banner issue. In many occasions people do not realize that “Arawan” or Daily method of doing construction is very risky.

“Arawan” or Daily method should only be done by experienced construction personnels. If the management of the project is mismanaged, the result would bring the project cost more expensive than if it were a “Pakyawan” or own Contract format. There are possibilities that unexperienced project owner maybe fooled by unscrupulous entities just to get funds from the project owner. Laborers may put one over the project owner since they have little or no experience at all in managing a construction. Having said those, the desired economy would not be attained.

2. Quality Control.

Quality control is essential in all construction projects from labor and material inspections to installation, erections and construction of the materials and construction components. I must give emphasis that if the structural soundness of the project is compromised because of not being able to give importance to quality control the project is a complete failure. If the project is in “Arawan” or Daily application it is possible that the workers may cut corners in doing their work right.

3. Litigations.

Many project owner do not realize that on “Arawan” or daily basis, workers are very informal. They may leave the project owner anytime for another project. But watch out, almost all who do “Arawan” or Daily application for their working relationship with the labors, ends up on labor cases at the Department of Labor and Employment (DOLE) for not following the necessary labor laws due to the laborers. When this thing happens you might end up having a labor case.

10 EASY STEPS TO BUILD YOUR HOUSE.

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1. List down all your needed minimum “Close Spaces” and "Open Spaces" house requirements with approximate desired floor dimensions of those areas. Examples of "Close Spaces" are Living, Dining, Kitchen areas, as well as bedrooms and toilets. Examples of "Open Spaces" are Service Areas, Carport, and other essential open spaces.

2. To help you visualize and appreciate those spaces you listed down, you need a measuring tape of at least 3.00 meters or 10 feet in length. Put markers to figure out if those dimensions on each space you wanted will best suit you. These data may be given to your architect in the future, as a suggested house requirement.

3. If you don't have a property yet, scout for locations that would best address your housing needs and budget. In most cases, the budget is the strongest component in deciding where your proposed location will be. You may consider purchasing a property in a suburban area for your property if you are under a budget constraint.

4. Gather as much information as you could about housing loans, especially from those available and possible financial institutions where you could possibly avail of a housing loan. The bulk of your housing funds may come from private, commercial, or government financial institutions. Remember, you need to add your own personal funds to supplement the funding for your construction.

5. Search, consult, and commission with professional/s or building contractor/s who can complete the required documentation in getting your housing loan, government permits, and your construction plans.

6. Monitor, evaluate, and release the funds you are giving to your building contractor, especially in an "All in Contract". It is best that you ask for a weekly work evaluation of your project from your building contractor and confirmed by the professional/s you have commissioned. If you manage the construction of your house yourself, you need to monitor closely your materials and equipment you have purchased, and the labor expenses you gave.

7. During construction, try not to deviate so much from the original plans. This act may derail your budget. On most occasions, Change Orders would make the construction cost higher and this would affect your construction budget.

8. Before the building contractor turns over to you the project, ask your architect, engineers, and your building contractor/s to conduct a final inspection of the project and come up with a punch list on what are the things the building contractor needs to substantially complete.

9. Once the items listed in the final official punch are completed and turned over to you all construction documents such as the as-built plans, signed and sealed by all professionals involved in your project, the construction logbooks, and other construction documents, you can now pay in full the professional fees and the balance due to the building contractor/s. Note that retention may be applied depending on what is stated in the contract/s

10. Ask your architect, engineers, or building contractor/s to help you obtain the Certificate of Occupancy from the government agency.

HOUSE vs CONDOMINIUM

This article is very timely for those who are at the point of considering buying a house or a condominium. This action you are about to undertake may probably be one of the most important undertakings you will enter in your entire life. In a situation like this, it is always advisable to have an “Open Mind Approach” before making a big decision like this.

Before we get into the meat of the matter, allow me to share with you the Three (3) L’s before making a big decision, these may help you.

Look at all available data at hand,
Listen to sound and fair advice, and
Lay down fairly all the pros and cons of the subject.

In a nutshell, information, facts, and data gathering of the property must be collated and evaluated properly, based on the following:

Your housing design criteria
Your housing financial status.

Remember that buying real estate is a major decision in which all elements must be studied and considered before taking any action. This is a major decision you are about to make. Normally, this kind of decision may involve your lifetime savings, therefore you need to consult this with the people that would give you sound advice.

The big question, do I see myself staying happily in a HOUSE or a CONDOMINIUM?

The old housing mindsets of every Filipino family in the past, whether they are in the urban areas or in the rural areas, would dream of having their own residential house on a spacious lot because they wanted to do some small gardening work someday when they retire. But nowadays, an introduction of the western style of living had shifted the mindset of Filipinos, where the condominium-style of living rose dramatically.

Here are major points to consider when constructing or purchasing a place to stay.

1. Budget. The budget of your housing needs is the most important element in identifying your housing needs. Your financial status will determine the size and where your proposed housing be. In both situations, constructing a house or buying a condominium, you may need a financial institution to finance your project. In addition, your paying capacity and your required equity on your project play a big role in this.

2, Location. People normally say that location, location, and location are the three (3) most important components in finding a place to stay. We'll most of the time it really matters. But the budget may suppress this saying. Normally, when identifying a place to stay, it should be near your workplace or any of your relative's places, has transportation accesses, and relatively safe and secure.

