Module 2: Construction

Contract Stages
© 3WEBPROJECT 2018
Introduction
• How a Construction Project evolved – Bonus Lesson
• Starting from:
The owner project idea
The inclusion of the design professional
Until the development of the construction contract
The final award of the contract to a contractor.
• Experienced professional - refresher course that will challenge your
perspective on the importance of this subject.
• The young professionals and mid career level - open a new
possibility for your profession, and appreciation on the role of the
owner, the design consultancy, and the contractor.
Introduction
• A successfully constructed project begins with the OWNER; The
general role and responsibilities of the owner, as well as the
owner’s typical requirements involves :
• Developing complete, attainable, and practical project goals and
objectives;
• Establishing an understanding of those goals and objectives, as
well as participant roles and responsibilities, among team
members.
Major project participants and involvement in a
project and their respective functions
• The Owner’s role
• Selection of Design Professional
• The Construction Contract
THE OWNER’S ROLE
• The owner holds the principal role in assuring effective project
management, quality and success of a constructed project.
 THE OWNER’S ROLE
Need for a
project

Communicates
adopted
requirements Establishes
about how the OWNER primary goals
project is to be
executed

Selects the
members of
the project
team
THE OWNER’S ROLE

Function Cost

Appearance Performance
THE OWNER’S ROLE
Preliminary
planning
Approval
Design
process

The shop Life-cycle cost

Basic Project
Project quality Management Peer review

Contract Alternative
administration studies

Value
Construction
engineering
THE OWNER’S ROLE
• During the early phases of refining broad goals into defined
objectives, the owner may wish to retain design and construction
professionals to supplement internal staff.
• In addition to setting goals, the owner is responsible for securing
and managing funds and paying team members and other technical
experts. Depending on the scope of the project, the nature of the
owner’s organization, and the delivery system selected, the owner
may delegate specific responsibilities to other project team
members.
• Therefore, an owner’s role can vary from being a highly involved
and interactive team member to providing broad “hands-off”
project-wide supervision.
THE OWNER’S ROLE
• Given the wide array of roles that a project owner can choose, it is
essential that the owner and team members understand each
other’s roles and responsibilities thoroughly.
• This understanding, which includes each participant’s authority and
responsibilities, is typically formalized in agreements, which are the
primary source for defining project duties and responsibilities.
• Other sources for describing participant roles include scope
definitions, design memoranda, project work plans, memoranda of
agreement, and letters of understanding.
PROJECT GOALS
The owner’s role and responsibilities in achieving project goals are
affected by the following factors:
• The fundamental need for the project;
• Past experience in, or responsibility for, completing projects;
• Observation of other owners’ activities on similar projects; or in other
words lessons learnt.
• Support from consulting design professionals, technical experts, and
construction advisers; and
• Legal advice.
Project owners typically express their basic project goals with a focus on
major key criteria: quality, project schedule, budget, and project risk.
The Owner’s general strategies
for achieving these goals
• Defining general quality expectations in terms that are easily
understood and meaningful to the project participants;
• Communicating the significance of these expectations to team members
and requesting acknowledgment that they are understood and agreed
upon;
• Developing realistic schedules and budgets that are accepted by the
other team members;
• Monitoring project participants through quality assurance (QA)
activities to enforce the fulfillment of their roles and responsibilities;
The Owner’s general strategies
for achieving these goals
• Maintaining a consistent project scope—and not changing conditions or
requirements without allowances for impacts on the schedule and
budget of all team members.
• Identifying project risk and the impact to the project, and mitigating
these risk.
ESTABLISHING PROJECT OBJECTIVES
• The specific objectives for each particular project will be far more
detailed and comprehensive than the goals listed above.
• Effective objectives refer to specific aspects of a project, such as
function, operation, maintainability, sustainability, schedule, life-cycle
costs, technical specifications, safety, aesthetics, finances,
administration and management, and regulatory requirements.
• It is also important that project objectives include a method for
measuring results.
• Beyond the broader project goals, owners have specific project
objectives that must be achieved, and sometimes these objectives are
not fully expressed, but it is implied; meaning you need to comply with
it because it is stipulated in the project objectives and translated later in
the construction contract.
