Contracts and Scpecifications

• PREPARING THE PACKAGE

  1.1 Project Concept and Needs

  1.2 Establishing Need

  1.3 Formal Need Evaluation

  1.4 Conceptual Drawings and Estimates

  1.5 Preliminary and Detail Design

  1.6 Notice to Bidders

  1.7 Bid Package

  1.8 General Conditions

  1.9 Supplementary Conditions

  1.10 Technical Specifications

  1.11 Addenda

  1.12 The Estimate and Decision to Bid

  1.13 Prequalifications

  1.14 Subcontractor and Vendor Quotations

  1.15 Bid Bond

  1.16 Performance and Payment Bonds

  1.17 Costs and Requirements for Bonds
• CONSTRUCTION CONTRACTS

  2.1 Contract Environment

  2.2 Process of Purchasing Construction

  2.3 Major Construction Contract Types

  2.4 Competitively Bid Contracts

  2.5 Stipulated-Sum Contracts

  2.6 Unit Price Contracts

  2.7 Negotiated Contracts

  2.8 Project Deliver Methods

  2.9 Design Build Contracts

  2.10 Design Build in a Consortium Format

  2.11 Construction Management Contracts

  2.12 Construction Management At-Risk

  2.13 Comparing Project Delivery Method
• Plan rooms 


  – a “library” where construction professionals may view bidding documents (blueprints and specifications) for projects seeking price estimates for specific construction products or services.
• Online plan rooms 


  – enable their members to conveniently view plan room projects 24 hours a day, 7 days a week from the member’s home or office location via the internet.
• Establishing Need 


  • first step in any project

  • normally defined in terms of a market analysis that establishes the profitability of the proposed project

  • feasibility study recommends optimal time frames for the plant construction to meet the market in advance of competition
• Formal Need Evaluation

  1. Cost/benefit analysis.
  2. Graphical representation of the project (e.g., sketch or artist's rendering), a layout diagram of the facility and/or a threedimensional (3- D) depiction that may be part of a building information model (BIM).
  3. Cost estimate based on the conceptual level information available.
• Conceptual Drawings and Estimates 


  • it is common practice to present conceptual documentation to potential funding sources

  • renderings, sketches, layout drawings, 3- D computer models and BIM (Building Information Modelling)

  • cost estimate is based on the conceptual drawings and other design information

  • more on concept

  • in this part you can identify the risk of the design
• Preliminary and Detail Design 


  The end product of the design phase of project development is a set of plans and specifications that define the project to be constructed.
• Preliminary Design 


  • offers the owner a pause in which to review construction before detail design commences

  • decisions regarding size and location of air conditioning and heating units as well as primary water distribution components
• Detail Design 


  • second step in the production of the plans and specifications.

  • A/E this focuses on the interior finishes, which include walls, floors, ceilings, and glazing.

  • Details required to install special finish items are designed.
• Notice to Bidders 


  • The document announcing to prospective bidders that design documents are available for consideration and that the owner is ready to receive bids.

  • Because of his commitment to the owner to design a facility that can be constructed within a given budget and at an acceptable level of quality, the A/E wants to be sure that the lowest bid price is achieved.

  • To ensure this, the job is advertised to those contractors who are capable of completing the work at a reasonable price.
• Bid Package 


  • documents that are available to the contractor and on which he must make a decision to bid or not to bid

  • prepared by the design professional consists of a proposal form, general conditions that cover procedures common to all construction contracts, and special conditions
• General Conditions 


  • general provisions

  • organizations that enter into construction contracts on a less frequent basis, professional and trade organizations publish standards that are commonly used in the industry

  • AGC standard subcontract protects the contractor in areas in which responsibility is unclear or subject to interpretation
• Supplementary Conditions 


  • Contains aspects of the contractual relationship that are peculiar or unique to a given project
• Items contained in supplementary conditions are of two types:

  1. Modifications to the basic articles of the general condition in the form of additions, deletions, or substitutions.
  2. Additional articles of a contractual-legal nature that may be desirable or necessary for a particular project.
• Technical Specifications 


  • A verbal description of the technical requirements is established in the technical specifications.

  • Standards of workmanship and material standards are defined in the specifications.

  • The fact that equality exists must be established by the bidder.
• Addenda 


  • documents issued by the owner to the contractor during the bidding process

  • meant to be incorporated into the contract documents once the construction contract is finalized.

  • Any changes that arise before bids are opened that are intended to become part of the bid package are incorporated here.
• Estimating 


  • the process of looking into the future and trying to predict project costs and various resource requirements

  • basis for determining the bid price of a project
• Estimation Cost 


  • Direct Cost Indirect Cost

  • Overhead Cost Management Cost
• Quantity Surveying 


  • process of determining the required material quantities on a job
• Prequalification 


  information gathering and assessment process used to determine whether a contractor's capabilities, capacities, resources, management processes, and performance are suitable for a project.
• Advantages of Prequalification

  • Allows the owner to assess potential bidders.

