CNST 403/508

Production Control

Construction Project Delivery Methods

By

Samer Alsharif Ph.D., PMP

 Class Outline
• Project Players Roles and Responsibilities

• Organization of Construction Business

• Construction Project Delivery Methods

• Construction Contracts

• Bonds

• Insurances
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Organization of Construction Business
• Project Players…

Owner Designer Constructor

• Roles, Responsibilities, Risk Allocation

• Who’s doing what….

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Organization of Construction Business
• Owner (Owner Representative)
• Define the scope of work
• Provide evidence for having the financial capability
• Provide evidence for the site title
• Manage the design and construction process
• Accomplish environmental remediation
• Provide site survey and zoning acceptance
• Necessary approvals for easements (gas, electricity, etc.)
• The right to stop the work…
• Testing services
• The right to clean up if the contractor fails to do so…
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Organization of Construction Business
• Designer (A/E)
• Design the project
• Construction administration services
• Advising and consulting services
• Observing work progress
• Communication between the owner and the contractor
• Review and approve submittals
• Involve in preparing and reviewing change orders (CO)
• The authority to reject work
• Evaluate contractor’s progress payment
• Project documents interpretation (specs, drawings, etc.)
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Organization of Construction Business
• Constructor (General Contractor)
• Review contract documents and field conditions (field
measurements, verify field conditions, site visits, etc.)
• Construct the work safely according to the specs and drawings
• Superintendence (supervise and direct the work)
• Construction permits
• Schedule development and compliance
• Submit to the A/E shopdrawings
• Pay for labor, materials, equipment, and subcontractors
• Provide accurate as built documents
• Provide warranties
• Clean up

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Single-Contract System

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Separate-Contracts System

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Organization of Construction Business
• Multiple Prime Contractors:
➢ Advantages:
• Save the cost of the G.C. profit and overhead
• To finish the work early (if the owners have the
experience and capacity)

➢ Challenges:
• The owner must perform the day-to-day management
and coordination.
• The owner must perform the General Conditions
responsibilities (site access, cleaning, office space,
utilities, etc.)
• Schedule challenges (owner’s limited experience)
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 Construction Project Delivery Methods
• Design-Bid-Build (DBB) Traditional Method
➢ Most common government used method
➢ linear (sequential) process with no task overlap
▪ Plans and specs are completed by the Architect/Engineer
▪ After design is complete and accepted by the Owner, the
bids are issued
▪ Contractors bid the project exactly as it is designed and the
lowest responsible responsive bidder awarded the
contract.
Max.
Scope work
Design Construction Schedule
definition
Duration
Budget Bid
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 Construction Project Delivery Methods
• Design-Bid-Build (DBB) Traditional Method

➢ Responsible bidder
✓ Provide required payment bond and performance bond
✓ Demonstrate the managerial and financial capabilities
➢ Responsive bidder
✓ Submit bid on time
✓ Submit bid using required forms

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 Construction Project Delivery Methods
• Design Build (DB)
➢ The Contractor and Architect are one entity
➢ Hired by the Owner to deliver a complete project
➢ Fast Track (overlap tasks)

Owner

Design/Builder

Design
Subcontractors Vendors
Consultants
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 Construction Project Delivery Methods
• Engineering-Procurement-Construction (EPC)
➢ The Owner procures a single contract for:
✓ Design
✓ Equipment / materials acquisitions
✓ Construction
➢ The EPC firm provides Pre-Construction services
➢ Examples: Oil refineries, mining plants, etc.

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 Construction Project Delivery Methods
• Construction Management (CM) Methods

➢ Construction Manager as Advisor

• Consulting services

➢ Construction Management @ Risk

• Assume the construction risk of time, cost, quality, safety,
risk, etc.

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 Construction Project Delivery Methods
• Construction Manager (CM) as Advisor
➢ Consulting services
➢ The owner interviews and selects a fee-based firm
✓ Qualifications
✓ Experience

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 Construction Project Delivery Methods
• Construction Manager (CM)
➢ The CM provides Pre-Construction services:
✓ Review the design for constructability
✓ Prequalifies subcontractors
✓ Manage the bidding process
✓ Act as a consultant to the Owner
✓ Review time, cost, quality, safety, risk, etc.

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 Construction Project Delivery Methods
• Construction Management @ Risk
➢ Guaranteed Maximum Price (GMP)
➢ The final construction price:
✓ CM’s fee
✓ Overhead
✓ Contingencies
✓ All subcontractors and vendors

➢ The design team selected by the owner

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 Construction Project Delivery Methods
• Integrated Project Delivery (IPD)
➢ Multiparty contract
➢ Shared risk / reward delivery method
➢ All major parties (including subcontractors) selected
and involved early
➢ New – under development

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 Construction Contracts
What is in a Construction Contract
• Construction Contract
An agreement between two parties that is enforceable
by law… To control & allocate construction risk

• Mutual agreement - There must be meeting of minds

• There must be an offer and acceptance
• Consideration – payment
• Lawful
• Capacity - legal capacities
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 Construction Contracts
What is in a Construction Contract
• The purpose of Construction Contract is to
deliver / produce
• Safely
• A quality construction project
• On time
• Within budget

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 Construction Contracts
• Typical contract provisions include
• Scope of the work
• Time of completion (schedule)
• Contract sum
• Progress payment
• Retained percentage (retention)
• Schedule of value (SOV) – contract prices for
specific items
• Work in place (% complete) and stored materials
• Acceptance and final payment
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 Construction Contracts
What is in a Construction Contract
• Essential Contract Document
• The Agreement
• The General Conditions
• The Special Conditions
• The Drawings
• The Technical Specs

