Qs 004 Module 3 Compilation

12/4/22, 8:21 PM 3.
0 Intended Learning Outcomes (ILO's) : QS 004-CE41S1C - Contract Practice and Administration including Cost Reporting
3.0 Intended Learning Outcomes (ILO's)
Intended Learning Outcomes:
At the end of the session the students should be able to:
1. Understand the Contract Administration

2. Identify the Best Practices for preparing a Contract Administration Plan
3. Understand Delays and Damages
4. Determine the Types of Damages
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12/4/22, 8:21 PM 3.0 Intended Learning Outcomes (ILO's) : QS 004-CE41S1C - Contract Practice and Administration including Cost Reporting
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12/4/22, 8:21 PM 3.1 Contract Administration: QS 004-CE41S1C - Contract Practice and Administration including Cost Reporting
3.1 Contract Administration
c
Contract Administration
Introduction to the Topic:
The purpose of contract administration is to see that the contract is properly

administered in parallel with the execution of works. This chapter will focus on the
main issues to be considered in contract administration.

Contract Administration
Contract Administration involves all necessary activities for a construction project

performance from the initial stage to its final stage. These activities include monitoring
of the project performance with the agreed contractual obligations between the parties
to the contract.

Different stages of a Construction Contract
Typically, a construction project undergoes few different stages.
Design Stage
Tender Stage
Construction stage
Handover and Final Account stage
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Design stage Contract Administration
In this stage, the employer is with his conceptual plan in mind. In most of the projects,
a project manager will be appointed at this stage. Contract Administration duties
during this stage include monitoring and controlling both cost and time under the pre-
determined terms with the Employer.
Contract Administration during the Tendering Stage
Procurement is an important stage for any project and this is the stage where more
contract administration work involves. It is necessary to determine the tender
procedure and prepare the tender documents. In most construction projects, tender
documents will be part of the contract documents. Therefore it is important to check
the tender documents thoroughly before calling for bids.
Contract Administration during Construction Stage
In this stage, it is necessary to understand the contract document and the obligations
to each party. During the construction stage, more risk is involved in terms of both time
and money. At the same time, it is also necessary to get the work done with the
required quality and as mentioned in the specifications.
Contract Administration during the construction stage involves progress claims,

variations to the contract, claims including Extension of Time, and other legal matters.
Usually, the contract administration team is aware of the binding contract and its
clauses. Contract Administrators, Quantity Surveyors, and Contract Engineers mainly
involve in the process in different roles and responsibilities.
Construction Contract Administration during Completion and Final Account

Stage
Contract Administration during the maintenance, completion and Final account stage
is mostly similar in different forms of contract. In this stage, it is necessary to monitor
the defects, warranties if necessary, and any other liabilities. Once all the obligations
are fulfilled, it is necessary to prepare the Final Account Certificate. Adjustments to the
contract document in terms of variations, liquidated damages or penalties should
indicate in Final Account. In this stage, the release of retention money is included too.
Best Practices for Preparing a Contract Administration Plan
1. Define the scope and deliverables
The first step to ensuring a successful contracting process is to clearly lay out
expectations, including the scope and deliverables. Scope creep is a common issue
that can derail any contract, so including in writing exactly what the contract does and
does not cover will help keep the contract on track.
2. Include a detailed timeline
It may sound like a given, but contract administration plans should include a detailed
timeline accounting for every important milestone throughout the life of the contract,
including project start and end dates, deadlines for deliverables, and progress
updates.
3. Sort out finances
To avoid contract disputes and maintain positive relationships between both parties,
everyone involved in the contract administration process should know the financial
terms of the agreement, including the value of the contract, payment intervals, and the
process to address the need for any additional expenses (depending on the type of
contract).
4. Plan the work
To ensure transparency and accountability, the plan should include details about how
the contract deliverables will be executed, including the people who will be working on
each part of the agreement (including both internal and third-party personnel, if
applicable).
5. Anticipate the risks
Every contract comes with risk, but putting plans in place to account for those risks
can prevent the contract from failing. Outline the most likely risks for each agreement
and the steps that should be taken in the event those events actually happen.
Issues to be considered in Contract Administration

Variations
Powers and responsibility of the engineer
Delays, Time extension and Liquidated Damage
Payment
Price Adjustment
Default of employer and contractor
Suspension
Termination
Claims and Disputes
End of Discussion.