3. Housing requirements. You need to identify your housing requirements based on your way of life or you are willing to change your lifestyle base on your budget and location. It is ideal to have at least a small Living, Dining, Kitchen, service areas, which may be integrated into one but a bedroom is a must. Those sizes and specifications are primarily dependent on your budget and the kind of housing you will have.

Condominiums are housing units stacked vertically, depending on the height of the building. The facade of the building is designed by the developer. It has common areas that are used to access the housing units. The ownership of the condominium unit is indicated on a condominium title. Every condominium normally has monthly condominium dues aside from your housing monthly amortization if you got it through a housing loan.

Houses are on a piece of property with the required setbacks. House may be constructed in Bungalow, Duplexes, Townhouses, or Row Houses. The number of storeys may be dependent on your budget ad your housing requirement. Normally, the facade of your proposed house is based on your likings. When your property is located outside a subdivision you have no monthly homeowner's fee, not unless you are inside a subdivision.

In summary, choosing a place to stay for you or for your family, whether it be a house or condominium you were able to study and evaluate them well base on your housing requirement. And finally thank God for the shelter He has given you and your family.

HOW TO AVOID UNSCRUPULOUS CONTRACTORS

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Constructing your house or doing some minor house repairs inside and/or outside your house may be the most stressful situation that may happen in your life. This may happen when your contractor you commissioned wasn’t able to deliver their job well, or wasn’t able to finish their job on time, or left the job undone and worst, got your funds and left you completely.

Our intention in writing this is to present simple points to consider before commissioning a contractor to build your house or do any of your house repairs. There are more good contractors over unscrupulous contractors but better be knowledgeable and aware. However, the suggestions we listed below do not guarantee that you will not end up with unscrupulous contractors.

Here are things to consider:

1. Your project requirements must be clear.

It is always best for the project owner to have a clear work understanding, clear work requirements, and a clear working budget that was set prior to your scouting for potential contractors.

2. Scouting your workforce.

Here are three (3) points to ponder in scouting the people who will do your project.

a. The most important criteria you must consider in scouting for potential contractors for your project is through recommendations from your friends or relatives.

b. You may also consider looking around your neighborhood because you can easily access them when a problem arises.

c. You may review company profiles as well, where you may appreciate their business status.

3. Commissioning the project.

Commissioning the project is the most important decision that the project owner needs to do in the entire project life because this signals the success or failure of your business relationship with the contractor.

4. Understanding the stages of your project.

It would be best if you are aided by a technical person or firm. They will provide sound advice on every step you will make during the construction period. Having them would enlighten you on technical matters that most of the project owners lack. Miscalculated decisions because of a lack of technical knowledge, may result to project failures and problems.

5. Release your funds wisely.

Financial matters are one of the most problems that occur between project owners and contractors. Most often, the contractor has an advantage over the project owner because the downpayment was given to the contractor. It is very important to secure your funds well by including the security clause, retention clause in your contract, to secure the funds you are giving to the contractor. Don’t forget to document all the payments you issued to all your contractors properly. You might use those documents to your advantage in the future.

If you follow these simple steps, you may be able to avoid getting involved with unscrupulous contractors.

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WHEN TO PAY YOUR CONTRACTORS

Generally speaking, releasing payments to contractors always involves risk, even you personally know your contractor.

It is always advisable for a building owner to consider all matters before they start releasing their construction funds to their building contractor. This is the reason why building owners should be properly educated and guided on when is the best time for them to release their construction funds to their building contractor or contractors.

Base on general practices in the Philippine construction industry, here are some suggested stages when to pay your contractor.

Downpayment. The Downpayment is the very first stage where the building owner releases the initial payment to the building contractor for the project. Paying the downpayment signals the consummation of a contract between the building owner and the building contractor. Normally, the release of downpayment happens during the signing of the agreed contract between the building owner and the building contractor. Roughly, the amount of the downpayment is around 10% to 50% of their contract. But this may vary depending on what is stipulated in the contract.
Progress Billing. Progress billings are the releases of construction funds by the building owner to the building contractor. The releases of these payments are dependent on the work accomplishments of the building contractor. The releases of progress billings, as agreed by both building owners and building contractors, may be scheduled on a weekly basis, bi-monthly basis, or on a monthly basis base on their work progress.
Substantial accomplishment payment. At this stage, the release of the 100% work value to the contractor is permitted even there are still minor works that need to be completed by the building contractor. An agreed punch list is drafted by both the building owner and the building contractor. Ideally, the cost of the remaining works or the value in the punch list should not be more than the retention value. Here are some reasons for allowing this stage: a retention cost is being withheld by the building owner, the contractor’s equipment and tools, and other assets from the building contractor are still on the project site.
Full payment. Full payment of the contract is normally given 30 days upon acceptance of the project with the corresponding retention.
Release of the full Retention. Retention is always applied in every progress billing and at the full payment of the contract. Generally, retention may be valued from 2% to 10% of the amount being collected by the building contractor depending on the project cost. The release of the retention will only be released after all necessary works and documents are accomplished with a specific time frame stipulated in your contract.