LEC 2 CMPM LECTURE (2019)1.pdf

LECTURE NOTES IN CONSTRUCTION METHOD AND PROJECT MANAGEMENT PREPARED AND COMPILED BY: ENGR. FROILAN P. NEY, MEng ASSISTANT PROF. 2 1  LECTURE II CONTRACTS A...

LECTURE NOTES IN CONSTRUCTION METHOD AND PROJECT MANAGEMENT PREPARED AND COMPILED BY: ENGR. FROILAN P. NEY, MEng ASSISTANT PROF. 2 1  LECTURE II CONTRACTS AND SPECIFICATION SELECTING A BUILDER The owner has three choices on who will do the construction works 1. He might do the work himself 2. He might select a construction consultant who is also a builder 3. He might choose a construction contractor Architect-Engineer-Constructor – a both designs and builds a project. The job itself is sometimes referred as a “turnkey” job. Turnkey – one company prepares the plans and constructs the project and turns the key over to the owner. Advantage: There is only one organization responsible for seeing that everything is done Disadvantage: An expensive way to get a project built, for very often there is a little competition. Competitive Bidding – A construction project is built by a contractor who has competed with others for the job. The owner choses the contractor by comparing what several contractors say it would cost them to do the job. The owner makes the contract with the one who has said he can do the job correctly for the least amount of money. CONTRACT An agreement between the owner and the contractor as to how much the owner will pay to have that contractor build the project Agreement of at least two parties with purpose of creating legal obligation between the parties and capable of being enforced by the court of law. CONTRACT = OFFER + ACCEPTANCE + Consideration Why Use contract in construction: Describe scope of work Establish time frame Establish cost and payment provision Set fourth obligations and relationship Minimize disputes Improve economic return of investment Content of the contract Identify the parties Promises and responsibilities Scope of work Price and payment terms Commercial terms and conditions Project execution plan. 2 Kinds of Contracts 1. Fixed Price 2. Cost plus a fixed fee 3. Cost plus a percentage of cost 4. Incentive 1. Fixed price contract – the contractor agrees to do all the building according to the owner’s plans and specification for a set sum of money which is to be paid by the owner. Sometimes, especially for buildings, this amount is stated as a single lump sum. Ex. Pintura Ink, a painting contractor, agree to paint MSC Classroom for P100,000.00 The P100,000 is called a single lump sum (fixed price – includes everything) 2. Cost-plus-a-fixed fee (CPFF) – the owner agrees to pay the contractor whatever it costs to do the job (materials, labor, and use of equipment) plus a fixed sum Ex. ABC Const. Co. agree to build a bungalow house for what it costs them to build it , plus a fee of P100,000.00. This fee of P100,000.00 is to cover ABC’s overhead (such as the cost of its home office) and profit. 3. Cost plus a percentage of cost (CPPC) – is one in which the contractor is paid a flat percentage of his cost. Ex. A contractor is given a contract of to build a bungalow house for the amount of whatever it will cost him (P1,500,000) plus an 8% fee (P1,500,000 x 8% or P120,000) 4. Incentive Contract – A target estimate is made. If the contractor should do job for less than the estimated cost, he gets to keep part of the saving. If it should cost more than the estimated amount, his fee is reduced. Thus, the contractor has a good reason (Incentive) to keep the cost down. Ex. Suppose the owner and contractor agree that the bungalow house should cost P1,500,000 and the contractor will get a fee of 120,000 for building it. They might also agree that if the bungalow actually costs P1,300,000, the contractor would get half of whatever he saved plus his regular fee of P120,000, a total of P220,000. The contract might further state that if it cost P1,700,000, the contractor fee would reduced to P50,000 Advertised and Negotiated Contract The owner places notices in newspaper, magazines and Philgeps asking contractor to send in their bids (the amount for which each could do the job). Public Contracts – are usually advertised because it is thought fair to give every qualified contractor the chance to bid, since they are also taxpayer. 3 Private Contracts – are sometimes advertised because the competition created by advertising usually results in the lowest cost for the project. Negotiated Contracts – are any contracts in which the owner and the contractor talks together to reach an agreement on the terms of the contract. Benefits of a Negotiated Contract 1. It limits the bidder to those who are only qualified for the project. 2. It save time and to begin the work before plan and specification were completed CONTRACTING Let us now assume that the plans and specification are completed. The procedure outlined below is typical of a fair and honest way to select a construction contractor. Advertising Receiving Bids Opening Bids Awarding Contract Bonding Agreement Notice to Proceed Advertising The first step in selecting a construction contractor is notify all bidders and this is done by an invitation to bid, a short notice which states: 1. The type of work 2. The location 3. The time and place of bid opening 4. Where and how plans and specifications are to be made available The invitation to bid is mailed by the owner to contractors who might be interested. Sometimes the invitation to bid is actually advertised in newpapers, magazines or in Philgeps Website 4 Qualification of Contractors Contractor Ability usually checked by the owner or his architect-engineer Experience Financial resources Integrity Personnel Equipment Prequalification – Contractor ability is determined before bidding and only those contractors who are considered capable of doing the job are invited or permitted to bid Post qualification – The qualifications of the low bidder are determined after the bids are opened but before the contract is awarded to the contractor. Bidding Documents Construction Documents are defined as the written and graphic documents prepared or assembled by the A/E for communicating the design of the project and administering the contract for its construction. 