WOLKITE

UNIVERSITY

COLLEGE OF ENGINGEERING AND TECHNOLOGY

DEPARTMENT OF HYDRAULIC AND WATER RESOURCE
ENGINEERING
COURSE NAME: CONTRACT SPECIFICATION AND QUANTITY
SURVEYING
COURSE CODE : CEng-4104
INDIVIDUAL ASSIGNMENT
NAME: ADDISHIWOT TAFESSE
ID NO : 0159/13
SUBMITTED TO : Mr.KASSAHUN
SUBMISSION DATE: 10/1/2024
Contents
1-Discuss in detail Special characteristics of insurance contracts and basic part of insurance policies? ..... 1
1. Absolute Honesty .................................................................................................................................. 1
2. Uncertain Outcome ............................................................................................................................... 1
3. Conditional Contract ............................................................................................................................. 1
4. Indemnity .............................................................................................................................................. 1
5. Insurable Interest................................................................................................................................... 1
6. Risk Transfer......................................................................................................................................... 1
Basic Parts of Insurance Policies: ................................................................................................................. 1
1. Declarations .......................................................................................................................................... 1
2. Coverage Agreement ............................................................................................................................ 1
3. Policy Terms ......................................................................................................................................... 2
4. Exceptions:............................................................................................................................................ 2
5. Additions/Supplements ......................................................................................................................... 2
2-Explain the process of a project risk management step by step? ............................................................... 2
The Crucial Role of Effective Communication in Project Risk Management .............................................. 2
1. Risk Identification:................................................................................................................................ 2
2. Risk Assessment: .................................................................................................................................. 2
3. Risk Response Planning:....................................................................................................................... 2
4. Risk Mitigation: .................................................................................................................................... 3
5. Risk Monitoring and Control: ............................................................................................................... 3
6. Risk Communication: ........................................................................................................................... 3
7. Documentation and Reporting: ............................................................................................................. 3
8. Review and Learn: ................................................................................................................................ 3
3-Discuss in detail all about contract type that are used in construction projects! ....................................... 4
Lump Sum or Fixed Price Contract (Firm Fixed Price - FFP) .................................................................. 4
Cost Plus Contracts ................................................................................................................................... 4
Unit Price Contracts .................................................................................................................................. 4
Guaranteed Maximum Price (GMP) Contracts ......................................................................................... 4
Design-Build Contracts ............................................................................................................................. 5
Time and Material Contracts .................................................................................................................... 5

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1-Discuss in detail Special characteristics of insurance contracts and basic
part of insurance policies?
Insurance contracts exhibit numerous distinctive attributes that differentiate them from other
contractual agreements. These attributes encompass:

1. Absolute Honesty: Insurance contracts operate on the principle of absolute honesty, requiring
both the insurer and the insured to truthfully and candidly disclose all pertinent information..
This principle guarantees openness and equity within the contract.

2. Uncertain Outcome: Insurance contracts are characterized by an uncertain outcome, where

the performance of the contract hinges on unpredictable events. The payment of premiums is
made in exchange for the insurer's promise to compensate for potential future losses, which may
or may not occur.

3. Conditional Contract: Insurance contracts are conditional contracts, meaning the insurer's
obligation to pay the claim is contingent upon the occurrence of the specified event or loss
covered by the policy.

4. Indemnity: The principle of indemnity in insurance contracts ensures that the insured cannot
profit from the insurance policy. The objective is to return the insured to their prior financial
standing before the loss, devoid of any financial gain stemming from the claim.

5. Insurable Interest: Validity of an insurance contract necessitates the insured possessing an

insurable interest in the subject matter. This implies that the insured should have a financial stake
or benefit tied to the existence or protection of the insured object, and would incur a loss if the
insured event transpires.

6. Risk Transfer: Insurance contracts serve as a mechanism for shifting risk from the insured to
the insurer. By paying a premium, the insured transfers the potential loss risk to the insurer, who
commits to indemnify the insured against covered events.

Basic Parts of Insurance Policies:

1. Declarations: This section includes basic information such as the insured's name, address,
policy period, premium amount, and a description of the insured property or person.

2. Coverage Agreement: The coverage agreement delineates the extent of protection offered
within the insurance policy. It details the covered risks or perils, coverage limits, and the
insurer's responsibilities in the event of a covered loss.

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3. Policy Terms: This segment enumerates the duties and responsibilities of both the insured
party and the insurer. It includes provisions such as the notice of loss, the insured's duties in the
event of a claim, policy cancellation terms, and other requirements for coverage.

4. Exceptions: Exclusions detail the risks or events that the insurance policy does not
cover.These could include specific perils, circumstances, or types of property that the insurer
does not intend to cover.

5. Additions/Supplements: These refer to amendments or supplementary documents that alter

or augment the coverage outlined in the standard insurance policy. These additions serve to tailor
the coverage to meet the specific requirements of the insured party.

Understanding these special characteristics and components of insurance policies is crucial for
both insurers and insured parties to ensure clarity, compliance, and adequate protection against
potential risks.

2-Explain the process of a project risk management step by step?

The Crucial Role of Effective Communication in Project Risk Management

Effective communication plays a pivotal role in every phase of project risk management. It
ensures that stakeholders, team members, and subject matter experts are actively engaged,
fostering a transparent environment conducive to proactive risk identification, assessment, and
mitigation. Here's an expanded exploration of how communication intertwines with each step of
the risk management process:

1. Risk Identification:
Effective communication encourages collaborative brainstorming involving diverse stakeholders,
team members, and subject matter experts. Open discussions facilitate the comprehensive
identification of potential risks that might impact the project. By fostering a culture of openness,
individuals are more likely to voice concerns or ideas, leading to a more thorough risk
identification process.