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 Construction Contracts
What is in a Construction Contract
• The Agreement
✓ Date
✓ Names and addresses
✓ Description of the scope of work
✓ Time limitations
✓ Contract considerations
✓ Payment conditions
✓ References to other documents
✓ Signatures
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 Construction Contracts
What is in a Construction Contract
• The General Conditions (G.C’s)
✓ Defines roles and responsibilities
✓ Risk
✓ Clauses used for contract administration
• Changes
• Time
• Insurances and bonds
• Termination and suspension of work
• Etc.
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 Construction Contracts
What is in a Construction Contract
• The Special/Supplementary Conditions
✓ # of copies of contract documents
✓ Survey information
✓ Materials provided by the owner
✓ Cost and schedule reporting requirements
✓ Deliverables start and finish dates
✓ Traffic controls requirements
✓ Testing requirements
✓ Etc.

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 Construction Contracts
What is in a Construction Contract
• The Drawings
• Architectural drawings
• Structural drawings
• Mechanical drawings
• Electrical drawings
• Plumbing drawings

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 Construction Contracts
What is in a Construction Contract
• The Technical Specs
• Written requirements
• Fully define requirements for materials,
equipment, systems, standards, etc.
• Quantity of materials
• Quantity of workmanship
• Erection and installation methods
• Testing and inspections
• …….
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 Construction Contracts
• Fixed Price (Lump Sum) Contracts
✓ Scope is fully defined
✓ Quantities are known
✓ The owner knows the construction costs
✓ The contractor accepts the bulk of the project risk

• Unit Price Contracts

✓ Fixed unit price
✓ Scope is fully defined
✓ Quantities are unknown (the owner provides estimated quantities –
most common in roads construction)
✓ The contractor assumes the risk of completing the work for the
stated unit price, the owner assumes the risk of the accuracy of the
quantities
✓ Usually unit price renegotiated if quantities vary by ….%
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 Construction Contracts
• Cost Reimbursable Contracts
✓ Known as….Cost Plus Fee
✓ Scope is not fully defined
✓ Uniqueness, schedule, and quality take precedence
✓ Allows for construction to begin before design is
completed (drawings and specs)
✓ The owner typically assumes the risk of cost overrun
✓ The contractor assumes the risk of schedule, quality,
constructability, etc.
✓ Final fee – fixed, percentage, GMP

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 Construction Contracts
• Cost Reimbursable Contracts
✓ Final fee:
▪ Cost plus percentage fee
▪ Final fee is based on the construction cost
▪ Cost plus fixed fee
▪ Fixed fee regardless of the project cost
▪ Cost plus fixed fee with GMP
▪ Fixed fee with guaranteed maximum construction cost

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 Construction Contracts
• Cost Reimbursable Contracts
✓ Final fee:
▪ Cost plus fixed fee with GMP with incentives
▪ The owner and the contractor share saving
▪ Cost plus fixed fee with incentives or penalty
▪ Target cost is set up, incentive or penalty based on the
actual cost
▪ Cost plus sliding scale fee
▪ Fee decreases as the cost increases

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 Construction Contracts
• Time and Materials Contracts
✓ Time spent
✓ Resources expended

• Hybrid Contracts
✓ More than one type of contracts in the same
project
✓ Large projects
▪ Design – fixed price
▪ Construction – cost plus

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 Project Manual
• The complete written document or a set of documents
that accompanies the plans
• Typically presented in the following sequence:
1. Invitation to bid (advertisement for bidders)
2. Instructions to bidders
3. Bid (or proposal) forms
4. Form of owner–contractor agreement
5. Form of bid bond
6. Forms of performance and payment bonds
7. General conditions of the contract
8. Supplementary general conditions
9. Specifications (technical specifications)
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 Bonds
• Referred to surety bonds; written documents that
describe the conditions and obligations relating to the
agreement
• If the contractor is in breach of contract, the surety must
complete the terms of the contract
➢ Bid Bond
• Assures the owner that the contractor will sign the contract
or at least begin to perform on the contract
➢ Performance Bond
• Assures the owner that the contractor will complete the job
➢ Payment Bond
• Assures the owner that the contractor will pay labor,
subcontractors and suppliers
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 Bonds
➢ Subcontractor Bonds
• The G.C may require the subcontractor to provide payment
and performance bonds
• Protect the general contractor against financial loss and
litigation due to default by a subcontractor
➢ License or Permit Bond
• When a state law or municipal ordinance requires a
contractor’s license or permit
• The bond guarantees compliance with statutes and
ordinances (most common in public roads construction)

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 Insurances
• Often required by the contract documents, and state statute
• Protects the contractors business assets
➢ Builder’s Risk Insurance
• Covers project during construction (fire, flood, theft, etc.)

➢ Worker’s Compensation Insurance

• Provides benefits to employees or their families if they are killed
or injured during the course of work
• The rate is based on the contractor’s experience rating

➢ Comprehensive or General Liability Insurance

• Covers liability arising out of negligent actions
• Exclusions; malpractice, defective construction

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 Insurances
➢ Pollution or Environmental Insurance
• Most general liability insurances excludes pollution
➢ Errors and Omissions Insurance
• A/E, DB firms
➢ Umbrella Insurance
• To cover anything not covered in other policies
➢ Automotive, Property, Life, etc…..

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 Assignment

In a table and bullet points format, summarize

the advantages and disadvantages of each
project delivery method

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