about engineering overhead

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about engineering overhead

Post by mae on Tue Sep 14, 2010 11:57 am

What is the implication if a part of Engineering Overhead (EAO) has been used up as additional cost in the computation of the Approved Budget Cost (ABC) that is ABC totaled is 97.1% and EAO lesser to 2.9% instead of 3.5%. Please enlighten. THANK YOU. . .
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Re: about engineering overhead

Post by jcolas on Tue Sep 14, 2010 7:35 pm

What is the implication if a part of Engineering Overhead (EAO) has been used up as additional cost in the computation of the Approved Budget Cost (ABC)

EAO is an expense that is set for engineering and administrative overhead and during the planning stage this have been thoroughly deliberated and discussed. As expected also, the ABC should be a product of judicious planning. If as what was presented by Mae, the EAO was used to beefed up the ABC, then certainly, their was failure in coming up with the ABC. May we hear from other posters, but before I close, welcome to the Forum Mae!!!
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Re: about engineering overhead

Post by jcolas on Wed Sep 15, 2010 9:51 am

What is the implication if a part of Engineering Overhead (EAO) has been used up as additional cost in the computation of the Approved Budget Cost (ABC)

Mae, may I temper my response in my first post with regards your question. The maximum EAO is 3.5%; so that the Procuring Entity has the discretion to allot a lesser EAO if in their belief, a lesser EAO will still be enugh to cover all the engineering and administative cost attendant to the project. The only problem is that , if in midstream, they will after all find out na kulang pala yong 2.9% EAO. What will be their recourse?
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about engineering overhead

Post by mae on Wed Sep 15, 2010 12:58 pm

Good Morning. Thank you for the reply. I would like to further seek clarification if such oversight in the preparation of ABC has no negative implication nor sanction be meted to the person responsible in the preparation of POW, etc.
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Re: about engineering overhead

Post by jcolas on Wed Sep 15, 2010 2:05 pm

Good Morning. Thank you for the reply. I would like to further seek clarification if such oversight in the preparation of ABC has no negative implication nor sanction be meted to the person responsible in the preparation of POW, etc

I would like to believe that they will not do such a thing. If they signed the document, then they should share the blame. Kung sino man ung nag prepare wala naman violation yang ginawa nya. Ang problema nga lang ay kung sapat yong na allot na EAO.
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Re: about engineering overhead

Post by jomai on Tue Oct 12, 2010 3:21 pm

Can we still disburse funds out of engineering overhead even if the project was already completed and accepted by the end user? Our engineering department justify that there are still a lot of paperworks to be done related to the project.
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Re: about engineering overhead

Post by engrjhez® on Wed Oct 13, 2010 9:33 am

jomai wrote:Can we still disburse funds out of engineering overhead even if the project was already completed and accepted by the end user? Our engineering department justify that there are still a lot of paperworks to be done related to the project.
My general take to this question is NO.

If the project is already completed and accepted, this would mean the contract amount (whether that covers or not the overhead) is already paid. Where can they get the funding for that 'extra overhead' expense? As an engineer myself, I do not know of any other paperworks (related to the project) after the project has been accepted. If you can elaborate further, maybe I can give you a more precise answer. Smile
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Re: about engineering overhead

Post by charlie brown on Wed Oct 13, 2010 1:04 pm

jomai wrote:Can we still disburse funds out of engineering overhead even if the project was already completed and accepted by the end user? Our engineering department justify that there are still a lot of paperworks to be done related to the project.

In the 6th paragraph of page 10 volume 3 of the Generic GPM, the ABC for infra shall cover the individual cost components of civil works only. other components such as the ROW, consultancy and ESAO shall comply with specific provision of law or agency guidelines. One such provision of law can be found in the special provisions for DPWH under the 2010 GAA (page 708). based on the said provision the EAO can be used for administrative overhead, pre-construction activites after detailed engineering, construction project management, testing and quality control, acquisition, rehab and repair of equipment, and contingencies.

the info provided is sketchy but my understanding is that there was an amount earmarked for the project (from an allotment) of which a certain amount less the EAO, ROW ultimately became the ABC and found its way into the APP. Thus, for the said project, the APP would show the ABC and the EAO separately. If such is the case, and there is still funds left for the EAO and their are still legitimate expenses chargeable to said fund, then they can still charge regardless of the stage of completion of the project.

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Re: about engineering overhead

Post by engrjhez® on Wed Oct 13, 2010 2:20 pm

Charlie Brown,

While it is true that there may be other expenses that may be attributed to the project, it is only limited to those that constitutes the capitalized cost of the project. This means that inevitably, the cost(s) must be referring to items sine qua non to the project. Examples of which are those you have mentioned like Engineering Supervision and other Administrative Overhead (ESAO), Acquisition of Road Right of Ways (ROW), etc.

