1667construction Contract and Specifications

8/11/2019 1667construction Contract and Specifications

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An Najah National University

Faculty of Engineering

Dr. Nabil Dmaidi

Eng. Mohammed Abu Neamah

CONSTRUCTION CONTRACTS

COST ESTIMATE AND

SPECIFICATIONS


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Course Description

The course is designed to give students, a working

knowledge of construction contracts, contractual

relationships within the construction industry and

fundamentals of construction specification writing.


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Course Outline

Introduction

Elements of the total construction project cycle and processes.

project delivery methods,

Construction contracts types

bidding process

Contract documents

Type of bonds

Specifications

Drawings

General Conditions


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Course Outline

Claims

Dispute resolution

Quantity surveying

Estimating construction cost

Pricing


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Grading System

Grading policy for this course will be based on the following:

Project 30%

Midterm Exam 30%

Final Exam 40%


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Text Book & References

Text Book:

Estimating Construction Cost, Robert R. Peurifoy

Hinze, Jimmie (2003) Construction Contracts. 3rd Edition,

McGraw-Hill Book Company, New York.

References:

Edward R. Fisk & Wayne D. Reynolds, Construction Project

Administration, 9thEdition.

Smith, Currie & Hancock (2005) Common Sense Construction

Law. 3rd Edition, John Wiley and Sons, Hoboken , New Jersey


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Aims and Objectives

At the completion of this course, the student will:

Describe the relationships between the parties in the construction

process (the owner, contractor, and architect) as well as their

roles, duties, and responsibilities. Understanding the projects delivery systems and different

contracts organizations. And understanding the different

construction contracts types, documents and specifications.

Understanding the various bidding procedures and ability toprepare bid documents and contract documents, in addition to

ability to understand the types of bonds.


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Aims and Objectives

At the completion of this course, the student will:

Ability to estimate various cost components in construction

projects.

Understand the quantity surveying techniques and methods.


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Introduction

Definition of Terms:

Construction Management

Construction Contracting

Construction Administration

One-to-One Concept (in organization)


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Construction Management

Construction:

The process by which material, equipment,

machineries are assembled into a permanent facility.

Management

The planning, directing, and controlling of resources

(Material, Manpower, Machines, Money) to achieve

the desired goal (Time, Cost, Quality)


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Construction Contracting

Contracting:

The legal and business activities needed for initiating,

executing, and terminating a construction contract.


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Construction Administration:

Closely related to construction management.

Can be defined as the implementation of constructionmanagement principles.


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Covers the following area:

Planning and Scheduling

Business and communication system

Material control

Payment procedure

Changes to the work

Inspection and acceptance


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One-to-One Concept

Previous Administration functions involve different

parties (Owner, contractors, Engineers)

To minimize confusion, conflicts, claims, use:

One to One concept Each party has a single representative who

communicates important project information and

orders.


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Classification of Construction Projects:

By Size: Small, Medium, Large, Mega.

By Ownership: Private, Public, Military.

By Usage: Residential, Commercial, Industrial,

Utility. (Usage can be expanded to subcategories). By Scope (preferred):

Building (Residential, non residential), emphasis

on aesthetics. Engineering (Highway, Heavy, Utility) emphasis

on function

Industrial: emphasis on production


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The Construction Participants

Three key players in the game:

The client (or Owner or stakeholder)

The A/E or consultant

The contractor (or Constructor or Builder)


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Relationship Among Parties

OwnerGeneral

Contractor

SubsA/E

Project

contract

contract

own

Design

build

build

contract


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The Owner

The owner, (also called the client)

A client maybe an individual.

A group of people.

A partnership.

A limited liability company.

A local or central government authority


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The Owner

The owner is responsible for:

Funding and paying bills for the construction of project.

Determining what the project will include (also called the

scope of the project), when the project can begin and must

end (the schedule),

Receive the ultimate benefits of the finished project.


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The Owner

Owner organizations can be broken into two major categories,

public and private.

A public agency exists for the ultimate benefit of the

citizens, the general public. Examples of public projects:,an highway, or an University.

A private organization can be described as any individual,

partnership, corporation, or institution that builds a project

for its own use or for resale.

The owner enters into separate contract with Architect and

contractor.


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The Design Professional

The consultant is a party of the contractual relationship has

professional skills in engineering whether civil, structure,

architectural, mechanical. Etc.

