CONTRACTS AND SPECIFICATIONS

CONSTRUCTION METHODS AND PROJECT

MANAGEMENT
CONSTRUCTION METHODS AND PROJECT MANAGEMENT

Virtually all civil engineering structures are unique. They have to be designed for
some specific purpose at some specific location before they can be constructed
and put to use. Consequently, the completion of any civil engineering project
involves five stages of activity which comprise the following:
1. Defining the location and nature of the proposed works
2. Obtaining any powers and permissions necessary to construct the works
3. Designing the works and estimating their probable cost
4. Constructing the works
5. Testing the works as constructed and putting them into operation
Risks in Project Delivery
There are inherent risks arising in this process
because the design, and therefore the estimated cost
of the works, is based on assumptions that may later
have to be altered. The cost can be affected by the
weather during construction, the nature of the ground
Limited Visibility Data Overload
or groundwater conditions encountered, or changes in
requirements that may involve additional expenditure.
The contract must therefore identify risks and allocate
who is to bear the cost of such extra work or
unforeseen conditions.
CONTRACTS

An agreement enforceable by law is a “Contract”. Those agreements

enforceable by law are made by the free consent of parties competent
to contract, for a lawful consideration and with a lawful object. The
essential ingredients include:
1. Offer
2. Acceptance
3. Consideration
4. Lawful object
5. Competent parties
TYPES OF CONTRACTS

LUMPSUM CONTRACT

ITEM RATE CONTRACT

Supervised Learning
LUMPSUM AND SCHEDULE CONTRACT

Unsupervised Learning
COST PLUS FIXED FEE CONTRACT

Reinforcement Learning

COST PLUS PERCENTAGE OF COST CONTRACT

SPECIAL CONTRACT
A. LUMPSUM CONTRACT
In this contract, the contractor offers to do the whole work as shown in
drawings and described by specifications for a total stipulated sum of money. It is
suitable where contractors have previous experience in similar works.

MERITS Owner knows total cost; contractor can earn more by planning.

Thorough study needed; unforeseen items may lead to additional

DEMERITS
claims.
B. ITEM RATE CONTRACT
In an item rate contract, the contractor undertakes the execution of work on an
item rate basis, and payment depends on quantities actually executed. This is
commonly used for public works.

MERITS No detailed drawings needed initially; changes allowed within limits.

Final cost known only after completion; requires detailed

DEMERITS
measurements.
C. Lumpsum and Scheduled Contract
This is similar to the lumpsum contract except the schedule of rates is also included in the contract
agreement. In this type of contract, the contractor offers to do a particular work at a fixed sum within
a specified time as per plans and detailed specifications. The schedule of rates for various items is
provided which regulates the extra amount to be paid or deducted for any additions or deletions
made during the progress of work. Measurements of different items of original work are not required
but extra items are required to be measured for payment.

SUITABILITY More suitable for works for which contractors have prior work experience
and can estimate the cost more realistically.

MERITS No need for additional staff for original item measurements; owner knows
project cost from tenders.

DEMERITS Contract documents must be fully completed; non-scheduled items may

cause disputes.
D. Cost Plus Fixed Fee Contract
Cost plus fixed fee contract is desirable when the scope and nature of the work can at least be
broadly defined. The amount of fee is determined as a lump sum from consideration of the scope
of work, approximate cost, nature of work, estimated time of construction, manpower and
equipment requirements. The contractor is selected on the basis of merit, and the drawback of
cost-plus percentage contracts is avoided because the contractor’s fee does not fluctuate with
the actual cost.

Suitable for works required to be completed expeditiously and for

SUITABILITY
important structures where cost is immaterial.

Owner bears actual cost, ensuring good quality; work can start before
MERIT drawings are finalized; changes in design can be easily made; work
proceeds quickly.

