Professional Documents
Culture Documents
Construction Project Delivery Method and Contract Management
Construction Project Delivery Method and Contract Management
Class Outline
• Project Players Roles and Responsibilities
• Construction Contracts
• Bonds
• Insurances
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Organization of Construction Business
• Project Players…
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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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Single-Contract System
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
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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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 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 Management @ Risk
Guaranteed Maximum Price (GMP)
The final construction price:
CM’s fee
Overhead
Contingencies
All subcontractors and vendors
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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
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
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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.)
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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
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