2. Risk Assessment:
Communication is crucial in conveying the assessment criteria and findings. Clear articulation of
the likelihood and potential impact of risks is essential to ensure all stakeholders understand the
basis for risk prioritization. Qualitative or quantitative analysis should be communicated
transparently, enabling stakeholders to comprehend the severity and urgency of each risk.

3. Risk Response Planning:

During the planning phase for risk responses, effective communication ensures that stakeholders
comprehend the chosen strategies. Transparent explanations regarding risk avoidance,

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mitigation, transfer, or acceptance enable alignment among stakeholders. By clarifying the
rationale behind each response strategy, active engagement and support from stakeholders are
encouraged.

4. Risk Mitigation:
Communication remains pivotal during the execution of risk mitigation plans. Regular updates
on the progress of mitigation actions, potential obstacles, and necessary adaptations should be
shared promptly. Engaging with the team and stakeholders ensures a shared understanding of the
evolving risk landscape and the effectiveness of mitigation measures.

5. Risk Monitoring and Control:

Throughout the project lifecycle, ongoing communication about the status of risks, changes in
risk factors, and the need for adjustments in risk management strategies is essential. Regular
updates and reports help stakeholders stay informed and enable timely decision-making to
address emerging risks.

6. Risk Communication:
Dedicated communication strategies specifically focused on risks are vital. Regular reports,
meetings, and dedicated risk registers should be utilized to ensure that all stakeholders have
access to updated risk information. These channels facilitate an open dialogue regarding risk
status and the efficacy of risk management strategies.

7. Documentation and Reporting:

Clear and comprehensive documentation of identified risks, assessments, planned responses, and
the status of risk management activities is essential. Detailed records, risk registers, and reports
serve as crucial communication tools, enabling stakeholders to grasp the overall risk profile and
progress in managing these risks.

8. Review and Learn:

Post-project reviews serve as an opportunity to communicate lessons learned from the project's
risk management process. Sharing insights and experiences gathered during the project enables
continuous improvement of risk management strategies for future projects.

In essence, effective communication is woven throughout the fabric of project risk management.
By integrating open dialogue, transparency, and comprehensive information sharing at every
stage, project managers can significantly enhance their ability to identify, assess, and effectively
manage risks, thereby elevating the overall success rate of projects.

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3-Discuss in detail all about contract type that are used in construction
projects!

In construction projects, the choice of contract type significantly influences project dynamics,
risk allocation, cost management, and overall success. Various contract types govern
relationships among stakeholders, including the owner, contractor, subcontractors, and suppliers.
Understanding the intricacies of these contracts is crucial for effective project management and
successful project outcomes.

Lump Sum or Fixed Price Contract (Firm Fixed Price - FFP)

A Lump Sum or Fixed Price Contract establishes a set price for the entire project. The contractor
agrees to execute specific work for a pre-determined sum, irrespective of actual project costs.
This contract type provides cost certainty for the owner, as the contractor assumes the risk of
cost overruns. It offers clear scope delineation and pricing, ensuring a defined project
framework. However, contractors may factor contingencies into initial pricing, potentially
elevating costs. Moreover, changes in project scope often necessitate negotiation for additional
compensation, leading to increased time and expenses.

Cost Plus Contracts

Cost Plus Fixed Fee (CPFF) and Cost Plus Percentage Fee (CPPF) contracts involve reimbursing
the contractor for actual incurred costs along with either a fixed fee or a percentage of total costs.
These contracts promote transparency, making them suitable for projects with evolving scopes or
unclear requirements. They enable better control and oversight of project expenses for the owner.
However, without proper management, they may lack cost control, as contractors might perceive
fewer incentives to manage costs as their fee escalates with project expenses.

Unit Price Contracts

Unit Price Contracts base payments on unit prices for specific quantities of work completed.
Ideal for projects with uncertain work quantities or repetitive elements, they offer flexibility in
dealing with varying work quantities. However, accurate estimation of quantities is paramount to
prevent cost discrepancies. Changes in quantities or specifications can significantly impact
project costs.

Guaranteed Maximum Price (GMP) Contracts

Guaranteed Maximum Price Contracts assure that project costs will not exceed a specified
maximum price. Contractors commit to completing the project within this predetermined
maximum cost. GMP contracts provide cost certainty for owners, allowing potential savings if

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actual costs fall below the agreed maximum. Nevertheless, the initial GMP might be higher due
to risk allocation, and changes in scope can still affect costs.

Design-Build Contracts
Design-Build Contracts entrust a single entity, typically the contractor, with responsibility for
both the design and construction phases. This integrated approach aims to streamline
communication, potentially expediting project timelines and reducing disputes between designers
and builders. However, limited owner involvement in design decisions may impact the final
project outcome. Conflicts of interest between design and construction aspects can arise,
requiring careful management.

Time and Material Contracts

Time and Material Contracts involve payment based on the time spent and materials used by
contractors at predefined rates. These contracts offer flexibility for projects with evolving scopes,
allowing adjustments as the project progresses. However, owners may face challenges in
predicting costs, and contractors may lack motivation to efficiently complete work due to the
absence of fixed pricing incentives.

Each contract type in construction projects possesses distinct advantages and drawbacks,
significantly influencing project management, risk allocation, and overall success. The selection
of the appropriate contract type hinges on project specifics, risk tolerance, complexity, and
relationships between involved parties. Therefore, thorough evaluation of project requirements
and consultation with legal and construction professionals is imperative to select the most
suitable contract type for a particular construction project. Successful project outcomes hinge on
the meticulous consideration and alignment of contract types with project specifics.