DEMERIT Not normally adopted for public bodies; final cost not known in
advance.
E. Cost Plus Percentage of Cost Contract
In this type of contract, the work is given on a certain percentage over the
actual cost of construction. The contractor is paid the actual cost of
construction together with a certain percentage as agreed earlier. The
contractor agrees to do the work in accordance with the drawings,
specifications and other conditions of contract. Proper control must be
exercised by the owner in purchase of materials and arranging labour.

Note Additional Demerit

Same suitability, merits, and Tendency of the contractor to
demerits as cost plus fixed fee increase the cost of work to earn
contract. more profit.
F. Special Contracts
Special forms include turn-key, package, negotiated, continuing, and running
contracts. These contracts vary by how responsibilities, coordination, and pricing are
managed.

There are certain contracts which are used at different occasions. Some of these
contracts are listed below:

C. Negotiated Contract
A. Turn-key Contarct

D. Continuing Contract
B. Packange Contract
E. Running Contract
F. Special Contracts
A turn-key contract places all work—civil, electrical, mechanical, and others—
under one main contractor. This contractor may hire subcontractors for specialized
A. Turn-key Contarct tasks. The advantage to the owner is that he does not need to coordinate different
contractors because the main contractor handles everything from planning to final
commissioning. The owner receives a complete, fully operational project.

a. Turn-key Contract
A package contract combines two or more related jobs into one contract. Design,
development, construction, supply, or maintenance may be grouped together. The
B. Packange Contract
main contractor follows the agreed plan and standards and must get the owner’s
approval for design and technical matters. The contractor is responsible for
ensuring the design is correct.
F. Special Contracts
A negotiated contract is formed through direct discussion between the owner and
the contractor about project cost and contract conditions. The project specifications
C. Negotiated Contract
are finalized through these discussions. This type often involves long negotiations
and is commonly used in World Bank consultancy projects.

A continuing contract allows new or additional work to be given to the same

D. Continuing Contract
a. Turn-key Contract contractor using the terms and conditions of an existing contract. It avoids re-
tendering and saves time and money.

A running contract provides goods or services repeatedly or whenever needed

E. Running Contract by the owner. The price is not fixed; payment depends on the actual goods or
services supplied as stated in the contract.
Contract Documents
The contract document includes the contract agreement (prepared on non-judicial stamp
paper) and a complete set of supporting documents. Each page must be signed by both the
owner and the contractor. These documents define the work, responsibilities, and conditions
of the01
contract.
Adaptive AI

Contains the name of the work, name of the owner, name

Cover Title Page of the contract, contract agreement number, and the
02 Automated Security
contents.

Shows the list of all sections of the agreement with

Contents Page corresponding page numbers.
03

Provides a brief description of the work, estimated cost,

Notice Inviting
tender submission date and time, earnest money, security
Tender (NIT)
money, and time of completion.
Contract Documents

Includes the bill of quantities, contractor’s rates,

Tender Form (Simplified)
total cost of the work, completion time, security
deposit, and penalty clauses.
01 Adaptive AI

Lists the materials to be issued by the owner or

Schedule of Issue department, along with the rates and place where
02
of Materials
they will be issued.

03
Consist of fully dimensioned plans, elevations, sections,
Drawings detailed drawings, and the site plan for the project.
Contract Documents

Specifications
Since drawings cannot show detailed materials and workmanship,
specifications are included as part of the contract. They must be clear and
01 Adaptive AI
precise.

General Specifications
02
Describe the class and type of work and
general quality of materials
03 Detailed Specifications
Provide complete details for each item, including
materials, proportions, methods, and
workmanship.
Contract Documents

Conditions of Contract

The conditions of contract specify the rates of each item including

01 materials,
Adaptive AI labor, transport, and equipment, the method of payment
through running bills, final bills, and refund of security, the time of
completion and required progress, and the penalties for poor quality,
02
slow progress, or delays. They also cover extension of time, engaging
another agency at the contractor’s cost, termination of the contract,
03 restrictions on subletting, changes in design or drawings with valuation
of variations, and the use of arbitration for settling disputes.
Important Conditions of Contract
The construction team must clearly understand their rights and obligations under the
contract. They must know the purpose and meaning of every clause. The important
conditions of a contract include time of completion, delay and extension, penalty,
compensation for delay, liquidated damages, debitable agency, valuation of variations,
settlement of disputes, natural disasters, price escalation, and termination.