However, my understanding to the "overhead" jomai is referring to is the overhead (OCM) as defined under DPWH DO 57 (2002). Since the bidder is not required to follow the DO in the presentation of their bid proposals (follow this link), the contract amount (works) shall have no more effect to the means of disbursing funds of the other capitalized cost. Smile
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Re: about engineering overhead

Post by charlie brown on Wed Oct 13, 2010 3:15 pm

engrjhez® wrote:
Charlie Brown,

While it is true that there may be other expenses that may be attributed to the project, it is only limited to those that constitutes the capitalized cost of the project. This means that inevitably, the cost(s) must be referring to items sine qua non to the project. Examples of which are those you have mentioned like Engineering Supervision and other Administrative Overhead (ESAO), Acquisition of Road Right of Ways (ROW), etc.

However, my understanding to the "overhead" jomai is referring to is the overhead (OCM) as defined under DPWH DO 57 (2002). Since the bidder is not required to follow the DO in the presentation of their bid proposals (follow this link), the contract amount (works) shall have no more effect to the means of disbursing funds of the other capitalized cost. Smile

the OCM, unlike the EAO - is a part of the ABC - thus the OCM cannot be a part of the 3.5%. the Overhead, Contingency and Miscellaneous you are referring to pertains to that of the contractor while the EAO is that which is used by the PE and is therefore not a part of the ABC. for DPWH, these costs as "capitalized" because this is taken from the Capital Outlay releases of the DBM. Administrative costs and wages of casual employees supposedly working in projects - which forms part of the EAO on the other hand - are PS ans MOOE components. not capitalizing these would mean that the agency would be juggling funds. when we say we capitalize we actually mean we are disbursing funds for items which are typically not Capital Outlay (PS and MOOE) out of allotments for Capital Outlay. this is true specially for DPWH since most of the operating expenses of engineering Districts are taken out of thier share in the EAO.
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Re: about engineering overhead

Post by riddler on Wed Oct 13, 2010 4:31 pm

charlie brown wrote:
engrjhez® wrote:
Charlie Brown,

While it is true that there may be other expenses that may be attributed to the project, it is only limited to those that constitutes the capitalized cost of the project. This means that inevitably, the cost(s) must be referring to items sine qua non to the project. Examples of which are those you have mentioned like Engineering Supervision and other Administrative Overhead (ESAO), Acquisition of Road Right of Ways (ROW), etc.

However, my understanding to the "overhead" jomai is referring to is the overhead (OCM) as defined under DPWH DO 57 (2002). Since the bidder is not required to follow the DO in the presentation of their bid proposals (follow this link), the contract amount (works) shall have no more effect to the means of disbursing funds of the other capitalized cost. Smile

the OCM, unlike the EAO - is a part of the ABC - thus the OCM cannot be a part of the 3.5%. the Overhead, Contingency and Miscellaneous you are referring to pertains to that of the contractor while the EAO is that which is used by the PE and is therefore not a part of the ABC. for DPWH, these costs as "capitalized" because this is taken from the Capital Outlay releases of the DBM. Administrative costs and wages of casual employees supposedly working in projects - which forms part of the EAO on the other hand - are PS ans MOOE components. not capitalizing these would mean that the agency would be juggling funds. when we say we capitalize we actually mean we are disbursing funds for items which are typically not Capital Outlay (PS and MOOE) out of allotments for Capital Outlay. this is true specially for DPWH since most of the operating expenses of engineering Districts are taken out of thier share in the EAO.

i agree charliebrown...all expenses related to the capital outlay are considered as "capital cost" which eventually form part and parcel of the capital outlay.. whether the appropriation is under the GAA or LGU. the preparation of the ABC shall be less or equal the Appropriation.. under the old rules, ESAO is called EAS for which the ABC must contain an ESAO/EAS or OCM to be used during the implementation of the project by the Contractor. A separate ESAO/EAS or OCM under the same appropriation shall be used as Adminitrative expenses of the Procuring Entity.. Very Happy
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Re: about engineering overhead

Post by jomai on Thu Oct 14, 2010 12:17 pm

Our engineer called it as post construction overhead cost, he wanted to utilize the remaining appropriation intended for the project.
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Re: about engineering overhead

Post by engrjhez® on Thu Oct 14, 2010 6:09 pm

jomai wrote:Our engineer called it as post construction overhead cost, he wanted to utilize the remaining appropriation intended for the project.
If it was not included in the computation of ABC for the project, then you can (provided there is an existing appropriation) subject to auditing rules and regulations. Smile
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