TEAM MEMBER REQUIREMENTS
• In order to address a project’s objectives, each team member brings
individual requirements, interests, and values to the effort. Naturally,
the interests of some team members conflict—especially when large
numbers of participants are involved.
• In these situations, the owner benefits from establishing clear lines of
communication and an unambiguous system for identifying and
resolving differences in a prompt, mutually satisfactory manner.
• Therefore, communication among project team members should begin
as early as possible. Team members(such as engineers of all disciplines,
architects, and administration support) have a better opportunity to
develop an accurate understanding of the project goals and objectives,
and a heightened commitment to achieving them, if they assist in the
development process.
TEAM MEMBER REQUIREMENTS
• Early communication also allows team members to gain an awareness
of each others’ requirements and expectations, allowing them to be
better prepared to deal with potential conflict. ( we have discuss about
communication in Module 1, lesson 5) and “about conflict “will be
discuss in detail in Course 4, Project teams of the Project Managers
Course.
• An owner’s organizational structure and culture have a direct bearing
on the formulation of project objectives, as well as on the owner’s role.
TEAM MEMBER REQUIREMENTS
• Private owners may be able to expedite projects more quickly than
public owners. However, private owners carrying out projects in highly
regulated industries, such as:
• roads and other infrastructures project,
• electric power production,
• gas utilities,
• telecommunication,
• and aviation,
may face rigorous constraints, processes, and procedures that
affect project progress.
TEAM MEMBER REQUIREMENTS
• All owners have an economic interest in completing projects quickly.
• However, compared to public owners, private owners are often more
influenced by, and subject to, economic factors, such as short- and long-
term financing, the amount of capital investment, return on investment,
profitability, cash flow, and economic risk.
• Other project aspects that may have greater influence on private
project owners include demand, marketability, aesthetics, and general
fiscal performance. The success of a private project tends to be
measured with a strong emphasis on the value to customers and
investors. New laws and agency regulations, especially those dealing
with energy, transportation, health, safety, and the environment, can
also affect established project objectives for both private and public
projects.
Public Owners
• Public project owners include national government, provincial, cities,
towns, special districts and other government agencies.
• Like private owners, public owners must follow relevant project
development processes and procedures as outlined in national and local
laws, ordinances and regulations, and applicable national and municipal
laws and regulations. Public owners are usually subject to a greater
degree of public scrutiny and oversight than Private owners (especially
now with social media).
• For example, public review and comment can require further studies on
high-profile projects. Public projects must often conform to pre-
established funding limits, and the project objectives tend to be
oriented toward performance and compliance.
Public Owners
• The success of a public project typically relies on a greater number of
factors than a private project. These factors may include the benefits to
the wider public (not just those with a direct stake in the success of the
enterprise), public utility to the community, potential increases in
accessibility, and protection of the environment.
• Finally, project objectives for public projects may be influenced by
political change, especially if planning and funding involve lengthy
processes. Over time, the owner’s representatives, budgets, programs,
and even prospective users may change, creating direct impacts on
project objectives. New laws and agency regulations, especially those
dealing with energy, transportation, health, safety, and the
environment, can also affect established project objectives for public
projects.
TIMING AND DURATION OF PARTICIPATION
• The involvement of different team members during appropriate periods
of the project is critical for achieving the project objectives and the
owner’s requirements.
• In general, the earlier team members become involved and the greater
the continuity of their participation, the greater the benefit to the
owner. The growing popularity of alternative project delivery systems
reflects the owner’s quest for new ways to benefit from a consistent,
cohesive project team from the outset to the completion of the project.
TIMING AND DURATION OF PARTICIPATION
• One strategy for achieving greater continuity is for the owner to engage
a design professional as an adviser early in the conceptual development
phase.
• After completing traditional preliminary and final design services, the
design professional may also play a role in the construction phase,
quality assurance, and start-up.
TIMING AND DURATION OF PARTICIPATION
• In the case of the contractor, similar continuity is desirable. While
private owners are free to bring contractor onto the project team at any
point, public owners may be constrained by local, national, and
provincial that limit contractor participation in the early phases of a
project.
• In such cases, the owner may engage a construction adviser with
relevant experience to review the feasibility of construction, which is
generally known as a constructability review.
