Construction Methods & Project Management Lesson 1 PDF

# BOHOL ISLAND STATE UNIVERSITY ## College of Engineering, Architecture, and Industrial Design (CEAID) ### Construction Methods & Project Management #### Lesson No. 1 **What is a contract agreement?** A construction contract agreement is a document that lays out the terms of a construction proj...

# BOHOL ISLAND STATE UNIVERSITY ## College of Engineering, Architecture, and Industrial Design (CEAID) ### Construction Methods & Project Management #### Lesson No. 1 **What is a contract agreement?** A construction contract agreement is a document that lays out the terms of a construction project. It is a legal document that defines the work being done, which all the parties involved must agree to. **Contract** - is the term used to describe the combination of two sets of documents: the Agreement and Contract Documents. **Agreement** is the term used to describe the agreement signed by the Owner and the Contractor, excluding the Contract Documents. **Contract Documents** are the documents attached to the Agreement identified therein as Contract Documents, including all additions, deletions and modifications incorporated to those Contract Documents. These generally include the following: * Special Provisions or Conditions * General Conditions * Specifications * Drawings * Other Bid Documents Most construction companies or contractors will have a template they use as the basis of their construction contract. This template will outline their standard operating procedures, rates, and other conditions. Depending on the project, each agreement will be slightly different, with modifications made for scope of work, cost, and more, depending on the job. However, most contract agreements should include certain sections to project description: This details what the project is about, including the most important idea or description of the problem being addressed. It can be a summary of items or just a paragraph. * **Contract price:** The type of contract price that has been awarded and the total amount of money being contracted are detailed, as well as possible additions or deductions to the contract and how payments will be made. * **Payment basis:** This describes the money that will be paid to the contractor, whether on a weekly, monthly, or milestone basis. This section should also specify what percentage of money should be retained on every application for payment. It will also define when the payment is due, the penalty for late payments, whether interest is accrued, and any other payment and invoicing terms. * **Schedule or calendar:** The total number of days or how the project schedule will be divided, it should describe either calendar days or business days and can be presented as a Gantt Chart, bar chart, CPM, or another method. * **Document list:** A list of all contract documents forms this part of the contract agreement. Drawings, exhibits, specs, and supplemental conditions can be part of this list. * **Construction scope:** The scope normally can be measured or quantifiable and is a description of all construction activities that will form part of the project. * **Construction conditions and responsibilities:** Responsibilities for the owner and the contractor, including who is responsible for providing documents, information, payments, or other deliverables are laid out so the project can progress on time. It should contain specific terms for liens, penalties, withholding, and arbitration rules, as well as specific instructions on how to process claims and proceed with disputes. * **Contract laws:** Any applicable legal requirements, including governing laws, liens requirements, claims procedures, arbitration procedures, insurance, substantial completion requirements, final completion, and liquidated damages are detailed. This may also include procedures for how to terminate or suspend the work and the agreement with the contractor. **Who are the parties involved in a contract** The parties are the Owner and his Contractor; or the Contractor his Subcontractor. * **An OWNER** is the person or entity or authorized representative thereof who signed the Contract as Owner. He is represented by an OWNER'S REPRESENTATIVE, who is the person or entity commissioned by the Owner or authorized in writing by the Owner to act on his behalf. * **A CONTRACTOR** is the person or firm duly registered and licensed by the Philippine Contractors Accreditation Board whose bid proposal has been accepted and to whom was awarded the Contract to execute the WORK. * **A SUBCONTRACTOR** is a contractor duly registered and licensed by the Philippine Contractors Accreditation Board who signs a construction Contract with the main CONTRACTOR. **What are specific bidding process in order for a party to become a Contractor?** * **An INVITATION TO BID** is the notice published by the Owner or the invitation issued to prospective bidders, giving information as to the nature of the proposed project, conditions for the issuance of Contract documents, date of bidding, and information that would give the Contractor a general idea of the magnitude and extent of the project. * **BID DOCUMENTS** collectively refer to all documents provided or made available to prospective bidders, which include the Invitation to Bid and a copy of the Contract which the winning bidders would be required to sign with the Owner and the Contract Documents. * **A BID BULLETIN** contains additional information on Bid Documents issued to bidders before the date of bidding. * **A BID** is the tender, or proposal, or quotation, or offer of a bidder to perform the work described in the Contract. * **A BID BOND** serves as a guarantee that the bidder will enter into the Contract with the Owner for the construction of the Work, if the Contract is awarded to him. **What are special provisions or conditions, specifications, supplementary specifications and drawings?