Lecture 4: Construction Contracts

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Questions and Answers

What defines the final price in a unit price contract?

  • The performance outcomes of the contractor
  • The estimated quantities of items and their unit prices (correct)
  • The cost of all labor regardless of itemization
  • The total value of the project agreed beforehand

Which type of cost plus contract includes a cap on maximum costs?

  • Cost + Fixed Fee with Guaranteed Maximum Price Contract (correct)
  • Cost + Fixed Fee Contract
  • Cost + Fixed Fee with Agreement for Sharing any Cost Saving
  • Cost + Fixed Percentage Contract

In an incentive contract, what is the basis for compensation?

  • Quality of materials used
  • The efficiency of labor employed
  • The total cost of the completed project
  • Contracting performance based on targets (correct)

Which of the following is a characteristic of Cost Reimbursement Incentive Contracts?

<p>They adjust the initially negotiated fee based on total allowable costs. (D)</p> Signup and view all the answers

What best describes the Turnkey Contracts?

<p>They release the owner from responsibilities during planning and construction. (A)</p> Signup and view all the answers

In a Cost + Fixed Fee with Bonus Contract, what triggers a bonus for the contractor?

<p>Finishing the project below budget and ahead of schedule. (C)</p> Signup and view all the answers

Which category does Fixed Price Incentive Contract belong to?

<p>Incentive Contracts (D)</p> Signup and view all the answers

What is a key feature of the Cost + Fixed Fee with Agreement for Sharing any Cost Saving?

<p>Cost savings are shared between the owner and the contractor. (A)</p> Signup and view all the answers

Which of the following best describes the nature of Built-Operate-Transfer (BOT) contracts?

<p>Contractors retain all or a portion of the revenues earned during the concession. (B)</p> Signup and view all the answers

What is NOT a typical content of a construction contract?

<p>Requirements for custom designs (C)</p> Signup and view all the answers

What are the primary components involved in the contracting requirements of a project?

<p>General Conditions of the Contract and bonds (C)</p> Signup and view all the answers

Which section of a construction contract includes the title page and introduction to the project?

<p>Introductory information (C)</p> Signup and view all the answers

What does the specifications component of a construction contract typically include?

<p>General rules and directions for project execution (D)</p> Signup and view all the answers

In what situation would a construction manager (CM) operate independently of the contractor?

<p>When the CM acts as the owner's agent (C)</p> Signup and view all the answers

Which division in a specifications template typically addresses general requirements?

<p>Division 01 (A)</p> Signup and view all the answers

Which of the following is NOT typically included in the bidding requirements of a construction contract?

<p>Supplementary contract terms (D)</p> Signup and view all the answers

What is a key characteristic of a Lump-Sum or Stipulated Contract?

<p>It is suitable when the scope and schedule are well defined. (D)</p> Signup and view all the answers

Which of the following is NOT typically a component of a Letter of Intent (LOI) in construction projects?

<p>Detailed architectural plans (D)</p> Signup and view all the answers

Which organization provides guidelines for Government-initiated construction projects in the Philippines?

<p>Government Procurement Policy Board (GPPB) (B)</p> Signup and view all the answers

What is a characteristic of the private industry standard for construction contracts in the Philippines?

<p>It follows the Construction Industry Authority-CIAP document 102. (D)</p> Signup and view all the answers

If a larger scope of work arises, what component of the LOI addresses this situation?

<p>A statement about contingencies (D)</p> Signup and view all the answers

What form of contract is best suited for projects with a clearly defined scope and schedule?

<p>Lump-Sum or Stipulated Contract (B)</p> Signup and view all the answers

Which of the following is one of the common references for construction contracts in private industry?

<p>Construction Industry Authority-CIAP (D)</p> Signup and view all the answers

What does the LOI typically signify in the context of a bidding process?

<p>The firm expresses intent to participate in the bidding process. (D)</p> Signup and view all the answers

Flashcards

Unit Price Contract

A contract where the final price depends on the actual quantities of items, but the unit prices are fixed.

Cost-Plus Contract

A contract where the owner pays for all costs (labor, materials) plus a contractor's fee (often a percentage).

Cost + Fixed Fee Contract

A cost-plus contract with a set fee for contractor overhead and profit.

Cost + GMP Contract

Cost-plus contract with a maximum price limit. The contractor's fee is still based on costs, but not exceed the set price.

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Incentive Contract

A contract type where compensation depends on fulfilling predetermined targets, like budget, schedule, and quality.

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Fixed-Price Incentive Contract

Incentive contract where the base price is fixed but may be adjusted based on performance.

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Turnkey Contract

A contract where the contractor is responsible for the entire project, from planning to completion.