TIMING AND DURATION OF PARTICIPATION
• The owner can enhance the caliber of team member participation by
being an exemplary communicator. Communication at every level, every
phase, and in many relationships, is a key to the fulfillment of the
project objectives and the meeting of participant requirements. This is
particularly true in overcoming the loss of continuity when key
personnel depart.
• To improve communication, the owner should make available pertinent
information to internal managers and the team members through
regular update meetings, disseminate appropriate documents, and visit
the project site.
TIMING AND DURATION OF PARTICIPATION
• The owner may also reduce the risk of unforeseen site conditions, and
associated disputes, claims, and disruptions, by sponsoring an adequate
investigation of site conditions and sharing this information with
appropriate team members. Such extra efforts usually save more than
they cost.
SELECTION OF THE DESIGN PROFESSIONAL
• Selecting the design professional is a critical step in achieving project
goals and objectives and project success.
• The owner is the central figure in the process of selecting the design
Professional ( whether choosing a lead architect and each specialty
design ), with the responsibility for crafting and administering
procedures to identify and engage a design professional with the
necessary experience, technical resources, availability, and commitment
to succeed.
• The owner’s dedication to achieving a high-quality project is exemplified
during the selection of the design professional when the qualifications-
based selection process is used.
SELECTION OF THE DESIGN PROFESSIONAL
• This lesson presents details on the procedures for selecting a design
professional for a design-bid-build (DBB) project.
• The owner’s project goals and objectives are central in choosing an
appropriate selection process, as well as the appropriate project
delivery system.
PROJECT GOALS AND THE DESIGN
PROFESSIONAL’S SCOPE OF SERVICES
• As a first step in any selection process, the owner defines the general
project goals. These are typically broad and include the type and size of
the proposed project, the preliminary budget, schedule, site
constraints, mitigation measures, legal constraints, safety concerns, and
quality-related goals.
• Once established, the project goals are a key consideration in
determining the appropriate procedure for selecting the project
delivery system and the design professional, and for establishing the
scopes of services to be provided.
• Short-term budget concerns often put pressure on a public owner to
ignore lifecycle cost considerations and opt for lowest cost design
services.
PROJECT GOALS AND THE DESIGN
PROFESSIONAL’S SCOPE OF SERVICES
• However, this is usually not in the owner’s best interest. Design costs
typically total less than 5% of life-cycle costs. Yet, during design, the
major decisions that affect costs for construction, operation, and
maintenance are made.
• There may be occasions where a private owner will transfer ownership
of the project early in its useful life. In these cases, the private owner
may wish to minimize design and construction costs and seek the
lowest cost design services.
• However, even in these situations, it is likely that the increased sale
price of a well-designed project will more than offset the increased
design cost incurred by using the most qualified design professional.
PROJECT GOALS AND THE DESIGN
PROFESSIONAL’S SCOPE OF SERVICES
• For both public and private owners, minimum cost design may omit the
analysis of alternative solutions that could dramatically improve project
outcomes.
• The detail and specificity of the scope of design services vary with the
size and complexity of the effort. The scope can range from a general
statement of the facility’s performance specifications to an extensive
itemized description of each task.
• The scope should also specify the owner’s requirements for professional
design services during the construction and start-up phases.
PROJECT GOALS AND THE DESIGN
PROFESSIONAL’S SCOPE OF SERVICES
• Owners that manage construction projects, or those with large facilities
departments, often have the in-house capability to prepare a well-
defined scope of design services for use during the selection of the
design professional.
• Owners who do not regularly undertake construction projects usually
benefit from engaging an independent design professional to develop
the scope of services.
• In general, greater precision in the scope of services produces a clearer
understanding on the part of the owner and competing design
professionals about the designer’s expected qualifications to achieve
the desired level of quality and project expectation.
QUALIFICATIONS-BASED SELECTION
• Qualifications-based selection (QBS) is the generally accepted practice
for design-bid-build contracting, both for private and public-works
projects.
• Design professionals submit statements of interest and qualifications in
response to an owner’s invitation or advertisement, known as a request
for qualifications (RFQ).
• The owner and/or designated selection committee evaluates the
responses according to the selection criteria provided in the RFQ.
