Contract and Specifications Construction Methods of contract is not suitable for difficult foundations,

and Project Management excavations of uncertain character, and projects

susceptible to unpredictable hazards and variations.
What is Contract?
o "An agreement enforceable by law is a Contract." Merits
o "Every promise and every set of promises, forming
o The owner can decide whether to start or shelve the
the consideration for each other, is an Agreement."
project knowing the total lumpsum price quoted by
o "The agreement must create legal obligations
different contractors.
between the parties is an Enforceable."
o The contractor can earn more profit by in-depth
planning and effective management site.

Demerits

o Before the contract is awarded, the project has to be

studied thoroughly and the complete contract
documents must be prepared in advance.
o In this type of contract, unforeseen details of work are
not specified in the contract document. Many
o Offer: An offer is an invitation to make a contract additional items 4 may have to be undertaken as the
o Acceptance: The point at which one party agrees work progresses, giving opportunity to the contractor
to the other parties offer for claiming higher rates of the extra items not
o Consideration: Generally, courts will only included in the contract agreement
enforce a contract if both sides are getting
something.
What each side gives the other is called Item Rate Contract
consideration. Also called a schedule contract, in this contract, the
contractor undertakes the execution of work on an item
PURPOSE OF CONTRACTS IN CONSTRUCTION rate basis.
Contracts in construction clearly define the scope
and nature of the work and specify the Suitability
responsibilities, rights, and obligations of each party. The item rate contract is most commonly used for all
types of engineering works financed by public or
They allocate risks between the owner and the government bodies. This type of contract is suitable for
contractor, fix important project details such as works which can be split into various items and
contract cost, project duration, and method of quantities under each item can be estimated with
payment, and serve as a legal protection for both accuracy.
parties in case disputes or misunderstandings arise.
Merits
Types of Contracts
o In this type of contract, there is no need for detailed
A. Lumpsum contract
drawings at the time of allotting contract as in the case
B. Item rate contract
of lumpsum contract. The detailed drawings can be
C. Lumpsum and schedule contract
prepared after the contract is awarded.
D. Cost plus fixed fee contract
o Changes in drawings and quantities of individual
E. Cost plus percentage of cost contract
items can be made as per requirement within agreed
F. Special contracts
limits.
Lumpsum Contract o The payment to the contractor is made on the actual
work done by his at the agreed rates
In this type of contract, the contractor offers to do the
whole work as shown in drawings and described by Demerits
specifications, for a total fixed price.
o The total cost of work can only be known upon
Suitability completion. As such, the owner may incur financial
difficulty if the final cost increases substantially.
A lumpsum contract is more suitable for works for which
contractors have prior construction experience. This type
o Additional staff is required to take detailed Merits
measurements of work done for releasing payments
o In this type of contract, actual cost is to be borne by
to the contractor.
the owner. Therefore, the contractor performs the
o he Scope for additional saving with the use of interior
work in the best interest of the owner resulting in good
quality materials may prompt the contractor to use
quality work.
such materials in the work.
o The work can be taken in hand even before the
Lumpsum and Schedule Contract detailed drawings and specifications are finalized
o Changes in design and method of construction if
This is similar to the lumpsum contract except the
needed can be easily carried out without disputes.
schedule of rates is also included in the contract
o The work can be executed speedily.
agreement. In this type of contract, the contractor offers
to do a particular work at a fixed sum within a specified Demerits
time as per plans and detailed specifications.
o This form of contract cannot be adopted normally in
Suitability case of public bodies and Government departments.
o The final cost of the work is not known in advance and
This type of contract is more suitable for construction
this may subject the owner to financial difficulties.
works for which contractors have prior work experience
and can consequently estimate the project cost more Cost plus Percentage of cost Contract
realistically.
A contract where the contractor is paid the actual
Merits construction cost plus a previously agreed percentage as
profit, with work carried out according to drawings,
o In this type of contract, additional staff for recording
specifications, and contract conditions.
detailed measurements of original item of work is not
required for making payment to the contractor Merits
o The owner can know from tenders as to what the
o Flexibility for scope changes
project will cost him. Knowing the financial
o Useful when exact quantities or costs are uncertain
implications, the owner can decide to start or defer
o Encourages contractor to focus on quality
the project.
Demerits
Demerits
o Contractor may inflate costs to increase profit
o Before the contract is awarded the project has to be
o Requires strict control by the owner
studied thoroughly and all the contract documents
o Less predictable total cost
are required to be completed in every respect.
o The non-scheduled extra items arising out of changes Special Contracts
made in the drawings and specifications are often a
source of dispute because the contractor presses for Turn-key Contract: A single main contractor handles all
rates higher than the prevailing market rates.4 disciplines and delivers a fully operational project to the
owner.
Cost plus Fixed fee Contract
Package Contract: Two or more related jobs are
This type of contract is desirable when the scope and combined into a single contract, with the main contractor
nature of work can be generally defined. The fee is fixed as responsible for execution and design correctness.
a lump sum based on the scope, estimated cost, nature
of work, construction time, and required manpower and Negotiated Contract: The contract terms, cost, and
equipment. Clear definition of the scope and general specifications are agreed through direct negotiations
details is essential for negotiation. between the owner and contractor

