Built Environment Contract and Risk Management PDF

CONSTRUCTION CONTRACT AND RISK MANAGEMENT CONTRACT AND PROJECT DELIVERY METHOD STRATEGIES Copyright ©2024 Project Management Institute, Inc. All rights reserved. 1...

CONSTRUCTION CONTRACT AND RISK MANAGEMENT CONTRACT AND PROJECT DELIVERY METHOD STRATEGIES Copyright ©2024 Project Management Institute, Inc. All rights reserved. 1 This material is being provided as part of a PMI course. “The whole is greater than the sum of its parts.” – Aristotle Copyright ©2024 Project Management Institute, Inc. All rights reserved. 2 This material is being provided as part of a PMI course. Built Environment Project Considerations PLANNING DESIGN CONSTRUCTION PROJECT DELIVERY CONTRACT METHOD STRUCTURE/TYPE Copyright ©2024 Project Management Institute, Inc. All rights reserved. 3 This material is being provided as part of a PMI course. Objectives Review various Introduce project delivery various contract methods structures Copyright ©2024 Project Management Institute, Inc. All rights reserved. 4 This material is being provided as part of a PMI course. Project Delivery Methods Copyright ©2024 Project Management Institute, Inc. All rights reserved. 5 This material is being provided as part of a PMI course. What Is Project Delivery? Process required to execute and complete a construction project Project delivery method defines contractual relationships Selecting the correct project delivery method is critical Copyright ©2024 Project Management Institute, Inc. All rights reserved. 6 This material is being provided as part of a PMI course. Meanwhile, on Avocet Island Applying What You’re Learning Copyright ©2024 Project Management Institute, Inc. All rights reserved. 7 This material is being provided as part of a PMI course. Avocet Island Project: Roles Describe the relevance of your assigned role as it relates to the project Owner Designer Contactor Ernie Becklesten Helmut Schmidt Monisha Klarewill WOW CEO Track Designer Main Contractor 4 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 8 This material is being provided as part of a PMI course. Project Delivery Method: Selection Criteria Budget Design Risk Schedule Owner expertise Copyright ©2024 Project Management Institute, Inc. All rights reserved. 9 This material is being provided as part of a PMI course. Project Delivery Method: Impact Establishes engagement Affects contractual relationship Influences ownership Impacts changes and modifications to cost Copyright ©2024 Project Management Institute, Inc. All rights reserved. 10 This material is being provided as part of a PMI course. Project Delivery and Contract Strategy (PDCS) Tool Quantitative assessment of 12 decision- making alternatives Focused on the project’s objectives and the execution environment Copyright ©2024 Project Management Institute, Inc. All rights reserved. 11 This material is being provided as part of a PMI course. Project Delivery and Contract Strategy (PDCS) Tool Identifies selection factors Assesses preference weights Offers aggregate scores.XLS Copyright ©2024 Project Management Institute, Inc. All rights reserved. 12 This material is being provided as part of a PMI course. Project Construction manager Delivery Design must be completed DBB, but replaces Construction Design-bid-build Design-build oversees project and before construction combines the designer and manager at risk (DBB)/traditional (DB)/turnkey provides a guaranteed Methods starts contractor into one builder (CMAR) maximum price (GMP) Multiple projects can be Multiple-award task Owner acts as a general Construction Incorporates a pool of Jobover completed order the life of contractor; contracts with order contract contractors under a single management multi- contracting (JOC) one long term master contract each designer entity and contract (MATOC) prime major trade(CMMP) contractors UsedPublic–private for projects between Focuses on Use tradesmen and private and public entities Integrated project partnership collaboration and shared Direct laborto professionals (e.g. affordable housing delivery (IPD) ownership of risk directly execute projects (PPP or P3) projects) Business entity Professional Owner appoints a PCM to Build-operate- responsible for design, construction manage and coordinate transfer (BOT) construction and financing management the design and the transferred to owner construction (PCM)of a project. 002 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 13 This material is being provided as part of a PMI course. Matching Activity: Project Delivery Methods Design must be completed before construction starts Design-build (DB) turnkey Replaces the owner and combines the designer and Construction Manager at Risk contractor into one builder (CMAR) Click to begin Construction manager Integrated project delivery (IPD) oversees project and provides a guaranteed maximum price Design-bid-build Focuses on collaboration and shared ownership of risk Copyright ©2024 Project Management Institute, Inc. All rights reserved. 14 This material is being provided as part of a PMI course. Contract Types/Structures Copyright ©2024 Project Management Institute, Inc. All rights reserved. 15 This material is being provided as part of a PMI course. Consider Contracts Is a contract a binding agreement between two or more parties? Yes No Correct! Contracts are typically agreed to Actually, that’s incorrect. Contracts are by two or more parties. typically agreed to by two or more parties. Copyright ©2024 Project Management Institute, Inc. All rights reserved. 16 This material is being provided as part of a PMI course. “The written documents that define the roles, responsibilities, and “Work” under the construction contract, and are legally-binding on the parties (Owner and Contractor).” - ENGINEERING JOINT CONTRACT DOCUMENTS COMMITTEE (EJCDC) Copyright ©2024 Project Management Institute, Inc. All rights reserved. 