** * **SPECIAL PROVISIONS OR CONDITIONS** are instructions which are issued prior to bidding to supplement and/or modify the Drawings, Specifications and/or General Conditions of the Contract. * **SPECIFICATIONS** are the written or printed description of the work to be done describing qualities of the material to be used, the equipment to be installed and the mode of construction. * **SUPPLEMENTARY SPECIFICATIONS** are additional information which may be issued as an addition to or amendment of the provisions of the Specifications. * **DRAWINGS** are graphical presentations of the Work, including supplementary details and shop drawings. **What is the WORK that the Contractor must perform pursuant to the Agreement?** * **WORK** is all Contractor-provided labor and/or materials, as well as equipment, transportation or other facilities necessary to commence and complete construction and to fulfill all his obligations per the Contract. * The **WORK** must be completed within a certain **TIME LIMIT** or **COMPLETION TIME.** The owner shall issue a written **CHANGE ORDER** to the Contractor to authorize changes or variations in the work whether or not it requires an adjustment in the Contract Price or Contract Time. **What is cost as defined in construction industry?** **COSTS** means all expenditures properly incurred or to be incurred, whether on or off the site, including overhead and other charges properly allocable thereto but does not include any allowance for profit. The Contractor incurs costs when performing the WORK. **May the Contractor sub-contract in order to complete the Work under the Agreement?** Yes. A Contractor may engage a **SUB-CONTRACTOR** to acts for or in its behalf in executing any part of the Contract. If a party merely furnishes materials without labor, said party is a supplier and not a Sub-Contractor. **What is the amount to be paid by the Owner to the Contractor for the execution of the Work?** The Owner should pay the **CONTRACT PRICE**, or the amount in money or other consideration to be paid by the Owner to the Contractor for the execution of the Work in accordance with the Contract. The Owner's obligation to pay the **CONTRACT PRICE** ends when he makes the **FINAL PAYMENT** to the Contractor. There is a **FINAL PAYMENT** when payment is made of the final progress billing and all approved claims including but not limited to variations in the work, Contract Price adjustments and/or escalation, acceleration of work, and others. **Must the Contractor provide any securities to guarantee the performance of the Work?** Yes. There are three kinds of bonds: **Guarantee Bond, Payment Bond, and Performance Bond.** The Contractor and his Surety furnish these bonds. A Surety is the person, firm, or corporation which issues the bond required of the Contractor. * **GUARANTEE BOND** is furnished as a guarantee of the quality of the materials provided, the equipment installed, and the workmanship performed by the Contractor. * **PAYMENT BOND** is furnished as a guarantee of good faith on the part of the Contractor to faithfully comply with the Contract in respect of its obligations arising therefrom to its workers, subcontractors, and suppliers. * **PERFORMANCE BOND** is furnished as a guarantee of good faith on the part of the Contractor to execute the Work in accordance with the Contract. **What are acts of God or force majeure?** **ACTS OF GOD OR FORCE MAJEURE** refer to any event beyond the reasonable control of the Owner or the Contractor, as the case may be, and which is unavoidable notwithstanding the reasonable care of the party affected and shall include, without limitation, the following: * War, hostilities or warlike operations (whether a state of war be declared or not), invasion, act of foreign enemy, civil war; * Rebellion, revolution, insurrection, mutiny, usurpation of civil or military government, conspiracy, riot, civil commotion, terrorist acts; * Confiscation, nationalization, mobilization, commandeering or requisition by or under the order of any government or de jure or de facto authority or ruler or any other act or failure to act of any local or state or national government authority; * Strike, sabotage, lock-out, embargo, import restriction, port congestion, lack of usual means of public transportation and communication, industrial dispute, shipwreck, shortage or restriction of power supply, epidemics, quarantine, plague; * Earthquake, landslide, volcanic activity, fire, flood, inundation, tidal wave, typhoon or cyclone, hurricane, storm, lightning, or other inclement weather condition, nuclear and pressure waves, or other natural or physical disaster; * Shortage of labor, materials or utilities where caused by circumstances that are themselves Force Majeure. **What does WRITTEN NOTICE mean?** 'Written Notice' means information, advice or notification pertinent to the project delivered in person or sent by registered mail, or by courier to an individual, firm or corporation at the latter's last known business address. 1. **What is the intent of the Contract?** The intent of the Contract is to include all labor, materials, equipment and transportation necessary for the proper execution of the Work. 2. **What is the standard of conduct required of the parties?** Each party to the Contract acknowledges that, in the exercise of his rights and in the performance of his duties, he must act with justice, give the other party his due, and observe honesty and good faith. 3. **Who is responsible for resolving conflicts or discrepancies in the interpretation of the Contract?** The Owner is responsible for resolving such conflicts or discrepancies. The interpretation of or explanation by the Owner shall be issued in the form of instructions to the Contractor. 4. **What is the consequence of the Owner failing to issue the instruction in writing?** The execution of the work affected by the interpretation or explanation without the Owner's timely objection or protest shall be considered executed in accordance with the Owner's interpretation or explanation. Thus, the Owner cannot later on say that the work was done incorrectly. 