Suitability Continuing Contract: Additional work is awarded based

on an existing contract without re-tendering.
This type of contract is suitable for works required to be
completed expeditiously and where it is difficult to foretell Running Contract: Goods or services are supplied at
what difficulties are likely to be encountered. This intervals or as required, with payment based on actual
contract is also suitable for important structures where delivery or work performed
the cost of construction is immaterial. What is Specification?
Detailed statements describing the nature, quality,
materials, labor, methods, and workmanship required for
a project, providing information not shown in drawings
and guiding construction execution.

The following are the essential ingredients of a

specifications:
a. Guide the bidder at the time of tendering for arriving at
a fair price for the work involved.
b. Provide guidance for execution and supervision of
Construction Company
work and purchase of materials.
o A construction company could be a one-person
c. State the acceptance criteria for different items of
organization or a larger firm with several departments,
work
o The primary aim of these companies is to make profit.
o The common function of a construction company are:
Types of Specification
A. Contract Specification • General administration,
B. Guide Specification • Estimating,
C. Standard Specification • Managing contracts and personnel,
[Link] Specification • Design, engineering, purchasing/procurement,
• Accounting, and
Contract Specification • Managing field construction.
Specifications prepared for a particular job to A project organization is a structure that facilitates the
accompany working drawings, including General coordination and implementation of project activities. Its
Specifications, which provide a brief overview of main reason is to create an environment that foster
materials, quality, and workmanship, and Detailed interactions among the team members with a minimum
Specifications, which give a full description of each number of disruptions, overlaps and conflict.
item, materials, methods, and workmanship in the order
the work is carried out POSITIONS AND WORK DESCRIPTIONS IN A
CONSTRUCTION COMPANY
Guide Specification o Owner / Client – Initiates the project, provides
These specifications provide a guideline for preparing funding, and sets overall requirements.
contract specifications and give a broad idea about class o Project Manager – Plans, coordinates, and controls
and type of construction for a particular purpose. the project to meet time, cost, and quality goals.
o Project Engineer – Handles technical aspects,
Standard Specification drawings, specifications, and site coordination.
These specifications are prepared for various materials o Site Engineer – Supervises daily construction
or group of materials for the guidance of all concerned activities and ensures work follows plans.
with construction or construction industry. These o Foreman – Directly oversees workers and assigns
specifications include methods of manufacture daily tasks on site.
methods of tests, code of practice etc., o Safety Officer – Ensures compliance with safety rules
and prevents accidents.
Manufacturer’s Specification o Quantity Surveyor / Cost Engineer – Prepares
estimates, monitors costs, and manages quantities.
Specifications prepared by manufacturers to guide
o Procurement Officer – Sources and purchases
users, including installation, usage, and maintenance
materials, equipment, and services.
instructions, which are usually provided in manuals and
o Skilled Workers / Laborers – Perform the actual
are essential for successful project completion.
construction work.
CONSTRUCTION PROJECT ORGANIZATION
Other positions may include HR personnel,
Introduction equipment managers, logistics officers, among
others.
Based on the latest available data, the graph presents the
number of contractors in the Philippines according to
PCAB regular license classifications
 TYPES OF ORGANIZATION FOR PROJECT
MANAGEMENT/ PROJECT LEVEL

