CONSTRUCTION CONTRACTING STATAGIES

Types of building contracts

 Contracting strategies can influence various parties involved in the project, Including CONSULTANTS and
entire PROFESIONAL TEAM.
 CONTRACTING OPTIONS
- DESIGN-BID-BUILD (Normal process)
- DESIGN + BUILD (Turnkey solution)
- DEVELOP + CONSTRUCT
- CONSTRCUCTION MANAGER
- MANAGEMENT CONTRACTOR

CONSTRUCTION PRICING STRATAGIES

- Make use of a Quantity surveyor Who will carry out exact budget calculations and final cost control.
- Fixing of a price for construction is not always realistic.
o Contractors will not fix their costs when prices (Labour / Material) are continually adjusting.
Usually upwards.
o During construction there are often changes or variations to the works.
- Contractors generally compensate by charging more to fix their costs

PRICING STRATEGIES OPTIONS

- LUMP SUM
- ACTIVITY SCHEDULE
- BILL OF QUANTITIES
- COST REIMBURSABLE
- TARGET COST
- ALTERNATIVE STARTAGIES

FORMS OF CONSTRUCTION CONTRACTS

FACTORS TO CONSIDER:

- Complexity, type, location, size of the project.

- Employers level of involvement.
- Requirements of the selected pricing + contracting strategies.
- Balanced levels of risk between the parties

ESSENTIAL TERMS OF THE CONTRACT

- The parties
- Description of the works
- The agreed price
- The period of construction

FORMS OF SUB-CONTRACTS
Roles and relationships of the Subcontractor relate to the management of Risks between the employer, the
principal contractor, and the subcontractor. The risks will relate to the following:

- The Risks between the parties

o Performance
o Time requires
o Quality required
 o Payment for the work

Forms of Subcontractors

1. Direct Subcontractors
o The employer engages a direct contractor to carry out certain work alongside the main
contractor while the main building contractor is on the site.
o The main building contractor is not responsible of his performance.
o Any delay caused by the direct contractor may cause the contractor an extension of time.
o Should the direct contractor default, any additional costs incurred will be for the employer
2. Selected subcontractors
o A subcontractor which is selected Jointly by the main contractor and by the employer / agent.
o The main contractor is liable
o Not entitled to an extension of time
o Should the direct contractor default, any additional costs incurred will be for the main contractor

KEY CLAUSES IN THE JBCC

When words like (Notice, accept, authorise, issue, allow, certify, demand, instruct, grant) it must be done so “IN
WRITING”

CLAUSE 6 = EMPLOYERS AGENTS

The Employer Warrants that the principle agent has = Full AUTHORITY AND OBLIGATION to ACT and BIND the
employer in terms of the agreement.

CLAUSE 12 = EXECUTION

On being given possession of the site, the contractor shall commence with the works within TEN Working days, and
proceed with: DUE DILIGENCE, REGULARITY, EXPEDITION, SKILL & APPROPREATE RESOURCES. To bring the works
to practical completion and to Final completion.

CLAUSE 19 = PRACTICAL COMPLETION

Practical Completion = State of completion that has been certified by the principal agent & the Works have been
completed free of PATENT defects (Other than Minor defects) and can be used for the intended purpose. the works
must be SAFE FOR USE

You are therefore obligated to Monitor the progress + Inform the Contractor of the outstanding work to be
completed to achieve PRACTICAL COMPLETION

CLAUSE 23 = REVISION FOR PRACTICAL COMPLETION

Revision of date of practical completion: The contractor is entitleD to the REVISION of the date of practical
completion (granted by the principle agent) Either With or Without an adjustment to the contract value. (TIME AND
COST – The cost is directly related to the delay in the project and decided in the contract data)

CLAUSE 28 + 29 = SUSPENSION + TERMINATION

The contractor may: Give notice to TERMINATE the agreement where the employer has failed to: or if the Principal
agent has FAILED TO ISSUE a PAYMENT CERTIFICATE by the due date (Specified in the contract data)

Compile a STATUS REPORT of the works, which includes marked up drawings and photographs that records the
completed and incomplete work on the date of termination. Your status report will be important to determine the
value of the FINAL ACCOUNT and could be relied on during the course of DISPUTE RESOLUTION
CLAUSE 30 = DISPUTE RESOLUTION

Both parties shall: REGARDLESS of whether a disagreement or a dispute exists between them Continue to perform
their OBLIGATIONS, in terms of the contract

OBLIGATIONS OF THE PRINCIPAL AGENT

PRINCIPAL Agent – Representing the employer / These professionals do not acquire any contractual rights and
obligations but carry these out on behalf of the employer.

Validate why the architect is the best person to be the PA.

o Architects have TOTAL PROJECT COMPREHENTION.
o Make the best decisions to administer and manage the project as per what the client wanted from the
very beginning.
 Principal Agent may DELIGATE:
o Accept the design from a subcontractor
o Periodically Inspect the works
o Issue lists for practical and Final completion
o Prepare valuations for interim + Final payment certificates
 Principal Agent may Not DELIGATE:
o Issue an interim or final payment certificate to the contractor
o Issue special payment certification relating to a subcontractor
o Issue a practical or Final completion certificate
o Revise the date for practical completion
o Issue notices of cancellation of the agreement

STAGES OF THE JBCC_PBA

- Practical Completion = State of completion that has been certified by the principal agent & the Works have
been completed free of PATENT defects (Other than Minor defects) and can be used for the intended
purpose. the works must be SAFE FOR USE

DELAYS

- Delays to the contractor’s progress may be a result in time + and Cost + overruns + are a major source of Claims
and Disputes
- A delay in works progress in not necessarily the same as a delay in practical completion
o CRITICAL DELAY = Will have an adverse effect on the critical path of the contractor’s program.
o NON – CRITICAL DELAY = will not impact Practical completion.
o NON – JUSTIFIABLE DELAY = A delay caused by the contractor or any aspect that falls within the
contractor’s control, no additional time or compensation will be granted for such delays.

OTHER TYPES OF JBCC AGREEMENTS

- The PA – carries greater responsibility that a normal JBCC, the contractor must report delays + Claims at SITE
MEETINGS – therefore the Minutes of the meetings must be recorded and become and form part of the
contract. Discussions held, progress, contract insurance, drawings issued, claims, decisions regarding claims.
- therefore, one should consider your professional fees especially when you consider the additional work
required as the Principal Agent, for this agreement!
DISPUTE RESOLUTIONS
The shortage of construction work results in a reduction of pricing by contractors, meaning there is NO MARGIN FOR
ERRORS.

- ARBITRATION - The arbitrator’s judgement will be final and binding.

- ADJUDICATION - The decision must be made by the adjudicator within Twenty-eight days.

ADVANTAGES OF DISPUTE RESOLUTION.

- Main advantage – It will not interfere with the PROGRESS of the works. Therefore, for the good of the project.

Suggestions on how to avoid disputes:

- Keep ADEQUATE RECORDS.