• In many cases, the owner develops a short list of the top three ranked
design professionals and conducts personal interviews with each before
making a final selection.
QUALIFICATIONS-BASED SELECTION
• Owners and design professionals tend to be more satisfied with the
results from contractual agreements in which the parties agree on the
design professional’s fee after the full scope of services is established
and understood.
• Depending on the size and complexity of the project, reaching this level
of understanding may require extensive discussions and effort.
• Professional experience and knowledge play a crucial role in achieving a
satisfactory contract agreement.
QUALIFICATIONS-BASED SELECTION
• Private-sector owners may omit, modify, or combine some of these
steps if a well-established and satisfactory relationship exists with the
design professionals involved.
• Public-sector owners, however, must comply with applicable law and
contract guidelines.
OWNER’S SELECTION COMMITTEE
• On large projects, the owner often designates a design professional
selection committee.
• This committee requests and evaluates the design professionals’
qualifications, reviews proposals, makes appropriate inquiries, checks
references, and conducts interviews. The owner’s final selection of the
design professional is based upon the recommendations of the
committee.
• Ideally, the design professional selection committees include at least
three individuals with the experience and qualifications to make
insightful judgments about the ability of the design professional to meet
the owner’s requirements and project goals.
• To avoid conflicts of interest, committee members are not affiliated with
competing design firms.
OWNER’S SELECTION COMMITTEE
• Typical selection committee members may include
• At least one professional engineer or licensed architect;
• The owner’s principal contact with the design professional;
• The owner’s project manager;
• The operations manager of the future facility;
• An owner representative authorized to make subjective judgments on
aesthetic project elements involving architecture or public perception.
• On smaller projects, the owner may not formally convene a committee
but may assemble experienced staff or even engage a consultant to
assist in the selection of a qualified design professional.
SELECTION CRITERIA
• Although many design firms possess similar qualifications, no two have
identical strengths in experience, skills, resources, training, workload,
technical capabilities, or project-specific expertise.
• Therefore, the owner and selection committee members work to craft
selection criteria that simplify the task of separating design firms that
have the appropriate qualifications from those that do not.
TYPICAL DESIGN PROFESSIONAL SELECTION
CRITERIA
Ethics: The professional and ethical reputation of the design professional,
as determined by inquiries with previous clients and other references.
Professional Registration: Professional registration of the principals and
other responsible members of the design professional’s organization in its
state of residence and registration or qualification to obtain registration in
the municipality in which the project is to be located.
Specific Qualifications: The design professional’s demonstrated
qualifications and capability to perform the scope of services, including
knowledge of international codes or other governmental and municipal
regulations.
Similar Experience: Evidence that the design professional has performed
similar services on equal, or more difficult, projects.
TYPICAL DESIGN PROFESSIONAL SELECTION
CRITERIA
Resources: Evidence that the design professional has the financial
resources and business background to accept the assignment and provide
full, continuous service.
Availability: The design professional’s ability to provide appropriately
qualified staff to the project and complete the required services within a
time frame that supports the project schedule.
TYPICAL DESIGN PROFESSIONAL SELECTION
CRITERIA
• Most of the time training certificate are attached to serve as evidence
of skills and qualifications of the project manager, engineers, architect,
and project staff. These is the reason companies require applicants
certificate of training to be attached in their cv when applying, to meet
owner/client requirement just for this reason stated.
• And another way to get more score in the evaluation of Design
professional staff qualifications.(The same is being applied during
Tender evaluation for the construction contract of prospective
bidders/contractor.)
Request for Qualifications
• In a qualifications-based selection procedure, the qualifications of the
prospective design professionals are the basis for selection. The owner
or selection committee issues an RFQ, which can be a direct invitation
to specific design professionals or a public notice or advertisement
stating the general nature of the proposed project and requesting
statements of qualifications and experience from interested design
professionals.
• In the RFQ, the selection committee specifies the format for submission
of the written qualifications. Although corporate resumes and
marketing materials may be acceptable, designers are often asked to
submit a complete company profile.
Request for Qualifications
• A standardized format by the owner, allows the selection committee to
easily compare the qualifications of key personnel and relevant project
histories.
• Private owners may also use this standard form or a modified version of
it for obtaining qualifications.