Frequently used organizational forms for project MATRIX ORGANIZATION

level…
o It is used mainly in the management of large projects
o Classical or functional organization, or product development processes, drawing
o Pure project or product organization, and employees from different functional disciplines for
o Matrix organization assignment to a team without removing them from
• Functional matrix, their respective positions.
• Balanced matrix, o Matrix management is a type of organizational
• Project matrix. management in which people with similar skills are
pooled for work assignments.
FUNCTIONAL ORGANIZATION o The matrix structure combines both the functional
In a functional structure, the organization is broken into and project structures. Each team member has two
sections based upon specialty. This organization are bosses; they report both to the functional manager
arranged different by function such a marketing, and the project manager.
engineering, production, contract, resources • If the matrix is strong, the power resides more
procurement, HRD, etc., and each headed by a director with the project manager.
or specialist manager. • If the matrix is weak, the power resides more with
the functional manager.
Its center of power and coordination in concentrated at • The key is to find a balance in which the power is
the top with chief executive. shared equally.
PURE PROJECT ORGANIZATION o Because of its complexity, this type of structure can
lead to problems if it is not used carefully and
o Project organization is a project focused properly. Good communication is essential for
organizational structure where project manager has success.
the final authority over the project to make project o This structure utilizes both the functional and
decisions, priorities, acquire and assign resources. divisional chains of command simultaneously in the
o A project organization refers specifically to an same part of the organization.
organizational structure that has been set up in a
manner in which the project manager leads the TYPES OF STRUCTURE OF CONSTRUCTION
group and in which the project manager has the ORGANIZATION/ CORPORATE LEVEL
ultimate authority to make any and all decisions Depending upon the manner in which the authority and
involving the organization. responsibility in an organization, the structure of
o In a project structure, all the work is looked at as a construction organization level can be divided in to two
project. The project manager has complete control, categories…
unlike in the functional structure, and all team
members report directly to the project manager. 1. Line or military organization
o Sometimes these team members are permanent, 2. Line and staff organization
and sometimes they are hired as temporary workers
LINE ORGANIZATION
to help with the project until its completion. If the
organization takes on a large project, it will have all o Line organization is the simple and oldest type of
the necessary resources available to sustain the organization followed in an organization. Under line
project and will act as a small, self-contained organization, each department is generally a
company. complete self-contained unit.
o The project manager works with complete autonomy o A separate person will look after the activities oof the
(central authority, power) over the project, team is on department and he has full control over the
the project full time and report to the project department.
manager. o The same level executives do not give or receive
o As a project manager, you have the responsibility to orders amongst themselves. But they receive orders
take authority, rather than waiting for someone to from their immediate boss and give orders to their
give you the authority. subordinates. Hence, all the heads are responsible to
 the general manager, the general manager, in turn, is BAR CHART METHOD – ADVANTAGES
responsible to the shareholders who are the owners.
o CLARITY
o This type of organization is followed in the army on the
o TIME MANAGEMENT
same pattern. So, it is called military organization, the
o FLEXIBILITY
line of authority flows from the top to bottom
o EFFICIENCY
vertically. So, it is called line organization.
o COMMUNICATION
LINE AND STAFF ORGANIZATION
BAR CHART METHOD – DISADVANTAGES
o Line officers have the authority to take decisions and
o Need to be updated all the time
implement them to achieve the objectives of the
o The length of the bar does not indicate the amount
organization.
of work
o Staff officers give advice and services to the line
o Difficult to see on one sheet of paper
officers. Staff officers are generally expecting in a
particular field. CRITICAL PATH METHOD
o The authority flows from top to bottom through the
line officers, while staff officers give advices at o helps to break down complex projects into individual
various department. tasks and gain a better understanding of the overall
o Full authority is headed by line officers regarding project flexibility.
planning, implementation and control of workers. o revolves around discovering the most important
tasks in the project timeline, identifying task
PLANNING AND SCHEDULING (PERT-CPM) dependencies, and calculating task durations.
PLANNING

o is the function of coordinating in a logical order of all

the activities, persons, machines, and materials that
is necessary to complete the project
o is a vital and most difficult part of a construction
project