17 This material is being provided as part of a PMI course. Contract Type Considerations Contract Closeout 5 Owner-selected, based on advice of Discovery engineers and legal advisors 4 1 Supports project objectives and details Contract Execution project constraints and Management Dictated by project scope Pre-Award 3 Proposal Process 2 024 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 18 This material is being provided as part of a PMI course. Built Environment Project Commonalities Addressing complexity and diversity of risks Solidifying administrative procedures Establishing attainable requirements for success Copyright ©2024 Project Management Institute, Inc. All rights reserved. 19 This material is being provided as part of a PMI course. Standard Form of Contract (SFoC) Predetermined by authoritative bodies or alliances Focused on the rights, obligations, and duties Provide contractual administrative guidance, conditions, directives, and suggestions Copyright ©2024 Project Management Institute, Inc. All rights reserved. 20 This material is being provided as part of a PMI course. Purpose of an SFoC Starting point for the contracting process Customizable to suit project needs Holds all contractual parties accountable Owners can amend the standard form of contract Copyright ©2024 Project Management Institute, Inc. All rights reserved. 21 This material is being provided as part of a PMI course. Contract Payment Structures Owner makes a Owner will pay a fixed Owner seeks a guaranteed contractual agreement to Guaranteed maximum Lump amount, on asum periodic Cost plus a fee maximum price from the basis pay for all costs of price (GMP) contractor/partner performing the work Owner or contractor pays Introduces cost targets into Items of work are specified supplier/subcontractor an Admeasurement cost-reimbursable Unit price in bills of quantities or Target cost contract agreed unit price for the contract schedule of rates. contracts. Partners paid a scope of work (SOW) share for any savings No scope or time line Time and materials established; owner and contractor establish (T&M) an agreed hourly or daily rate 009 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 22 This material is being provided as part of a PMI course. Contract Award Method Owner Ownerprequalifies a subset identifies selection Owner of bidders identifies criteria an entity to and submit assigns All contractors hire. a bid weight to each Each bidder to submits bid Owner Owner selects the negotiates a lowest mutually Selection basedbidder qualified on highest Most competitive accepted agreementbid awarded ratings directly. Best valuebid Pre-qualified Negotiated Competitive the contract selection bid competitive Copyright ©2024 Project Management Institute, Inc. All rights reserved. This material is being provided as part of a PMI course. 23 Matching Activity: Contract Payment Types Lump-sum Owner and contractor agree to an hourly or daily rate Cost plus a fee Work specified in schedule of rates Click to begin Owner makes a contractual Time and materials agreement to pay for all costs (T&M) Owner pays fixed amount on a periodic price Admeasurement contract Copyright ©2024 Project Management Institute, Inc. All rights reserved. 24 This material is being provided as part of a PMI course. Contract Risks Copyright ©2024 Project Management Institute, Inc. All rights reserved. 25 This material is being provided as part of a PMI course.  Built environment contract risk refers to any exposure to possible loss occurring at any point in the contract life cycle. Copyright ©2024 Project Management Institute, Inc. All rights reserved. 26 This material is being provided as part of a PMI course. 026 Contract Risks The contract type is not well defined, which Risk allocation has not been appropriately Contract type and causes incentives to bemisaligned misaligned defined, causing cost and time increases Inappropriate risk allocation incentives among parties Owners and contractors engage in the extremely Parties enter into a long-term relationship in risky practice of passively reviewing certificates of which they require flexibility to deal with matters insurance to confirm compliance with insurance Increased thatcontract complexity arise over time Inadequate requirements insurance certificate Risks include contractors assuming costs, freeing Some contracts don’t clearly or accurately define the owner from overruns, issues with change the general conditions, which may result in claims Risks in general conditions of order management or the possibility of and disputes Pricing underbidding risks to win a contract contracts Copyright ©2024 Project Management Institute, Inc. All rights reserved. 27 This material is being provided as part of a PMI course. Common Disclaimer Clauses Uncertainty of work conditions Delaying events Indemnification Liquidated damages Sufficiency of contract documents.ORG Copyright ©2024 Project Management Institute, Inc. All rights reserved. 28 This material is being provided as part of a PMI course. Meanwhile, on Avocet Island Applying What You’re Learning Copyright ©2024 Project Management Institute, Inc. All rights reserved. 29 This material is being provided as part of a PMI course. Avocet Island Project: Project Delivery Method and Contract Type/Structure Discuss which project delivery method might be most appropriate for the project What criteria would you use to recommend an appropriate contract type? 002 5 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 30 This material is being provided as part of a PMI course. Questions Copyright ©2024 Project Management Institute, Inc. All rights reserved. 31 This material is being provided as part of a PMI course. Thank You! Copyright ©2024 Project Management Institute, Inc. All rights reserved. 32 This material is being provided as part of a PMI course.