Reference:
Uniform General Conditions of Contract for Private Construction – CIAP DOC 102
The International Federation of Consulting Engineers; Fédération Internationale des

Ingénieurs – Conseils) Suite of Contracts
RICS.Cost Reporting: Royal Institution of Chartered Surveyors (RICS)

For more references, kindly check TIP Online Resources
TIP Library
(https://www.tip.edu.ph/library.html)

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12/4/22, 8:21 PM 3.2 Delays and Damages: QS 004-CE41S1C - Contract Practice and Administration including Cost Reporting
3.2 Delays and Damages
c
Delays and Damages
Introduction to the Topic:
Construction delays are among the most common disputes that arise on projects.
However, the process of establishing and proving a delay claim can get complicated
quickly. That’s why having a comprehensive understanding of the necessary elements
to justify a delay claim can be a priceless advantage.

A delay damages construction contract contains a clause that provides for damages
due in the event of delays. The term “delay” may be broadly defined, however, so the
amount of damages can vary widely.

Types of Construction Delay Claims
1. Critical vs. Non-Critical
A critical delay is one that will affect the project completion date (or some other
important milestone date on a project). Critical delays can’t really be made up – they
just tack on extra time.
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Non-critical delays will affect the completion of specific activities, but not the
completion date or the date of some important milestone. The determining factor is
whether the delay extends the Critical Path of the project.
2. Excusable vs. Inexcusable
An excusable delay is one that allows the contractor an extension of time,

compensation, or both.
Inexcusable delays are those where the contractor was entirely responsible for
extending the project’s duration. If this is the case, then the contractor will be liable for
any costs or damages caused by the delay.
3. Compensable vs. Non-Compensable Delays
All excusable delays are compensable. This means that any time a delay is
considered “excusable,” the contractor will generally have a claim for a time extension,
compensation, or both! If the contractor is solely at fault, the delay will very likely be
non-compensable. Non-compensable delays can fall under any of the other
categories, depending on the situation and contract terms.

Damages
Are intended for recovery of costs caused by the delay.

Legal Damages for Construction Delays
1. Damages claimed by a contractor
For owner-caused delays (or those caused by another contractor), a contractor may
have a claim for:
Project management & supervisory expenses

Overhead
Loss of use
Loss of rents
Lost profits
Insurance costs
Construction loan interest
2. Damages claimed by an owner
When a contractor is at fault for a delay, an owner may have a claim for:
Supervision costs
Extended general conditions
Jobsite trailer rental
Temporary facilities/utilities
Liability insurance
Equipment rental & maintenance costs
Field labor
Increased materials cost
Lost productivity
Hourly labor rate increases
De-mobilization/re-mobilization
Types of Damages
1. Liquidated Damages (LD) or Liquidated Ascertained Damages (LAD)
Pre-determined, mentioned in the contract and is a genuine pre-estimate of the loss

per day if a project gets delayed.
Deducted irrespective of the actual employer loss as a result of the delay.
May be expressed in the percentage or of the contract amount or actual amount per
day or week. (CIAP DOC 102 – 1/10 of 1% of Contract Amount per day)
With Cap or Maximum level of Damages (CIAP DOC 102 – But not more than 10%)
If there is no clause in the contract about the limit of LD, it may be implied at 10%
(by Phil. Practice)
2. Unliquidated Damages
Based on actual loss and has to be proved.

If there is no clause in the contract about Liquidated damages, Unliquidated
damages are applicable.