The contractor must finish the work within the agreed time
period, stated in years, months, or weeks depending on the project.
A. Time of Completion
The contractor must also maintain proper progress throughout the
work.

If delays occur that are not the contractor’s fault, he must notify
B. Delay and Extension the owner in writing within the period stated in the contract. The
of Time owner will check the reason for the delay before granting an
extension.
Important Conditions of Contract

A penalty is a fine imposed on the contractor for failing to meet

C. Penalty his obligations, such as not maintaining progress, delaying
completion, or delivering poor-quality work.

If the contractor is responsible for delays, he must pay

D. Compensation for compensation to the owner. This is usually a percentage of the
Delay estimated cost for each unit of time delayed, up to a maximum of
10% of the contract price.

Liquidated damages are a fixed amount charged per day of delay,

E. Liquidated Damages regardless of the actual loss to the owner. They are usually high and
apply for each day beyond the completion date stated in the
contract.
Important Conditions of Contract
If the contractor fails to meet required progress or quality even after
being warned, the owner may hire another agency to continue the
F. Debitable Agency
work. The cost of this agency is charged to the original contractor’s
bill or security deposit.

Changes to the work are valued based on written change orders from
G. Valuation of the owner. Normally, an item should not vary more than 25%, and the
Variations total cost should not vary more than 10%.

Disputes should first be solved through mutual discussion. If

H. Settlement of
unresolved, the contract may include an arbitration clause to
Disputes
settle the dispute without going to court.
Important Conditions of Contract
Events like floods, earthquakes, fires, riots, or civil disturbances are
i. Forces of Nature and beyond the contractor’s control. The contractor should have
Natural Disasters
insurance for risks that can be insured. For non-insurable losses, the
contractor may claim compensation and an extension of time.

During construction, wages and material prices may increase due to

j. Price Escalation inflation. The contract should include a clause to pay the contractor
for such price increases.

The owner may terminate the contract if the contractor defaults or

becomes bankrupt. Defaults include abandoning work, failing to
K. Termination of
maintain progress, or ignoring instructions. Penalties up to 10% of the
Contract
estimated cost may be imposed, and the contractor must be given
proper notice before termination.
SPECIFICATION

Specifications describe the nature and type of work, the materials to be used,
the labour required, the methods of work, the precautions to be taken, and the
quality of workmanship. They greatly affect the cost of the work and help
explain the details that drawings cannot show. While drawings provide the
layout and dimensions, specifications explain the materials, quantities, and
workmanship required. Specifications help in the following ways:

1. They guide bidders in preparing fair and accurate tenders.

2. They guide the execution, supervision, and purchase of materials.
3. They state the acceptance criteria for the completed work
A. Contract Specifications

These are prepared for a specific job and accompany the working drawings. They
include:

General Specifications
Give a brief idea of the class and type of work, including materials, quality,
and workmanship.
Detailed Specifications
Describe each item thoroughly, including material proportions, methods, and
required workmanship, usually arranged in the order the work is carried out.

TYPE OF SPECIFICATION
 B. Guide Specifications

These provide general guidelines for preparing contract specifications and indicate the
class and type of construction needed for a particular purpose.

C. Standard Specifications

These are prepared for different materials or groups of materials and provide
standardized methods, tests, and codes of practice used throughout the construction
industry.

TYPE OF SPECIFICATION
D. Manufacturer’s Specifications

Manufacturers prepare specifications for their products, including

installation instructions and guidelines for use and maintenance. These are
usually provided in manuals.

A clear understanding of specifications is essential for the successful

completion of any construction project.

TYPE OF SPECIFICATION
THANK YOU!