CEIE370 Week 3 - Construction Phase PDF

Construction Phase 1 Chronology of Bid Procedure  Notice to Proceed ❖ The Notice to Proceed is the document that establishes the contractor’s right to have access to the owner’s property  It is issued after the contract award is complete.  It est...

Construction Phase 1 Chronology of Bid Procedure  Notice to Proceed ❖ The Notice to Proceed is the document that establishes the contractor’s right to have access to the owner’s property  It is issued after the contract award is complete.  It establishes the official start date of the contract. 3  Letter of Intent ❖ In situations when the project is being delayed by other causes (than the owner), the owner does not wish to lose the bid prices that have been received, the owner may issue a “letter of intent” 4  Pre-Construction Conference ❖ Owner’s representative ❖ Designer ❖ General contractor ❖ Specialty contractors ❖ Municipal authorities, utility companies, emergency organizations (fire & police). 5  Pre-Construction Conference ❖ Main purposes are to:  Open the lines of communications between owner and contractor  Establish agreement on the rules of doing business  Address technical questions of the general and subcontractors 6  Subcontracts ❖ A subcontractor is a construction firm that performs work in a specialty area such as electrical or mechanical construction. ❖ They contract directly with the general contractor and do not have a contractual relationship with the owner 7  Construction Contract Administration (A/E) ❖ Review and approve submittals/shop drawings ❖ Observe construction ❖ Prepare change orders (if required) ❖ Interpret contract if needed ❖ Certify pay requests ❖ Inspect work 8  Construction Phase ❖ Implement contract documents ❖ Submittals /Shop Drawings  Material samples Architect’s Review Stamp  Product data  Certifications  Calculations 9  Shop Drawings ❖ Contain information concerning products to be incorporated in a construction project. ❖ Must be approved by the owner or designer before products are used in the work. ❖ Consist of drawings, diagrams, catalog cuts, and other data prepared by the contractor, subcontractor, manufacturer, or supplier to illustrate what items will be installed in the facility or how specific portions of the work will be performed. 10  Request for Information (RFI) ❖ Written communication used to document questions and record the resulting answers. ❖ General contractors should maintain a log of RFIs, sorted by urgency, to track the RFIs and their responses 11  Time Extensions Delay will affect time required to finish project Delays in work can be attributed to: – Acts of God or Force Majeure (Ex. Unexpected Weather) – Owner (Design Errors) – Other (Ex. Strikes, Late Deliveries, etc.)  Time Extensions Governed by General Conditions Article 8.3.1- : “If the contractor is delayed … by any act or neglect of the owner or the Architect, or by changes ordered in the work, or by labor disputes, fire, unusual delay in transportation, adverse weather conditions not reasonably anticipatable,…etc… Contractor time shall be extended by a Change Order…” If the owner agrees to give the contractor a time extension, the completion date is increased by the extension.  Delays Excusable – Compensable – Non-Compensable Non-Excusable  Reasons for Delays Design changes and errors Owner required changes Late approvals Exceptional weather conditions Labor problems Unexpected site conditions Material delivery  Substantial Completion Date Date when construction is sufficiently complete so that the owner can use the facility Also known as beneficial occupancy date (BOD)  Time Provision in G.C. Article 8.1.2- The date of commencement of the work is the date established in a notice to proceed Article 8.1.3- The date of substantial completion of the work or designated portion thereof is the date certified by the architect…so the owner can occupy or utilize the work…  The Change Clause Provides: Means by which the owner can adjust plans and specifications Means by which the contractor may incorporate suggestions An outline for organizing and presenting claims for additional compensation Coordination with dispute clause for serious problems  Issues related to “Change Clause” Does it fall within the scope of the project? Must the change be in writing? Who has the resolution available if a price cannot be agreed upon? Is the time requirement appropriate? Are markups properly applied?  Contract Changes Disrupt orderly sequences Interfere with planned deliveries Void prior coordination Change schedule logic Change methods for work not otherwise addressed by the change Cause a contractor to remain mobilized on site longer than originally planned Continue to add administrative costs resulting from backtracking and rework  Change Orders ❖ Change orders are part of every construction contract because each project is a new prototype. ❖ Change orders do not change the original scope of work. ❖ They do change the details or conditions of the work, and they are used to add “extra” work or to delete work. 21  Change Orders Article 12.1.1- A change order is a written order to the contractor signed by the owner and the Architect, issued after execution of the contract authorizing a change in the work or adjustment in the contract sum or the contract time. Reasons for Issuing Change Orders Changes requested by the owner, contractor, or design professional Emergence of unforeseen conditions during construction Material nonconformance with original specifications Correct errors or omissions in the original document  Change Order Procedures Owner/Rep. Sends a formal