Defenses to Construction Delay Claims
1. Concurrent Delay
A concurrent delay occurs when multiple activities affect the project’s timeline, but the
delays don’t precisely stack on top of each other. That doesn’t necessarily mean the
delays have to happen at the exact same time to be considered concurrent.
2. No Damages for Delay Clause
Contract clause stating that delays are not compensable. Enforceability may be limited
by statute.
Some exceptions might be where delays:
are not covered by the clause language,

are not contemplated at the time of contracting,
sustain for an unreasonable time,
result from active interference by the owner, or
result from a fundamental breach of contract by the owner that justifies the non-
enforcement of the clause.
3. Improper Notice
A contractor failed to notify the owner of the delay in the time required by the contract.
4. Time is of the Essence
A “time is of the essence” clause means that the contract will hold everyone
responsible for completing the agreed upon work by the agreed upon time.
5. Force Majeure Events
Force majeure generally covers any occurrences that were (a) not reasonably
foreseeable at the time of contracting, (b) beyond the control of the parties, and (c) not
caused or compounded by negligence. Consequently, when one of these events
occur, performance will either be suspended or excused depending on the contract
terms and the duration of the disruption

End of Discussion.

Reference:
Uniform General Conditions of Contract for Private Construction – CIAP DOC 102
The International Federation of Consulting Engineers; Fédération Internationale des

Ingénieurs – Conseils) Suite of Contracts
RICS.Cost Reporting: Royal Institution of Chartered Surveyors (RICS)

For more references, kindly check TIP Online Resources
TIP Library
(https://www.tip.edu.ph/library.html)

Proprietary Clause

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osneey)
Module 3
: aeet as
aI a ES and Damages
lis nie Types of Damages
s Contract Administration involves all necessary activities for a
construction project performance from the initial stage to its final
stage. These activities include monitoring of the project
performance with the agreed contractual obligations between the
parties to the contract.
* Design Stage
« Tender Stage _
« Construction stage
¢ Handover and
Final Account stage
— :
sie Typically, a construction project undergoes few different stages.
Ce Pl fef aml e-tei—) In this stage, the employer is with his

* Tender Stage conceptual plan in mind. In most of the
projects, a project manager will be
* Construction stage appointed at this stage. Contract
¢ Handover and Administration duties during this stage
Final Account stage include monitoring and controlling both
cost and time under the pre-determined
terms with the Employer.
k
* Design Stage Procurement is an important stage for any
project and this is the stage where more
¢ Tender Stage contract administration work involves. It is
, necessary to determine the tender procedure
I and prepare the tender documents. In most
¢« Handover and Slag projects, teed caged “Hi
1 ccount stage be part of the contract documents. Therefore
ee 8 it is important to check the tender documents
thoroughly before calling for bids.
ie
* Design Stage In this stage, it is necessary to understand

* Tender Stage the contract document and the obligations
to each party. During the construction
* Construction stage stage, more risk is involved in terms of
* Handover and both time and money. At the same time, it
Final Account stage is also necessary to get the work done with
the required quality and as mentioned in
the specifications.
2 Typically, a construction project undergoes few different stages.
« Design Stage Contract Administration during the maintenance,

completion and Final account stage is mostly
« Tender Stage similar in different forms of contract. In this
stage, it is necessary to monitor the. defects,
« Construction stage warranties if necessary, and any other liabilities.
Once all the obligations are fulfilled, it is
¢ Handover and necessary to prepare the Final Account
Certificate. Adjustments to the contract
Final Account stage document in terms of variations, liquidated
damages or penalties should indicate in Final
Account. In this stage, the release of retention
money is included too.
* Define the scope
and deliverables = *
« Include a detailed
timeline
« Sort out finances
« Plan the work
« Anticipate the risks
eee scope The first step to ensuring a successful
and deliverables contracting process is to clearly lay out
¢ Include a detailed expectations, including the scope and
timeline deliverables. Scope creep is a common
« Sort out finances issue that can derail any contract, so
including in writing exactly what the
¢ Plan the work contract does and does not cover will help
* Anticipate the risks keep the contract on track.
* Define the scope It may sound like a given, but contract
and deliverables administration plans should include a
« Include a detailed detailed timeline accounting for every
timeline important milestone throughout the life of
¢ Sort out finances the contract, including project start and
end dates, deadlines for deliverables, and
« Plan the work progress updates.
+ Define the scope To avoid contract disputes and maintain
and deliverables positive relationships between _ both
¢ Include a detailed parties, everyone involved in the contract
timeline administration process should know the
« Sort out finances financial terms of the agreement,
including the value of the contract,
« Plan the work payment intervals, and the process to
« Anticipate the risks address the need for any _ additional
expenses (depending on the type of
contract).
* Define the scope To ensure transparency and accountability,
and deliverables the plan should include details about how
« Include a detailed the contract deliverables will be executed,
ia aatslel ass including the people who will be working
¢ Sort out finances on each part of the agreement (including
both internal and third-party personnel, if
¢ Plan the work applicable).
0
ia ts
« Define the scope Every contract comes with risk, but