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BOT Contract

A contract where a contractor builds and operates a facility under a pre-agreed structure.

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Turnkey Project Delivery

A project delivery method where the contractor is responsible for all aspects of the project, from design to construction to completion, with the client taking ownership once the project is finished.

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Construction Management (CM) Contract

A contract where a specialized company acts as the owner's agent to oversee and manage contractors during the projects' execution.

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Construction Contract Components

The key elements required to successfully execute and document a construction project (introduction, bidding, contracting, specifications, drawings, etc.).

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Bidding Requirements

The instructions and forms used to solicit bids from potential contractors for a construction project, ensuring fairness and transparency.

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Contracting Requirements

The core stipulations within a construction contract, including the agreement, general conditions, supplementary details, and related documents.

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Specifications

Detailed instructions and requirements for the project's design, materials, and construction procedures, ensuring the project meets the intended quality.

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Drawings

Technical illustrations (plans, elevations, sections) of the project, specifying physical aspects of the structure.

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Letter of Intent (LOI)

A preliminary agreement outlining the scope of work, cost, and key terms for a potential project. It signals the intention to proceed with a project but doesn't bind either party legally.

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LOI Components

A Letter of Intent often includes a defined scope of work, a lump-sum or cost-plus pricing, payment terms, a start date, contingency plans, and details on project continuation.

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Government Project Contract References

Government projects in the Philippines typically adhere to the guidelines set by the Government Procurement Policy Board (GPPB).

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Private Project Contract References

Private construction contracts in the Philippines often refer to sources like the CIAP document 102, AIA, and AGCA.

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Lump-Sum Contract

A fixed-price contract where the total project cost is agreed upon upfront, regardless of actual costs incurred.

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When Lump-Sum Contracts Are Useful

Lump-sum contracts are suitable when the scope and schedule of a project are well-defined and understood.

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Construction Contract Types

Several construction contract types exist, with the most common being the Lump-Sum Contract.

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Construction Contract References

For both government and private projects, various organizations and agencies provide guidelines and standard contracts for construction.

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Study Notes

Lecture 4: Project Documents

  • Fundamentals & Types of Construction Contracts:
    • A Letter of Intent (LOI) is a contract with limited scope, used in government projects, to signal a company's interest in the bidding process.
    • LOIs in international and Philippine private projects usually contain:
      • A stated scope of work
      • A lump-sum cost or cost-plus fee
      • Payment terms
      • A commencement date
      • A statement about contingencies
      • Details for project continuation
    • Sources/references for Construction Contracts in the Philippines include:
      • Construction Industry Authority (CIAP) document 102: Uniform General Conditions of Contract for Private Construction
      • Philippine Bidding Documents (PBD)
      • American Institute of Architects (AIA) standard construction contract
      • Associated General Contractors of America (AGCA) standard construction contract
  • Construction Contract Documents:

    • Typical Contents: Introductory information, bidding requirements, contracting requirements (General Conditions of Contracts), specifications, drawings, bill of quantities, and appendices.

    • Introductory Information: Title page, table of contents, guides, and introduction to the project.

    • Bidding Requirements: Contains bid solicitation forms, instructions to bidders, information to bidders, and bid forms.

    • Contracting Requirements: The central part of an individual project, including: Agreements, General Conditions of Contract (GCC), Supplementary conditions, Bonds, and Certificates..

    • Specifications: Directions, provisions, and requirements of work.

      • Describes type and quality of products in a project.
      • Outlines fabrication, erection, application, installation, and finishing procedures.
      • Details quality of workmanship.
      • Includes necessary codes and standards for the project.
      • Offers alternate materials, products, or services (if needed).

    • Drawings:

      • Technical drawings, for visualization, communication, and documentation.
      • Types of Drawings:
        • Site plan: Shows property boundaries, buildings, driveways, and walkways on the property.
        • Plot map: A detailed view of a part of a city or township, focusing on a specific area (e.g., subdivision).
        • Civil/structural plans showing size and configuration.
        • Electrical systems, showing lighting, electrical outlets, communication, and other details.
        • Plumbing and sanitary systems, showing pipes, fixtures, and drainage.
        • Mechanical systems (HVAC, heating, ventilation, and air conditioning), showing equipment and systems.
        • Architectural drawings: show sizes, materials, connections, and parts of a structure(e.g., elevations, sections, parts).

    • Bill of Quantities: Detailed breakdown of work items and associated costs.

Self-Assessment:

  • Content of a Contract Document or Project Manual: List of documents included in the contract.
  • Attributes of Good Technical Specifications: Details expected for clear technical specifications.
  • Implications of Not Having a GCC for a Project: Consequences of not having a General Conditions of Contract.

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