Who acts in behalf of the client.


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The Design Professional

The major role of the design professional:

Is to interpret or assist the owner in developing the project's scope,

budget, and schedule and to prepare construction documents that

will be used by the construction contractor to build the project.

The architect typically sub-contracts portions of work to other

design professionals such as structural engineers, landscape

architects, electrical & mechanical engineers

In almost all cases the design professional is a licensed, registered

professional who is responsible for the physical integrity of the

project.


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The Contractor

A contractor is an individual or an entity that enters into a

contract with the owner to carry out the construction work.

If only one contractor is appointed he may be known as the

main/prime contractor.

The Contractor is responsible for the interpretation of the contract

documents into physical facility. Transform idea to reality


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The Contractor

In most cases the prime contractor divides the work among

many specialty contractors called subcontractors. On a large

project these subcontractors may also divide up the work into

even smaller work packages

In a traditional arrangement where the owner, design

professional, and contractor are separate companies, the

contractor is termed a prime contractor and is contractually

responsible for delivering a completed project in accordance

with the contract documents.


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The Subcontractors

A contractor assigned and work under the supervision of the

main contractor and who has special skills, experiences and

equipment to deal with specialized aspects of the work.

Nominated subcontractor

Non-nominated subcontractors


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Project Life Cycle

The major phases in the project cycle that are common to

most design and construction projects are:

Project Planning

DesignSchematic Design

Design Development

Contract Documents

Construction Procurement (Bidding Phase)

Construction

Occupancy


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Project Planning Phase

During this phase of the project the owner makes decision that

set the tone for the project. All projects begin with an idea or a

need

During this stage the owner :

Selects the project site, and

Establishes a conceptual estimate, schedule.

The most critical decision that is made during this project

phase is to make a decision as to whether or not to proceed

with the project (called a go/no go decision).


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Project Planning Phase

Phase activities:

Feasibility studies

Facility programming

BudgetingProject delivery system selection

Scheduling

Site selection/acquisition

Site investigation

Financing

Design services procurement


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Design Phase

Design process involves:

Schematic Design

Talk to owner, rough sketches

Design Development

Major Systems & component selected

Contract Documents

Preliminary Cost estimate

Develop Preliminary working drawings

Develop working drawings with Specifications


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Schematic Design

The A/E reviews and evaluates the owners program and budget

requirements and discusses with the owner alternative approaches to

the design and construction

During schematic design, the A/E prepares conceptual design

documents. These may include: Preliminary sketches ,Small scale

schematic plans, elevations, sections, diagrams, renderings, and other

graphic and written documents, General written description of

project.

The completion of the schematic design phase represents

approximately 30 percent design completion for the project


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Design Development

The design development phase takes the project from about 30

percent to approximately 60 percent design.

It is the time when the design team will be evaluating and selecting

all the major systems and components of the project.

During this phase of the project the design team is involved in the

evaluation and finalization of all the architectural components and

project systems.

The project's budget and schedule continue to be monitored and

adjusted.


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Contract Documents


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Construction Procurement:

Contractor qualification/bidder list

Solicitation

Proposal preparation

Bid/proposal opening

Bid/proposal evaluation

Award of contract

Final negotiation


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Construction

Mobilization

Subcontracting

Purchasing

Permits

Site preparation

Foundations

Interior finishes and equipment


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Occupancy/ Post Construction:

Start-up and testing

Leasing

Operation

Correction

Repairs/maintenance

Building evaluation


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Cost Influence Curve


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Level of Influence

Influence

ProjectCost

Time


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Project Delivery Systems (PDS)


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Project Delivery Systems

Project Delivery Methods

Definition

Types of Project Delivery Methods

Traditional

Design-Build

Professional Construction Management (PCM)

BOT ( Build Operate Transfer)

Advantages & Disadvantages of various PDM


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Project Delivery Method

The term delivery method means the approach used to

organize the project team so as to manage the entire designing

and building process.

The owner needs to decide which designers to hire, when to

hire them, and under what type of contract ?

The owner also needs to decide when to hire the

construction professional and under what type of contract ?

Which organization gets hired first? Do both organizations

report to the owner, or does one report to the other?


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project delivery systems

describe how the

participants are organized

to interact, transforming

the owners project goalsand objectives into a

finished facility. Also its is

the method by which a

construction project isexecuted.