Evaluation of Qualifications
• The committee evaluates the statements of qualifications received
against the selection criteria(a standardize checklist and formats
applicable to owner selection process).
• The committee contacts references, reviews the past performance of
prospective design professionals, and identifies a minimum of three
who appear to be qualified for the project. If more than three design
professionals appear to be best qualified, the committee may ask more
than three to continue with the selection process. The committee also
advises design professionals that do not make the best qualified list that
they will not receive further consideration.
Request for Proposal
• The owner or committee next sends the three candidate design
professionals the request for proposal (RFP) and sometimes they call it
best and final offer when the best offer from 3 design professional who
have fulfilled and met all evaluation criteria.
• Unlike the more general RFQ, the RFP describes the proposed project in
as much detail as possible and includes the scope of design services to
be performed.
• The owner invites each RFP recipient to submit a proposal describing a
work plan, key personnel to be assigned, the schedule planned for
completion, the location where the work will be performed, the firm’s
financial capacity, and other appropriate information.
Request for Proposal
• For large or complex projects, the design professionals may be invited to
a pre-proposal meeting, often held at the proposed project site, to
review available information and ask questions.
• At this stage of the selection process, the design professional may
benefit from learning as much as possible about the owner’s proposed
project history, mission, and capacity to support the project.
Interviews
• On receipt of proposals, the owner invites the design professionals to
meet with the selection committee for separate interviews. At the
interview, key personnel to be assigned to the project present their
firm’s and their own qualifications and experience record, capability to
complete the work within the allotted time, resources to complete the
project, and proposed project approach.
• This step allows the committee to better gauge each design
professional’s project understanding and ability to meet the project
objectives.
• Sometimes, for High end to Mega Projects, a project presentation of
the remaining prospective bidders approach to its design scope to the
bid committee is conducted as additional requirements to based their
final decision.
Interviews
• Take note also of the critical importance of the experience and
qualifications of proposed key staff, from Design Manager or Project
Manager, Designers from all discipline, support staff from, Contracts,
Technical experts, Quality, HSE, and Administration.
Additional References
• Following the interviews, the selection committee may broaden its
reference investigations of each design professional under
consideration.
• It is important to determine the quality of performance on projects
other than those referenced by the design professional. In short
background check can be conducted by the owner selection committee.
Recommendation for Negotiation
• The selection committee then ranks the design professionals based on
their ability to meet the selection criteria, as well as the information
obtained at the interview and the reference check.
• Upon the acceptance of the selection committee’s recommendations
for negotiation of the design contract, the owner usually discharges the
committee.
Negotiation
• After accepting the selection committee’s recommendation, the owner
meets with the top-ranked design professional to finalize the scope of
services.
• The owner invites the top-ranked design professional to appear for a
second presentation as the case may be.
• At this point, the owner and design professional combine their
capabilities, experience, and judgment to fully develop the scope of
services. If appropriate, participation in the construction phase and
other activities such as right-of-way acquisition, equipment
procurement, construction project management, project quality, start-
up, and preparation of operation and maintenance manuals can be
negotiated and included in the professional services agreement.
Negotiation
• Once the full scope of services responsive to the project goals and to
the owner’s schedule and budget is developed, the owner and design
professional negotiate a fair and equitable compensation for the
services to be provided.
• The owner evaluates the compensation requested based on previous
experience and the range of compensation reported by other users of
similar services.
• Fair compensation allows the design professional to utilize his or her full
expertise, and thus is vital to the success of a project.
Subsequent Negotiation through the Ranks
• If the owner cannot reach agreement with the top-ranked design
professional, the owner terminates negotiations by written notice.
• The owner is then free to begin negotiations with the second most
qualified design professional or the third, if necessary, until agreement
is reached.
• The owner may also refine the project goals and begin the selection
project again. All negotiations are strictly confidential, and the
compensation discussed with one firm is not revealed to another.
Agreement for Professional Services
• When agreement has been reached on scope of services, level of effort,
compensation, Project management, and schedule, the owner and
selected design professional formalize their negotiations in a written
agreement.
• The owner then promptly notifies the firm that were not selected.
