CE 511 – CE LAWS, CONTRACTS, SPECIFICATIONS & ETHICS

PREPARED BY: ENGR. ROMEL N. VINGUA

INSTRUCTOR
 Definition of Contract

Contract – is an agreement between two or more

parties for certain acts to be performed or
refrained from which has been arrived at in such
a manner, set forth in such form, and is of such
content that it has enforceable legal effect.
 Classifications of Contract

1. As to origin
2. As to participants
3. As to Obligations
4. As to completion status
5. As to form
6. As to legal status
 Construction by Direct Employment and by
Contract

Two ways of organizational business

arrangement :

1. Direct Employment – the owner purchases all

the materials, pays the wages of all employees,
and either directly or through an employee
supervises the work.

2. Enter into a contract ( this party known as

Contractor) – assume such responsibilities as
are delegated to him by the contract.
 Some factors which affect the cost of the
contract

1. The Engineer
2. Local Conditions
3. Plans and Specifications
4. Contingencies
5. Casualties
6. Transportation
7. Equipment
8. Material
9. Supervision
10. Labor
11. Combinations
12. Graft
13. POlitics
 Construction by Direct Employment of
workmen

Advantages:
1. When required, the construction maybe
started before the plans and specifications
have been completed in all their details.
2. Materials which exactly suit the desires of the
owner maybe provided without excessively
detailed plans and specifications or
complicated contracts.
3. Plan changes maybe incorporated relatively
easily and at minimum cost.
4. Claimed that the expense of the contractor’s
overhead cost and profit is saved by the
owner.
 Construction by Direct Employment of
workmen

Disadvantages:

1. The ability of the owner to assemble and

retain an organization with the skill and drive
comparable to that of a good contractor.
2. Good superintendents and foremen will not in
normal times take temporary jobs unless the
rate of pay is very high.
3. Required procedures for initiating changes
are relatively simple, there is usually
tendency to make changes where the results
are trivial rather than necessary
 Construction by Direct Employment of
workmen

Disadvantages:

4. Good organization of specialist has been

assembled, the overhead cost to maintain this
organization will be substantial.
 Contract at a Fixed Price

The oldest and most common method of letting

work under contract is by receiving competitive
beads with fixed prices This maybe either lump
sum or unit prices on each of a number of items
which together constitute the entire work.
 Waste in Competitive Bidding

Practices used in bidding have been under

discussion for years, an in particular much
criticism has been made under discussion for
years, and in particular much criticism has been
made of the practice of strictly competitive
bidding with no restriction as to the number of
bidders.
 Contracts for Cost Plus a Percentage

To obviate the difficulties of the fixed-price

contract , various methods have been suggested
and tried, the most common method has been to
pay the contractor the actual cost of the
construction work with specified percentage
thereof as compensation for his overhead
expenses, personal services, and profits.
Contracts for Cost Plus a Fixed Sum

By this form of contract, the contractor cannot

profit by any increase in cost, but on the other
hand, will secure the greatest returns to himself
by the least expenditure of time and money for
the owner.
 Contracts for Cost Plus a Variable Premium

Another form of contract , the contractor

undertakes to complete the work for a fixed sum
in a definite time. In addition to this sum, he is
paid a stated premium which is reduced or
increased accordingly as to the actual cost and
time of completion are greater or less than the
stipulated costs and time of completion.
Renegotiation of Contracts

Contracts maybe negotiated without bidding ,

and work under proposed contract may even be
started under a letter of intent before the
contract negotiations have been completed.

To protect the interest of the government and

prevent profiteering, renegotiation laws are
passed whereby means are provided for
compulsary review of gthe contractor’s profit
and if proven excessive, for the the recovery by
the government of the excess.
Construction by Direct Employment and by
Contract