communication describing the change order to the contractor The contractor responds with a price quotation/requests a time extension if appropriate Owner accepts or negotiates  Information Required on Change Orders Name, title or number of the project Date Number Changes required under this order Changes in the contract price Changes in time of completion Required signature  Suspension of Work The owner can issue a suspension order Costly to contractor – Demobilization – Re-Mobilization – Inflated prices Possible claim for contractor Sometimes leading to disputes Can be a compensable delay  Suspension, Delay, Interruptions Cause could be due to disruption of continuing funding Owner must negotiate this with care or face litigation and increased costs  Termination General conditions should contain information regarding the termination of the contract by the owner or the contractor Condition for termination should include the listing of reasons – Owner failure to pay promptly – Halting of work by court order or public body – Unwarranted delay on the part of the design professional  Liquidated Damages (LD) If time of completion is made a condition of the contract, failure to complete the project by an assigned time constitutes a breach of the contract that may stipulate liquidated damages Owner may be entitled to damages The amount of LD can be pre-determined and included in the supplementary conditions. Liquidated Damages VS. Penalties?  Progress Payment During construction the contractor is reimbursed on a periodic basis (e.g. monthly) Retainage: A percentage of the due payment is not paid to the contractor but held back by the owner to serve as incentive, and insure that the contractor completes all work as required  How does the Contractor get Paid? Engineer (on site) makes estimates of work done during the month Contractor submits an application for payment- estimate of work done (e.g.10 days before end of month) Application is reviewed Retainage is withheld Payment made by owner  MEASUREMENT & PAYMENT At a prearranged date the contractor is expected to submit a “request for payment” Contractor must show evidence price is correct Each cost item should contain its own share or profit and overhead For Unit-Price Bid, the unit price in the bid will be the bases for all progress payments. In Lump-Sum, a small error in one month will be compensated in later payments (Limit by % lump sum- Retainage)  BASIS FOR PAYMENT AMOUNT Lump-sum contract (fixed price) Contractor must complete the work for the fixed price shown as long as the scope of the contract has not been altered by change order Any additional cost must come out of the contractors pocket Similarly, any money that is saved on the job, as long as it conforms to the plans and specifications, belong to contractor.  BASIS FOR PAYMENT AMOUNT Unit Price Contract – The design firm provides a list of all individual bid terms, along with an “engineer’s estimate” of the quantities involved. – Blanks are provided in the proposal document for the bidder to insert a price per unit for which contractor agrees to build the work which, when multiplied by the quantity shown in the A/E’s estimates the total amount of bid for each item.  BASIS FOR PAYMENT AMOUNT Cost Plus Fixed Fee (CPFF) – The Contractor agrees to a fixed profit level, and is reimbursed for all costs of labor and material at their actual cost, plus the addition of a fixed fee rate for profit – The contractor’s books must be open to the owner or his/her representative, and all of the contractor’s costs must be regularly audited to establish the amount of progress payments.  Retainage Typically, 5-20% retained from every payment to the contractor Provides the owner with a leverage level to insure the correction and/or completion of the project May be used to satisfy lien claims if prime does not pay subs or suppliers Goes to surety company when the contractor defaults Contractor retains similar percentage from subs  Progress Reporting Contractor required to submit a schedule of activities and continuously update it to reflect the status of the project.  Acceptance and Final Payment Final acceptance means final payment and release of retainage Joint inspection by owner’s representative, Designer and contractor Punch list items (deficiencies) must be completed.  Final Payment to the Contractor After certificate of substantial completion has been completed, the contractor will apply for final payment. There are several additional requirements before the A/E should issue a final certificate for payment – The contractor must pay all bills or other indebtedness – Under certain contracts, contractor must submit receipts, releases, and waivers of liens – Consent of surety when a surety is involved  Claims ❖ Claims are the unfortunate result of change orders that cannot be resolved, or job conditions that the contractor considers to be changed conditions, but the owner does not agree. ❖ Often claims result from a disagreement on the meaning of the terms of the contract. Examples:  Late progress payments, delays caused by the owner, or rejection by the designer of “or equal” substitutes 40  Dispute Resolution ❖ Disputes are unresolved claims, unresolved disagreements, or unresolved change orders that somehow could grow into a court case. ❖ They always involve money. ❖ The key word is unresolved. ❖ What should a contractor do when a situation appears to be developing into a dispute? o Keep detailed and accurate records o Try to improve communications with the owner and designer 41  Alternate Dispute Resolution ❖ Partnering ❖ Mediation ❖ Arbitration ❖ Court 42