Competitive Bidding Procedures
• In instances where competitive bidding is to be used to select the
design professionals, the owner first prepares a complete and
comprehensive scope of work, schedule, and contract provisions.
• Design professionals are invited to submit a price, either lump sum or
an estimate not to exceed, for the described scope of work, along with
their work plan.
• The owner compares the bids and typically selects the design
professional submitting the lowest bid, either in terms of price or hours
of effort.
Competitive Bidding Procedures
• However, if the design professional with the lowest bid does not submit
a work plan that supports the required level of effort to complete the
scope of work within the owner’s schedule, the owner may select the
next lowest bid that meets the owner’s requirements.
• The owner may require that the designer be pre-qualified, with the
owner’s committee, to be eligible to bid.
Disadvantages of Competitive Bidding
Competitive bidding often does not serve the best interest of overall
project quality and project management for a variety of reasons:
• The low bidder may not be fully qualified to perform the services.
• It is difficult to include all the design services required in an advertised
scope of services. This can result in amendments to the design
professional’s agreement.
• The nature of having a very detailed scope of services may limit the
ability to achieve a “meeting of the minds” on difficult project goals or
objectives.
Disadvantages of Competitive Bidding
Competitive bidding often does not serve the best interest of overall
project quality and project management for a variety of reasons:
• Contracting on the basis of a limited scope and fee tends to reduce the
number of opportunities for alternative studies and evaluation, and also
limits the flexibility available to the owner and design professional in
solving problems that may arise as a project proceeds.
• Skimping on design costs can result in an increase in the number of
construction change orders, misunderstandings, and other unplanned
events and reduces the attention paid to operating and maintenance
efficiencies, all of which can drive up life-cycle costs.
TWO-ENVELOPE SELECTION
TWO-ENVELOPE SELECTION
• In the two-envelope system, each design professional submits a
technical proposal to the owner in one envelope and a price proposal
in another.
• The owner opens the “technical” envelopes first, evaluates the
proposals, and selects the best qualified design professional solely on
the basis of technical merit.
• After the selection of the best qualified design professional, the owner
opens that firm’s price envelope and uses that cost information as the
basis for negotiating the agreement for design services. However, the
decision and the manner of opening all of the price envelopes should be
announced to the design professionals before the submittal of
proposals—not after. Which is the standard of the two envelop systems.
TWO-ENVELOPE SELECTION
• The time between opening of the technical and commercial envelop can
be a one time event.
• However, some owners evaluation of the technical bid could take
several days before the opening of commercial envelop to pave the way
for technical bid clarifications.
• Until such time those bidders who are technically in compliance shall its
commercial proposal be open.
• During the negotiation of the professional services agreement, the
owner and best-qualified design professional may work together to
establish the final scope of services. Upon agreement of scope, the
price of services is negotiated to reflect changes from the owner’s
original scope or the design professional’s technical proposal.
Construction Contract
• The construction contract, including all exhibits and attachments,
defines the business agreement between the owner and the contractor.
• Under traditional design-bid-build (DBB) project delivery, the
construction contract is a two-party agreement that does not include
the design professional.
• The construction contract is a two party agreement between the
contractor and the owner.
• So during the execution of contract the contractor is solely responsible
to the owner as stipulated in the agreement which is the construction
contract between the owner and contractor.
• In short the design professional is not responsible with the intent of the
construction contract or any of it.
Construction Contract
• The design professional have separate contract with the owner as
explain in the previous topic.
• However, the design professional may provide professional services
related to construction at the owner’s direction during construction
supervision. In a design-build project, the design-build firm contracts to
perform both construction and design services.
• However, the basic elements of the traditional DBB construction
contract, as described in this lesson, remain at the core of design-build
agreements.
• Therefore, it is important that the construction contract, whatever form
it may take, accurately document a meeting of the minds; states clearly
the roles and responsibilities of the parties without overlaps or voids;
and aims squarely at achieving a project objectives.
FUNCTIONS OF THE CONSTRUCTION CONTRACT
• The construction contract serves several important functions from the
beginning to the end of a project.
• It defines the rights and responsibilities of the owner and the
contractor, ranging from the specific quality requirements contained in
the project specifications and project drawings to the owner’s
Obligations to make decisions and payments in a timely manner.