and deliverables putting plans in place to account for those
« Include a detailed risks can prevent the contract from failing.
timeline Outline the most likely risks for each
¢ Sort out finances agreement and the steps that should be
taken in the event those events actually
« Plan the work happen.
* Anticipate the risks
ae Variations
* Powers and responsibility of the engineer

* Delays, Time extension and Liquidated Damage
a NUL
aah Neh Uiaaal ale
* Default of employer and contractor
* Suspension
* Termination
¢ Claims and Disputes
an
Construction delays are among the most common disputes that

arise on projects. However, the process of establishing and proving
a delay claim can get complicated quickly. That’s why having a
comprehensive understanding of the necessary elements to justify
a delay claim can be a priceless advantage.
A delay damages construction contract contains a clause that
provides for damages due in the event of delays. The term “delay”
may be broadly defined, however, so the amount of damages can
vary widely.
¢ Critical vs. Non-Critical
« Excusable vs. Inexcusable
* Compensable vs. Non-Compensable Delays
Soiree Na Couater
* Excusable vs. Inexcusable
« Compensable vs. Non-Compensable Delays
A critical delay is one that will affect the project completion date (or
some other important milestone date on a project). Critical delays
can’t really be made up - they just tack on extra time.
Non-critical delays will affect the completion of specific activities, but
not the completion date or the date of some important milestone. The
determining factor is whether the delay extends the Critical Path of
the project.
: are vs. Inexcusable
___ + Compensable vs. Non-Compensable Delays
An excusable delay is one that allows the contractor an extension
of time, compensation, or both.
Inexcusable delays are those where the contractor was entirely
responsible for extending the project’s duration. If this is the
case, then the contractor will be liable for any costs or damages
caused by the delay.
ie * Critical vs. Non-Critical
ive
__ « Excusable vs. Inexcusable

* Compensable vs. Non-Compensable Delays
All excusable delays are compensable. This means that any time a
delay is considered “excusable,” the contractor will generally
have a claim for a time extension, compensation, or both! If the
contractor is solely at fault, the delay will very likely be non-
compensable. Non-compensable delays can fall under any of the
other categories, depending on the situation and contract terms.
Damages claimed by a contractor
For owner-caused delays (or those caused by another
contractor}, a contractor may have a claim for:
* Project management & ¢ Lost profits

OA Sa asec maesye:
* Overhead Mot ) iaav
reid (elaM(oy-la Mil eacatie
* Loss of use
* Loss of rents
Damages claimed by an owner
When a contractor is at fault for a delay, an owner may have
a claim for:
¢ Supervision costs costs
* Extended general conditions ¢ Field labor
* Jobsite trailer rental * Increased materials cost
* Temporary facilities/utilities ¢ Lost productivity
* Liability insurance * Hourly labor rate increases
* Equipment rental & maintenance »* De-mobilization/re-mobilization
* Unliquidated Damages
at Molaraee as unliquidated when the amount of damages is
i olaha) anes or subject to an unforeseen event that makes the
3 ei not calculable.
* Concurrent Delay,
* No Damages for Delay Clause
¢ Improper Notice
¢ Time is of the Essence
* Force Majeure Events
ectenetr Delay A concurrent delay occurs when
ee) Damages for Delay Clause multiple activities affect the
project’s timeline, but the delays
« Improper Notice don’t precisely stack on top of each
* Time is of the Essence other. That doesn’t necessarily
* Force Majeure Events mean the delays have to happen at
the exact same time to be
considered concurrent.
¢ Concurrent Delay
¢ Improper Notice
¢ Concurrent Delay
* No Damages for Delay Clause