5. **What should the Contractor do if it spots a discrepancy in any of the documents enumerated? What are the consequences of not reporting to the Owner?** The Contractor should immediately report the discrepancy to the Owner, who shall promptly correct it. Any work involving such discrepancies shall be estimated by the Contractor and unit prices or lump sum amounts shall be agreed upon by the parties whenever possible before the work is done. Any work done by the Contractor involving discrepancies found by the Contractor and not reported to and without the knowledge of the Owner shall be considered as having been done at the Contractor's risk. 6. **Who is responsible for adequacy of the design and sufficiency of the drawings and specifications?** Generally, the Owner shall be fully responsible for the adequacy of the design and for sufficiency of the Drawings and Specifications. However, if any part or whole of the Works, when agreed upon, are to be designed by the Contractor, then all responsibilities assigned to the Owner for such design shall automatically be assigned to the Contractor. 7. **What is the responsibility of the Owner with respect to performing acts which may affect the Contractor's timely completion of the work?** Here are some instances where the Owner may be required to act, and such action may affect the Contractor's timely completion of the work, such as: * Giving his decision, opinion or consent; * Expressing his satisfaction and approval; * Determining value; * Providing drawings; * Supplying equipment or materials In these cases, the Owner shall exercise such discretion fairly and in a timely manner, taking due regard of Completion Time and the approved construction schedule notwithstanding any provision in the Contract requiring the Contractor to notify the Owner when such action is due. 8. **What is the Contractor's responsibility in giving notices or submissions to the Owner?** The Contractor shall give notices or submissions in a timely manner so as to avoid delays in the Work. 9. **What is the responsibility of the Owner when the Contract or accepted industry practice requires that before any part of the Work is covered, it must be inspected and approved?** The Owner shall provide a sufficient number of inspectors at the project site while work is in progress. Failure of the Owner to provide inspectors is a waiver of the Owner to inspect and approve that part of the Work. 10. **What must the Owner do with respect to removing/ replacing defective or inferior equipment, materials, or work?** If the Owner is: (a) authorized by the Contract or General Conditions to require the Contractor to remove or replace defective or inferior materials or equipment or to replace bad or defective work; and (b) represented by a professional duly authorized to supervise the Contractor's work and to exercise the discretion and authority of the Owner, the Owner shall promptly condemn (seize) such materials, equipment or work in order to minimize the damage or loss of the Contractor. However, where even with the exercise of due diligence, the Owner could not have discovered the use of inferior materials and equipment or the defective work, the Owner shall promptly condemn it upon discovery, and the Contractor shall bear all the cost of removing and replacing the defective or inferior material or equipment or work. 11. **What is the duty of the Contractor in reviewing the contract and its attached documents?** The Contractor shall carefully study and compare the various documents comprising the Contract and shall report to the Owner any error, inconsistency or omission that may be discovered in its provisions. The Contractor, however, shall not be liable to the Owner for any damage resulting from any such error, inconsistency or omissions. The Contractor shall follow the Drawings and Specifications and all additional detail drawings and instructions issued by the Owner as being in full and strict conformity with the Contract and requirements of the Work. The Contractor shall not be liable to the Owner for undetected error, inconsistency or omission in the Contract or for complying with instructions or following Drawings or Specifications, or for using or following the approved shop drawings, product data or sample. 12. **How should the Owner's approval of documents be construed?** Generally, the Owner's approval shall be construed as the Owner's acknowledgment that the approved shop drawings, product data and sample comply with the Contract. The above rule does not apply in the case of shop drawings, product data and samples for any portion of the work provided or supplied by a specialty contractor, for which the latter shall be directly liable to the Owner. 13. **What documents should the Contractor maintain at the Project site?** The Contractor shall maintain in good order at the Project site on a current basis one (1) record copy of all Drawings, Specifications, addenda, Change Orders and other modifications, and changes made during construction, including approved shop drawings, product data and samples. These documents and samples shall be available to the Owner for the latter's inspection. The Contractor shall advise the Owner, on a current basis and in writing, of changes in the Work made during construction, except those made in accordance with Change Orders or Owner's instruction. 14. **Once the Owner provides a copy of the contract documents to the Contractor, does ownership of these documents transfer to the Contractor?** No. The Drawings, Specifications and models, including all additional instructions and copies thereof, furnished to the Contractor shall remain the property of the Owner. They are not to be used by the Contractor on any other work, and, with the exception of the signed Contract inclusive of Contract Documents, they shall be returned to the Owner upon completion of the Work before Final Payment to the Contractor is made.