• Additionally, the contract documents set forth procedures and
requirements for management and administration of the contract, such
as schedules, shop drawings, and inspections.
• In this context, the contract documents can be considered a procedures
manual to help ensure quality.
FUNCTIONS OF THE CONSTRUCTION CONTRACT
• Another important role of the construction contract is that of a
planning tool for quality of construction management. That is, the
parties preparing the contract documents can look to the various
components to help ensure that appropriate attention is given to
quality of construction.
• This could range from requirements for materials or workmanship to
procedural requirements such as submittals and inspections.
• The construction contract documents also support a structured
planning process in their role as a risk management plan and risk
allocation device.
FUNCTIONS OF THE CONSTRUCTION CONTRACT
• Finally, of course, there is the legal function.
• Where Contract rights and responsibilities are legally enforceable.
• This provides certainty to both parties that the other party will perform
in accordance with the terms of the contract, which if prepared with
appropriate quality requirements will result in a quality project.
• In the event of disputes, the contract documents will be an agenda or
road map for litigation or other dispute resolution procedure.
ROLE OF THE DESIGN PROFESSIONAL
IN THE CONSTRUCTION CONTRACT
• Under traditional DBB project delivery, the construction contract is a
two party agreement between the owner and the contractor.
• However, it may include a description of the various services and
functions the design professional may provide during construction.
• The design professional may also have a major role in preparing many of
the contract documents and compiling documents for use by bidders
and the parties.
DEFINING AND PREPARING THE CONSTRUCTION
CONTRACT DOCUMENTS
• Typically there are several separate components to the construction
contract documents. Each should be clearly listed in the agreement
signed by the parties.
• These documents supersede any prior oral or written agreements
DEFINING AND PREPARING THE CONSTRUCTION
CONTRACT DOCUMENTS
Construction contract documents generally include the following:
• The agreement (the document signed by the parties, which customarily
identifies the parties; states the contract price, payment terms, and
contract time; and lists the contract documents);
• General conditions;
• Supplementary conditions;
• Lien waivers;
• Confidentiality agreements;
• Project drawings;
• Project specifications;
DEFINING AND PREPARING THE CONSTRUCTION
CONTRACT DOCUMENTS
Construction contract documents generally include the following:
• Addenda (if any) issued before bid submittal;
• Bid instructions;
• Bid forms;
• Contractor’s bid;
• Notice to proceed;
• Performance and payment bonds (if any);
• Change orders or contract modifications (post-execution).
DEFINING AND PREPARING THE CONSTRUCTION
CONTRACT DOCUMENTS
• Preparation and assembly of the construction contract documents for
review and approval by the owner and the owner’s legal counsel may be
done by the owner’s staff, a third-party design professional, a
construction management professional, or a combination of these
parties.
• Sometimes the contractor or the design-builder may submit a contract
to the owner.
• In any case, preferably a team of individuals knowledgeable about the
project and contract documents work together to produce a
construction contract that accurately reflects the intent of the parties.
• Regardless of who prepares the construction contract documents, the
owner must make decisions on many subjects, such as insurance
requirements, bonds, and bidding requirements.
DEFINING AND PREPARING THE CONSTRUCTION
CONTRACT DOCUMENTS
• Because the contract documents are the key to defining how the project
will be manage and quality requirements, it is important to denote the
preparation effort necessary to produce quality contract documents
both individually and as an integrated “package.”
• Quality contract documents help provide quality in constructed
projects. It is essential that attention be given to a careful review of all
of the documents to help ensure coordination and consistency, i.e.,
avoid gaps and conflicts, the source of many misunderstandings and
disputes.
• One of the functions of the contract documents is to allocate risks
inherent in any construction project. Every risk has an associated,
unavoidable cost that must be accounted for or assumed in the design
and construction process.
DEFINING AND PREPARING THE CONSTRUCTION
CONTRACT DOCUMENTS
• Risk should be allocated to the party best able to evaluate, control, bear
the cost, and benefit from the assumption of risk.
• Some risks (weather, for example) may be shared, with each party
accepting its own risk for the cost associated by that risk.
• Improper allocation of risk is more likely to result in a poor quality
project and lead to disputes.