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It is the first allocation of base responsibilities between the

owner, design professional and contractor. Thus, the project

delivery system is the foundation on which all subsequent

negotiations will be based.


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Type of Project Delivery Systems

Traditional (Design-Bid-Build)

a) Design-Bid-Build with prime contractorb) Design-Bid-Build with multiple contractors

Design-Build (Turnkey)

Self performance (In house) or (force account work)

Professional Construction Management (PCM)

BOT ( Build Operate Transfer)

Choose one of these classifications depends up the client goal

suitability.


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TraditionalApproach

Also known as Design-Bid-Build or hard money or Competitive bidcontract.

Has three sequential phases: Design - Bid - Construction

The owner hires a design professional who prepares a complete set of

contract documents for the owner for a design fee.

The owner either negotiates a price with a general contractor or bids out thework.

The general contractor is totally responsible for delivering the completed

project as spelled out in the contract documents.

The general contractor may subcontract out parts of the project, with each

subcontractor reporting directly to the general contractor.The designer may be involved in overseeing the construction work in the

field.

In this delivery method no direct, formal relationship exists between the

designer and the builder. They communicate only through the owner


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a) Design-Bid-Build with prime contractor

Owner

Prime

Contractor

subcontractor Supplierssubcontractor

A/E

Design consultant

b) i id ild i h l i l


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b) Design-Bid-Build with multiple

primes/GC (separate contracting)

Owner

Prime

Contractor

subcontractor

M. Prime

Contractor

E. Prime

Contractor

A/E

Design consultant

subcontractorsubcontractor

b) i id ild i h l i l


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b) Design-Bid-Build with multiple

primes/GC (separate contracting)

The client has a direct contract with consultant.

The client also has direct contracts with many contractors to

carry out construction

The contractors also have contracts with the material suppliers

and other specialized subcontractors.


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Typical DBB Process

The four phases:


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Advantages of Traditional PDS:

Familiarity: Most owners, designers, and builders have workedunder this framework on many projects and therefore are familiar

with the system.

Overall Job coordination: Their control systems, documentation,

and organizations are all set up to manage this process. The workers,

subcontractors, and vendors also understand the system, improving

overall job coordination.

Owner can get a firm fixed price for the project before any work

begins. The owner knows before construction begins what the cost of

the project will be.

Opportunity to get good price competition from the open market.


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Disadvantages of Traditional PDS:

The approach takes a long of time.

Design does not benefit from construction experience

Conflicts between owner & G.C. and between A/E & G.C.

Changes in work may lead to disputes, litigation , claims and

may increase cost.


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Design-Build (Turnkey)

In this approach, a single organization is responsible for performing bothdesign and construction .

Within the design-build organization, parts of the design may be

subcontracted to specialist consultants.

Being responsible for both design and construction, the design-build

contractor carries most of the project risks, and this can mean additional cost

to owner.

The owner's role in this approach is minimal and is only to express his or

her objectives and specifications precisely before detailed design is started.

Consultant maybe appointed to prepare tender and evaluation

Contractor consultant if the first is unable to perform design skills.


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Design-Build DB (Turnkey)

Owner

Design-Build

Contractor

subcontractor suppliersubcontractor

Design consultant

Some times


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Design-Build DB (Turnkey)


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Typical Design-Build Process

The four phases


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Design-Build Advantages

Good communication occurs between the design team and theconstruction team. Allows for constructability analyses and value

engineering.

Single point of responsibility for owner.

This collaboration allows the project to be easily fast-tracked, cutting

down on the design-build time for the project.

Good cost estimating and scheduling should occur throughout the

entire project.

In general, this arrangement allows easier incorporation of changes

due to changed scope or unforeseen conditions than in the other

arrangements, since the coordination is to occur within the same

company.

Claims reduction


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Design-Build Disadvantages

Cost may not be known until the end of design

Design-build company may sacrifice quality to insure

profitability

Reduced owner involvement in the design process may result

in less than expected results

All your eggs in one basket

Heavy overhead due to large multi-disciplined staff

requirements


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Forms of Design Build Organization

Identity of the design-builder:

Integrated Design-Build Firm

Contractor as lead

A/E as lead

Joint Venture


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Self performance

Owner


Design consultant

worker


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Self performance

The client has a direct contract with consultants. (some times

not)

Owner is responsible for both design and construction

The client has no contracts with contractors to carry out

construction.

