Podcast
Questions and Answers
What is the primary advantage of a cost-plus-a-fixed fee (CPFF) contract?
What is the primary advantage of a cost-plus-a-fixed fee (CPFF) contract?
- The contractor is guaranteed a fixed profit regardless of expenses.
- The contract includes a fixed price that doesn't vary with costs.
- The contractor takes all the risk for any cost overruns.
- The owner pays only for the exact costs incurred plus a predetermined fee. (correct)
In a cost plus a percentage of cost (CPPC) contract, how is the contractor's fee calculated?
In a cost plus a percentage of cost (CPPC) contract, how is the contractor's fee calculated?
- A fixed fee is paid regardless of costs incurred.
- The fee is based solely on materials and labor costs.
- A percentage is taken from the total project cost only.
- A percentage is calculated based on the total costs incurred. (correct)
What characterizes an incentive contract?
What characterizes an incentive contract?
- The contractor is paid a fixed amount regardless of expenses.
- The contractor benefits from keeping costs below estimates. (correct)
- The owner covers all costs without additional fees.
- The contract compensates only for direct labor costs.
What is a significant benefit of negotiated contracts?
What is a significant benefit of negotiated contracts?
What happens in a cost-plus-a-fixed fee contract when the costs exceed what was estimated?
What happens in a cost-plus-a-fixed fee contract when the costs exceed what was estimated?
Which statement about advertised contracts is true?
Which statement about advertised contracts is true?
Which of the following statements best describes the nature of private contracts?
Which of the following statements best describes the nature of private contracts?
What is true about the single lump sum (fixed price) contract?
What is true about the single lump sum (fixed price) contract?
What is the first step in selecting a construction contractor?
What is the first step in selecting a construction contractor?
Which of the following is NOT included in the invitation to bid?
Which of the following is NOT included in the invitation to bid?
What are the two major groups of construction documents?
What are the two major groups of construction documents?
What does prequalification of contractors determine?
What does prequalification of contractors determine?
What is the purpose of the bidding requirements?
What is the purpose of the bidding requirements?
Which of the following activities occurs after bids are opened?
Which of the following activities occurs after bids are opened?
What are construction documents primarily used for?
What are construction documents primarily used for?
What aspect of contractor evaluation typically falls under post qualification?
What aspect of contractor evaluation typically falls under post qualification?
What is the purpose of examining bids after they are opened?
What is the purpose of examining bids after they are opened?
What does a performance bond guarantee?
What does a performance bond guarantee?
Which of the following is NOT included in the agreement between the owner and contractor?
Which of the following is NOT included in the agreement between the owner and contractor?
What triggers the contractor's permission to begin work?
What triggers the contractor's permission to begin work?
What is the main function of specifications in a construction project?
What is the main function of specifications in a construction project?
What does a payment bond ensure?
What does a payment bond ensure?
What does the legal documents section primarily include?
What does the legal documents section primarily include?
Which of the following is a key component of the agreement?
Which of the following is a key component of the agreement?
Which factor is NOT considered in the selection of materials and equipment?
Which factor is NOT considered in the selection of materials and equipment?
What is a guide specification best described as?
What is a guide specification best described as?
What is a responsive bid?
What is a responsive bid?
Which section would contain the methods and materials for plumbing?
Which section would contain the methods and materials for plumbing?
Which specification is created during the design phase with preliminary drawings?
Which specification is created during the design phase with preliminary drawings?
What consideration deals with the capability of equipment to be repaired?
What consideration deals with the capability of equipment to be repaired?
Which type of specification combines outline, standard, and guide specifications for a specific project?
Which type of specification combines outline, standard, and guide specifications for a specific project?
What is a common special requirement in technical descriptions?
What is a common special requirement in technical descriptions?
What is the primary purpose of bidding requirements?
What is the primary purpose of bidding requirements?
Which of the following documents is included in the bid package?