2 major groups 1. Bidding Requirements Used to attract bidders & explains bidding process 2. Contract Documents Legally enforceable requirements that become part of the contract Include all construction documents except bidding forms 5 BIDDING REQUIREMENTS Bidding Requirements are used to attract bidders and explain the procedures to be followed in preparing and submitting bids. Bidding requirements help bidders follow established procedures and submit bids that will not be disqualified because of technicalities. They do not become part of the contract documents Bidding documents All of the construction documents issued to bidders before the signing of an owner- contractor agreement. Bid Package Documents available to the contractor and on which he must make a decision to bid or not A set of plans and technical specifications, Proposal form, general conditions, special conditions, Description of the project to be constructed Instruction to bidders - It describe the scope of the bid, source of fund (if it is financed from other agency), fraudulent and fraud practices, eligible bidders, Eligible Materials, Equipment and Services, Clarification of Bidding Document, Site Visit, Pre-Bid Meeting, Amendment of Bidding Document The Bid Opening - The bids are usually opened about 30 days after the invitation to bid is issued or advertised. This period, during which the contractors prepare their bids, may vary from 10 to 90 days. Proposal form –is a form usually supplied by the owner or architect-engineer, on which the contractor writes in the amount for which he will build the project. - Lump sum job, contractor submit just one amount. - Unit price job, contractor submit the amount of work, unit price and total price for each item. 6 Bid bond –is a guarantee on the part of a bonding company (usually a large insurance company) that the contractor will enter into the contract. Bid bond are often 20% of the face value of the bid, If the bidder accepts the contract, the bid bond no longer serves a purpose. If the low bidder refuses to take the contract, the owner collects the difference between the low bid and the next lowest bid, up to the amount of the bid bond. Other requirements to be submitted by the Contractor 1. A list of the qualifications of the contractor 2. A list of subcontractors 3. A list of construction equipment to be used by the contractors 4. A list of makes and models of equipment the contractor will install in the structure Strict rules on Bid Opening 1. No bid may be submitted or changed after the time set for the bid opening 2. Bid must be submitted in sealed envelopes 3. Each contractor’s proposal is read aloud at public opening. The Award After the bids are opened, each bid is carefully examined by the owner or the architect- engineer. The purpose of this examination is to determine the lowest responsive bid. Responsive Bid – A bid that matches in every detail the conditions set forth in the bidding documents Notice of Award – a notice being sent to the qualified contractor who has the lowest responsive bid. The owner also send along with the notice of award, agreement forms and blank performance and payment bond. Bonds Performance Bond – is one in which the bonding company (an insurance company) guarantees that the contractor will build the project according to the owner’s plan and specifications. If the contractor does not fulfil his duties under the contract, then the insurance company itself will fulfil them. If this should happen, the insurance company would probably hire another contractor to complete the work. Payment Bond – is one in which the bonding company guarantees that the contractor will pay his subcontractors and suppliers for any amount due them. If the contractor does not pay a subcontractor for work satisfactorily performed, the bonding company must make payment. The Agreement 7 Agreement – is a brief statement of the work to be done under the contract and the price. It refers to the other parts of the contract, the plans, specifications, instruction to bidders, general and special conditions, and the bond. It is signed by the owner and contractor. The agreement should contain:  The names of contracting parties  A brief description of the work  A list of contract documents, including agreement, general conditions, drawings, and specifications.  The contract sum, or amount (lump-sum contract)  The procedures for payment  The contract time, or dates for start and completion  The signatures of contracting parties and witnesses Notice to Proceed Notice to proceed – a notice which gives the contractor permission to begin the work. WRITING SPECIFICATIONS Specification – are written instructions conditions and descriptions which tell the builder about a project to be constructed. Specifications also protect the interests of everyone involved: the architect, the builder, and the owner. Three general categories of specification 1. Legal documents section – consist of advertisement for bids, invitation and instruction to bidders, owner-contractor agreements and bond forms. 2. Condition Section – states the rights and responsibilities of the designer, the owner, the contractor and any subcontractors. 3. Technical description section – lists the materials and methods to be used for building the structure. Division of Technical Description Section 1. Architectural Section 2. Civil Section 3. Structural Section 4. Plumbing Section 5. Electrical Section 6. Mechanical Section Each section is organized to include: 1. The scope of work to be done 2. The complete description of materials to be used 3. General requirements or the usual work standards and practices 4. Special requirements of unusual work standards or practices 9 Major factors to consider in the selection of Materials and Equipment 8  1. Economy – the cost and appropriateness of the item 2. Quality – what grade of excellence of the material, fixture, or appliance is wanted? 3. Functionality–will it serve the purpose for which it is intended? 4. Ease of Installation – Is the item easy or hard to install. Will it require special tools for installation? 5. Appearance – Is it pleasing to the eye? 6. Codes – Is it with complying with the building codes? 7. Service Requirement – Can the equipment be repaired easily and quickly? 8. Warranty – Does the equipment carry a guarantee? 9. Size – It must fit a pre-planned space in a structure Kinds of Specifications 1. Outline specification – are made up when the design phase of a project begins and preliminary drawings are made. This specification gives only an outline (main facts) about materials to be used and how they are to be used for the job. 2. Standard Specification – are those which are made up by different companies about the use of their own materials. These are usually standard or the same for each material used. 3. Guide specification – are kind of check list which can be used for writing specifications. They tell about things which may be needed for a job. 4. Project Specification – are usually made up of outline specifications, standard specifications, and guide specifications. They are the finished specifications which have been made for one special construction project. Four ways to make specification 1. Getting an old set of specifications and working it over for the new job 2. Using several sets of specifications and cutting and clipping them to get one new set 3. Writing them by the paragraph procedure which requires the use of a specification file 4. Using guide specification 9 10