Best suited when volume of work is large and continuous.

He is the one who will perform the job.


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Professional Construction Management

In this approach, the owner appoints a PCM organization (also known asown construction management organization) to manage and coordinate the

design and construction phases of a project using a teamwork design

approach.

The design may be provided by specialist design firms and in some casesby the PCM organization.

With a high level of coordination between the participants, innovative

approaches of overlapping design and construction (i.e., fast-tracking) can

be adopted.

The PCM organization aims at holding a friendly position similar to that of

the consultants in the traditional approach.

The services offered by the PCM organization overlap those traditionally

performed by the architect, the engineer, and the contractor.


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These services may include:

management and programming of design;

cost forecasting and financial arrangements;

preparation of tender documents; tender analysis

and selection of contractors;

selection of methods of construction;

planning and scheduling construction works;

materials procurement and delivery expedition


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Although this approach is likely to prove marginally more expensivethan the traditional approach, it offers greater guarantee of

performance and the potential to avoid time overruns and to reduce

the cost of claims.

The payment to the PCM organization is usually a fixed fee orpercentage of the total project cost.

Use of PCM approach, should be considered when there is a need for

time saving and flexibility for design changes, and the owner has

insufficient management resources


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a) Management Contracting (CM @ risk)

Owner


A/E

Design consultant

Management

Contractor


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a) Management Contracting (CM @ risk)

The client contracts a contractor acts as a management

contractor.

Provide purely management services.

Management contractors contracts directly with other

contractors to carry out the work

The client contracts consultant to provide design and cost.


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b) Construction management (Agent)

Owner


A/E

Design consultant

Construction

ManagerPrime

Contractor

b) i ( )


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b) Construction management (Agent)

The clients directly contracts with a

professional construction manager.

Design and cost consultant

Construction Contractor to carry out the work

The construction manager is the agent of the client.


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PCM Advantages and Disadvantages

Advantages: Construction skills can be utilized at all stages of the project

Independent evaluation of cost, schedule, and construction performance

CM often assumes greater DEGREE of control over contractor

Full time coordination between design and construction

Opportunity to use value engineering and constructability review

Disadvantages: CM

Does not guarantee construction cost or time Involve additional fee up to 4%

Is not responsible for their performance

Success of the entire program depends on the skills of C. Mgr.


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Built Operate Transfer (BOT)

The term Build-Operate-Transfer (BOT) was first coined by Ministerof Turkey, in1984

Essentially in a BOT project delivery method, a private entity,usually a consortium is responsible for financing, construction,

operation and maintenance of the facility for agreed duration knownas Concession period and at the end of the period, transfers theownership of the facility to the government.

A BOT mechanism is a complex structure comprising multiple, inter-dependent agreements among various participants.

The concession agreement is between the government and theconcessionaire. The concession agreement is regarded as the heartof a BOT project


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Examples on (BOT) Projects


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(BOT) Contractual Structure


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Built Operate Transfer (BOT)

Characteristics of BOT projects:

Project financing is totally provided by the private sector.

Projects are large scale infrastructure, such as power plants,transportation, telecommunications.

The delivery is a complex system involving many

independent agreements with various parties.

Projects involve high risk.


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Advantages of Built Operate Transfer

Facilitate building public projects which otherwise can not bedone due to tight government budget.

The project and its associated services will be produced more

efficiently, since private organizations are more efficient andinnovative than public organizations.

BOT projects attract direct foreign investment and create

business opportunities for the local private sectors.

BOT projects help in transferring technology in the host

country.


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Disadvantages of Built Operate Transfer

BOT is not an easy method and requires high capability ofpromoters and expertise.

Not suitable for small projects

Transaction costs are high, they amount to 5-10% of total

project cost

Requires assurance that the revenues generated in the operation

phase are high enough to result in attractive Return OnInvestment (ROI)

S l i li h d


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Selecting Delivery Method

Three main factors:

Time

Cost

Quality

S l i D li M h d


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Selecting Delivery Method

All the systems mentioned provide adequate Performance.

However, they all provide different emphasis and different

levels of risk.

Economy & Speed Design & Build

Individual buildingwith longer program Traditional

Fast Completion withinnovation Management

1667construction Contract and Specifications

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