A “time is of the essence” clause
means that the contract will hold
everyone responsible fels
completing the agreed upon work
by the agreed upon time.
: 7: Pajeure Taha
ER eel ire]
a cca) an Pylt-\Y Force majeure generally covers any
* No Damages for Delay Clause occurrences that were (a) not
reasonably foreseeable at the time
« Improper Notice of contracting, (b) beyond the
« Time is of the Essence control of the parties, and (c) not
* Force Majeure Events caused Or | compounded oY)
negligence. Consequently, when one
of these events occur, performance
will either be suspended or excused
depending on the contract terms
and the duration of the disruption

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12/4/22, 8:21 PM 3.

3.0 Intended Learning Outcomes (ILO's)

Intended Learning Outcomes:

At the end of the session the students should be able to:

1. Understand the Contract Administration

Property of the Technological Institute of the Philippines (T.I.P.). No part of the

HAVING FUN? DON'T WORRY, THERE'S MORE.

Return to Modules! (https://tip.instructure.com/courses/38256/modules)

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3.1 Contract Administration

The purpose of contract administration is to see that the contract is properly

Contract Administration involves all necessary activities for a construction project

Different stages of a Construction Contract

Typically, a construction project undergoes few different stages.

Design stage Contract Administration

Contract Administration during the Tendering Stage

Contract Administration during Construction Stage

Contract Administration during the construction stage involves progress claims,

Construction Contract Administration during Completion and Final Account

Best Practices for Preparing a Contract Administration Plan

1. Define the scope and deliverables

2. Include a detailed timeline

3. Sort out finances

4. Plan the work

5. Anticipate the risks

Issues to be considered in Contract Administration

The International Federation of Consulting Engineers; Fédération Internationale des

RICS.Cost Reporting: Royal Institution of Chartered Surveyors (RICS)

For more references, kindly check TIP Online Resources

Property of the Technological Institute of the Philippines (T.I.P.). No part of the

HAVING FUN? DON'T WORRY, THERE'S MORE.

Return to Modules! (https://tip.instructure.com/courses/38256/modules)

Return to Home Page! (https://tip.instructure.com/courses/19379)

3.2 Delays and Damages

Types of Construction Delay Claims

1. Critical vs. Non-Critical

2. Excusable vs. Inexcusable

An excusable delay is one that allows the contractor an extension of time,

3. Compensable vs. Non-Compensable Delays

Are intended for recovery of costs caused by the delay.

Legal Damages for Construction Delays

1. Damages claimed by a contractor

Project management & supervisory expenses

Construction loan interest

2. Damages claimed by an owner

1. Liquidated Damages (LD) or Liquidated Ascertained Damages (LAD)

Pre-determined, mentioned in the contract and is a genuine pre-estimate of the loss

Based on actual loss and has to be proved.

Defenses to Construction Delay Claims

2. No Damages for Delay Clause

Some exceptions might be where delays:

are not covered by the clause language,

4. Time is of the Essence

5. Force Majeure Events

The International Federation of Consulting Engineers; Fédération Internationale des

RICS.Cost Reporting: Royal Institution of Chartered Surveyors (RICS)

For more references, kindly check TIP Online Resources

Property of the Technological Institute of the Philippines (T.I.P.). No part of the

HAVING FUN? DON'T WORRY, THERE'S MORE.

Return to Modules! (https://tip.instructure.com/courses/38256/modules)

Return to Home Page! (https://tip.instructure.com/courses/19379)

sie Typically, a construction project undergoes few different stages.

Ce Pl fef aml e-tei—) In this stage, the employer is with his