ADVANTAGES OF PLANNING ES- earliest start time

o The productivity and efficiency of your team are LS - latest start time
maximized
EF- earliest finish time
o The exceptional time allocation is reached
LF - latest finish time
o The safety level together with the quality of your
CRITICAL PATH METHOD – ADVANTAGES
project procurement is significantly improved
● Helps prioritize tasks
METHODS OF PLANNING
● Helps to create accurate schedules
o BAR CHART METHOD
o CRITICAL PATH METHOD ● Helps to map out project plans
BAR CHART METHOD CRITICAL PATH METHOD – DISADVANTAGES
o are simple presentations that show when major Can be complex and time-consuming to use for
work activities are scheduled complex projects that have numerous tasks and
o one of the most popular and useful ways of showing dependencies
activities (tasks) displayed against time
Can be lengthy and overwhelming if the critical path
needs to be re-evaluated

CRITICAL PATH METHOD & BAR CHART METHOD

o In summary, they are both essential project

management tools used to plan, schedule, and track
project progress visually
CONSTRUCTION SCHEDULING

o It gives quantity of work involved, labor, materials

and equipment of each work.
o The actual progress of the work can be checked.
o The project can be carried out in a systematic
manner using the scheduling.

ADVANTAGE OF SCHEDULING

o It gives clear idea regarding the required manpower,

materials, and equipment at different stages of the
project.
o Cost control study
o Arrangement of different materials
o Actual progress schedule
o Total time required for the completion of project is
known

METHODS OF SCHEDULING THE NETWORK ANALYSIS

o Gantt chart o Network analysis is the synthesis of two most

o Milestone chart powerful techniques of project management, the
o Network Analysis PERT and CPM

GANTT CHART DIFFERENCE OF PERT AND CPM

o Gantt chart is a matrix of rows and columns. The

time scale is indicated along the horizontal axis.
Activities are arranged along the vertical axis.
o Gantt chart are usually used to represent the project
schedule. Gantt charts should be updated
THINGS TO PROVIDE IN PLANNING AND SCHEDULING
periodically.
1. Project site analysis.

2. Planning with reference to materials, equipment,

manpower, site conditions, and laws/regulations

3. Construction methods

4. Table of activities

5. Bar charts

6. PERT/CPM

7. Bill of materials and project cost analysis

8. Manning and Equipment schedules

9. Logbooks

CONCLUSION

Overall, integrating effective planning and scheduling

MILESTONE CHART
practices enhances project efficiency, improves
o Milestone chart is a modification over the original communication, and increases the likelihood of
bar chart. completing construction projects on time, within
budget, and to the required quality standards.
Continuous review and adjustment of plans and
 schedules are therefore essential to address STEP-BY-STEP METHODOLOGY
uncertainties and ensure project success in a
o GATHERING DATA - This first step is all about
dynamic construction environment.
collecting information and getting a clear
VALUE ENGINEERING MAXIMIZING VALUE WITHOUT understanding of the project and its purpose
SACRIFICING QUALITY o THINKING CREATIVELY - With the core
expectations for the project documented, it’s time to
VALUE ENGINEERING
explore new and different ways to develop it
Value engineering (VE) is a systematic & organized o EVALUATING IDEAS - with a bunch of innovative ideas
approach to providing the necessary functions in a project now on the table, it’s time to decide which are feasible
at the lowest cost and which are not
o DEVELOPING TOP CONTENDERS - Once ideas are
CONSTRUCTION COMPANY COMPOSITION ranked, the strongest options are selected for further
o Architects analysis
o Designers
o Engineers VALUE ENGINEERING TECHNIQUES
o Contractors
LIFE CYCLE COST ANALYSIS (LCA)
o Project leads
o Includes initial cost, operation, and maintenance cost
ENGR. LAWRENCE D. MILES
Focuses on long-term cost efficiency
o 1940, Responsible for buying raw materials o Supports decisions with higher upfront costs but lower
o Shortage, Severe material shortages, such as total costs over time
copper and rubber
Example: In a building project, engineers are choosing
o General Electric, Historic American multinational
between a conventional concrete roof and a high-
conglomerate founded in 1892
performance insulated roofing system. The conventional
o Value Analysis Miles had to search for suitable
roof has a lower initial cost, making it attractive at the start
alternatives that could fulfill the function of
of the project. However, it requires frequent maintenance
unavailable material.
and results in higher energy consumption due to poor
thermal insulation.
DIFFERENCE OF VALUE ENGINEERING AND VALUE
ANALYSIS PARETO ANALYSIS