  • Informs decisions before considering actual bids
• Example Contents of Prequalification

  • Financial capacity

  • Work history

  • Licensing and qualifications

  • Management standards
• Subcontractor and Vendor Quotations/ Contracts

  • Subcontractor/vendor bid quotation forms with legal signatures are used to secure quotes.

  • Contractors request bids to be faxed with the quotation and a signature binding the bidder to the quoted price, or as a signed e-mail attachment

  • Material price quotations are obtained electronically from vendors and included in the bid.
• Subcontractor and Vendor Quotations/ Contracts

  • Quotations are integrated into the total bid price, providing protection against changes in the quoted price until a firm subcontract is established.

  • Standard forms for subcontract establishment are provided by the American Institute of Architects (AIA) and the Engineers Joint Contract Documents Committee (EJCDC).
• Quotation


  detailed breakdown of expenditure of the proposed project. (much more detailed than estimation)
• Bid Bond


  • a legal agreement that ensures contractors fulfill their stated obligations on a project.

  • form of assurance which provides both financial and legal recourse to the owner of the project.

  • usually submitted in conjunction with the project's contract.

  • backed by specialized surety companies that guarantee the payments will be made if the contractor fails to uphold their end of the bargain.
• Performance Bond 


  • issued to a contractor to guarantee the owner that the work will be contract completed and that it will comply with project specifications

  • protects the owner by making sure the contractor completes the project according to the terms of contract

  • Often required along with payment bond, but not always
• Payment Bond 


  • issued to guarantee the owner protection against any liens or charges against the project that are unpaid as a result of the contractor's default

  • protects the owner by making sure the contractor pays all laborers, subcontractors and material suppliers

  • Often required along with performance bond, but not always
• Force Majeure


  also known as "acts of God," is a legal term that refers to unforeseeable events or circumstances that prevent one or both parties from fulfilling their contractual obligations.
• Bonding Capacity Calculation


  • Determined by the contractor's net quick assets, including cash, deposits, and liquid assets.

  • Capacity multiple based on contractor's performance history.

  • New contractors may have a low multiple (e.g., 5 or 6), while reliable ones can have a multiple of 40 or greater.
• Web-Based Contracting

  • Enhances construction procurement and delivery through electronic processes.

  • Facilitates online competitive bidding and improves record-keeping
• Buyer's Benefit 


  • Enables quick comparison of product offerings and pricing

  • Empowers buyers to make optimal decisions on price and delivery time
• System Functionality 


  • easily submit bid documents and solicit competitive bids

  • Routing RFQs/RFPs to contractors based on attributes. Notifications and electronic responses organized for review
• Mutual Benefits of the Buyers and Sellers

  • Buyers anticipate ROI through reduced costs and supply-chain efficiencies.

  • Sellers find new sales opportunities and effectively communicate offerings.
• CONTRACT ENVIRONMENT

  • Construction involves various dimensions, and one crucial aspect is its business side.

  • The business aspects are shaped by contractual relationships, with construction firms commonly known as "contractors" due to the central role contracts play.

  • These contracts extend beyond the owner/client to include subcontractors, specialty firms, labor unions, and vendors supplying equipment and materials.
• CONTRACT ENVIRONMENT

  • Aspects like insurance, bonds, and legal documents defining a company's structure also have contractual requirements

  • Consistent issues in construction scenarios have led to the standardization of contract language over the years, resulting in the creation of various standard contract forms.
• PROCESS OF PURCHASING CONSTRUCTION

  • Construction contracts structure the purchasing process, distinct from buying consumer goods.

  • In construction, the facility is bought before being manufactured, involving coordination among various entities like designers, contractors, and subcontractors.

  • Unlike consumer goods, the finished product in construction is not available for inspection before purchase.

  • Traditional contracts separate the purchase of design and construction, often leading to adversarial relationships between parties.
• PROCESS OF PURCHASING CONSTRUCTION

  • Owners ideally prefer a single source for a fully constructed facility with warranties, similar to single-family housing.

  • Large projects like tunnels and bridges cannot be presented to the public for purchase due to the risk.
• PROCESS OF PURCHASING CONSTRUCTION

  • Project delivery systems like design-build and construction management contracts aim to provide clients with a one-stop shopping experience.

  • These contract formats have gained popularity in the last 25 years and continue to evolve.

  • Understanding widely used contract types over the past 60 years is crucial before exploring recent developments in construction contracting.