• Owners benefit from fair and balanced allocation of risk because
projects are more likely to be completed on time, with acceptable
quality, and at a fair price without the inclusion of contingencies in the
contractors’ bids to account for some uncontrollable risk.
• Fair and balance allocation of risks also enhance working relationships
between the parties throughout construction.
DEFINING AND PREPARING THE CONSTRUCTION
CONTRACT DOCUMENTS
• Unfair provisions in the contract documents may not be enforceable
and are more likely to distract the parties’ attention away from the
goals of the project and lead to expensive disputes and litigation.
STANDARD-FORM CONSTRUCTION CONTRACT
STANDARD-FORM CONSTRUCTION CONTRACT
• Several components of the construction contract documents may be
available as standard forms, to be completed or edited to define the
agreement for a particular project.
• These standard forms typically include the agreement form, general
conditions, and surety bond forms.
• The benefits of standard forms include efficiency in both time and cost
in their preparation and include efficiency in the bidding process
because bidders are familiar with the terms and working arrangements
set forth in the documents.
• Standard forms are more likely to include industry standard allocation of
risks and include tested language in the event of disputes. Standard
forms are also carefully prepared to coordinate provisions among the
various contract documents, thereby avoiding inconsistencies.
STANDARD-FORM CONSTRUCTION CONTRACT
• Large public and private owners, design professionals, and contractor
may have their own individually drafted standard contract forms.
• However, such forms may not always document an appropriate
allocation of risk. They may also include potentially unenforceable
contract provisions, archaic terms and procedures, and internal
conflicts.
• Professional organizations and industry associations offer important
advantages by promoting the broad use of standardized contract
content, forms, definitions, and language.
DESIGN-BUILD
• The basic components of the traditional DBB construction contract,
remain at the core of design-build agreements.
• The contract documents also include design criteria, performance
specifications, or outline specifications (or a combination thereof)
prepared by the owner or a firm specializing in the preparation of
design-build procurement documents (often a design professional), as
well as the design-builder’s proposal.
• In design-build projects, several of the contract documents that define
specific quality requirements, particularly the project drawings and
project specifications, have not yet been prepared or are not in their
final form at the time of entering into an agreement.
DESIGN-BUILD
• Consequently, it is important for the parties to come to a meeting of the
minds concerning project management and quality requirements prior
to establishing the price and time for the work.
• This can be done in a variety of ways, such as including specific project
management requirements or performance requirements in the request
for proposal, requiring the design- professional to include quality
requirements in its proposal, or by making reference to another specific
similar project.
SUMMARY
• The project owner is the primary force behind the translation of
concepts, ideas, and goals into the objectives that lead to effective
project management, quality and success of the completed project.
• For a project to fulfill the owner’s requirements, the owner must create
the conditions under which the project team can work together
effectively and develop a common understanding of project objectives
and the specific roles and responsibilities of each team member.
• As the initial force behind a project, the owner benefits from good
communication and agreement among team members on how the
project objectives will be developed and implemented.
SUMMARY
• Owners are more likely to have their requirements understood and met
when those requirements are reflected in project objectives that are
clearly specified in written agreements, contracts, specifications, and
drawings.
• In the other hand, Qualifications-based selection procedures generally
offer the owner several advantages in procuring the services of a design
professional. These include securing a designer that is fully capable of
meeting the project goals with the experience and expertise to develop
a specific scope of services, schedule, and budget before contract terms
are finalized.
SUMMARY
• QBS also allows the owner and design professional to agree on a fee
that is fair and based on the scope of services.
• A negotiated agreement for design services generally provides more
opportunities to achieve creative solutions to design problems that will
ultimately control the project’s life-cycle cost, management of project
and quality.
• Finally, the construction contract defines the relationship between the
owner and contractor. The contract documents embody the agreement
between these two parties for construction of the project.
SUMMARY
• The development of the construction contract is a crucial phase in the
life of a project. The roles and responsibilities stated and assigned by
the contract bear directly on the cost and quality of the project, project
management , as well as the safety of the people who will build and use
it.
• Therefore, while each party may approach the development and
negotiation of the construction contract in good faith, it is important
that the contract documents be reviewed and approved by qualified
legal counsel—preferably a person or firm with construction experience.