VALUE ENGINEERING o This technique categorizes the team to focus on the

areas with the greatest impact.
When It Is Used?
o Helps prioritize critical issues
Before a product, project, or system is finalized (design o Leads to significant improvements with minimal effort
or planning stage).

Purpose,

To optimize value proactively by finding better ways to

achieve required functions at the lowest life-cycle cost

VALUE ANALYSIS

When Is It Used?

After a product or system already exists or is in operation

Purpose
BENCHMARKING
To reduce unnecessary costs without sacrificing
o Identifies best practices and performance
performance, quality, or reliability.
benchmarks
o Helps set realistic performance and cost targets
o Pinpoints areas for improvement through
comparison
 COMMON MISCONCEPTIONS

MYTH: VALUE ENGINEERING = CHEAPENING THE

PROJECT

In reality, VE emphasizes maximizing the function to

cost ratio. By thoroughly evaluating different materials,
methods, or designs, it aims to preserve if not enhance
quality and performance

MYTH: VE OCCURS AT THE TAILEND OF A PROJECT

VE is most impactful when introduced in the early

design or planning stages of preconstruction allowing
potential inefficiencies or oversights to be addressed
before they become costly issues.

MYTH: ONLY LARGE PROJECTS BENEFIT FROM VE

VE’s principles are universal and scale to projects of

all sizes. Even minor tweaks like switching to a more
durable material or refining a design layout can lead to
notable budget savings and quality improvements
BENEFITS Advantages of Value Engineering
MYTH: VE TAKES TOO MUCH EFFORT AND TIME
INCREASED EFFICIENCY
A well-executed VE process does require tight-knit
o smoother project execution
collaboration and thorough analysis which takes time
o shorter lead times
and effort. But it often saves so much more time later by
o higher productivity
preventing rework, design errors, and mid-project
HOW? revisions.

By reassessing design decisions, construction ARTIFICIAL INTELLIGENCE -AI

techniques, and operational processes, value
AI in general definition - AI is a branch of computer
engineering streamlines workflows, removes
science that builds systems capable of performing task
bottlenecks, and optimizes resource use
that usually requires human intelligence:
REDUCED COST
Learning from data-input recognizing pattern making
o improves the company’s bottom line, autonomous decisions to solve complex problem
o boosting profits and; (output
o eventually making it more competitive.
ARTIFICIAL INTELLIGENCE IN VALUE ENGINEERING
INCREASED SUSTAINABILITY
It uses data analytics to optimize project cost,
o helps align projects with green principles and; performance and functionality by analyzing data,
o improve their environmental impact. stimulating design and identifying cost-saving
alternatives in real time.
HOW?
o COST EFFECTIVE
Trimming expenses by taking a close look at every part
o TIME EFFCIENT
of a project and spots where money can be saved.
o ENHANCE VALUE
HOW?
BUILDING INFORMATION MODELING IN VE
By making cost-optimizing decisions that are also eco-
Using a 3D representation of a project, teams can
friendly, such as choosing sustainable materials or
visualize the impact of changes on cost, schedule and
improving energy efficiency with alternative fuels
performance instantly.
For Example: HVAC System Optimization In a traditional
Value Engineering process, teams might suggest
switching from a centralized chilled water system to a
Variable Refrigerant Flow system for a lower cost
approach