Which of the following documents is included in the bid package?
When do bids typically get opened after an invitation to bid is issued?
When do bids typically get opened after an invitation to bid is issued?
What does a bid bond guarantee?
What does a bid bond guarantee?
What must bidders do with their bids before the bid opening time?
What must bidders do with their bids before the bid opening time?
Which of the following does NOT typically have to be submitted by the contractor during the bidding process?
Which of the following does NOT typically have to be submitted by the contractor during the bidding process?
What happens to the bid bond if the low bidder refuses to take the contract?
What happens to the bid bond if the low bidder refuses to take the contract?
What is included in the 'Instructions to bidders' document?
What is included in the 'Instructions to bidders' document?
Study Notes
Types of Contracts
- Single Lump Sum Contract: A fixed price agreement where all costs, including labor and materials, are included in a single payment.
- Cost-plus-a-Fixed Fee (CPFF): The owner pays actual costs for materials and labor plus a set fee to cover overhead and profit (e.g., P100,000 for ABC Const.Co).
- Cost plus a Percentage of Cost (CPPC): Contractor receives a percentage of the project's total cost (e.g., 8% of P1,500,000 equates to P120,000).
- Incentive Contract: Allows savings to be shared if the project is completed below the estimated cost, while the fee is reduced if the cost exceeds expectations.
Contracting Processes
- Public Contracts: Advertisement for bids ensures fair competition among qualified contractors.
- Private Contracts: May also be advertised to encourage lower bids through competitive bidding.
- Negotiated Contracts: Involves direct discussions between the owner and contractor to agree on terms.
Selection Steps for Contractors
- Advertising: Notifying potential bidders through invitations that detail the work, location, and bidding process.
- Qualification of Contractors: Evaluated by experience, financial resources, integrity, personnel, and equipment.
- Prequalification: Contractors vetted before bidding.
- Post Qualification: Low bidder qualifications confirmed after bids are opened.
Bidding Documents
- Bidding Requirements: Attract bidders and outline procedures; do not become part of the contract.
- Bid Package: Includes plans, specifications, general conditions, and project description.
- Instruction to Bidders: Outlines conditions of bidding, eligible bidders, materials, site visits, and amendments.
Bid Opening and Awarding
- Bid Opening: Typically occurs 30 days after bid invitations, where proposals are read aloud.
- Bid Bond: Guarantees contractor will enter the contract, often 20% of the bid value.
- Responsive Bid: A compliant bid matching all conditions in the bidding documents.
- Notice of Award: Sent to the lowest responsive bidder along with agreement forms and bond requirements.
Bonds
- Performance Bond: Guarantees project completion per the owner's plans; bonded company completes job if contractor defaults.
- Payment Bond: Ensures subcontractors and suppliers receive payment for work done, covered by the bonding company.
Agreement and Notice to Proceed
- Agreement: Summarizes contract terms, including work scope, price, payment procedures, and completion timelines.
- Notice to Proceed: Authorizes the contractor to commence work.
Specifications
- Specifications: Detailed written instructions outlining project requirements to protect interest from all parties involved.
- Categories of Specifications:
- Legal Documents: Includes advertisements, invitations, agreements, and bond forms.
- Condition Section: Defines rights and responsibilities of all parties.
- Technical Description: Details materials and methods for construction.
Material and Equipment Considerations
- Major Selection Factors: Economy, quality, functionality, installation ease, appearance, compliance with codes, service requirements, warranty, and size.
Types of Specifications
- Outline Specification: Initial outline based on preliminary designs.
- Standard Specification: Set by companies for consistent usage of materials.
- Guide Specification: Checklist to assist in specification writing.
- Project Specification: Finalized specifications tailored to a specific construction project, incorporating other types as needed.
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Description
Explore the different types of construction contracts including lump sum and cost-plus-a-fixed fee agreements. This quiz will help you understand the financial arrangements between contractors and clients in construction projects.
