1. Construction Engineering 221 Contracts & Contractor Procurement

2. Construction Engineering 221 2 Changes Standard practice (expect it – it’s a part of the process) Owner has the right (within original scope) Change clauses – regulate how a change is suppose to take place Equitable adjustment of price and time If not – claims and disputes procedures Be careful – “changes” need to be changes Who’s asking and are they in line w/ the scope of work Has the change clause been followed?

3. Construction Engineering 221 3 Constructive Change What is it?

4. Construction Engineering 221 4 Constructive Change A constructive change to the contract is the result of an action, or lack of action, of the owner or its agent that can be construed as a change to the contract even though the owner did not issue a formal, written change order. When the contractor is orally directed to do work different from, in addition to, or in a different manner from the mandated by the contract, a constructive change has taken place and the owner is responsible for additional cost or time.

5. Construction Engineering 221 5 EXAMPLES of CONSTRUCTIVE CHANGES Owner gives verbal direction to change the design of the project Use wallpaper in lieu of paint on walls Contractor usually is required to confirm owner’s direction in writing with a request for a formal contract change order for additional costs

6. Construction Engineering 221 6 Acceleration What happens when the owner creates expectations that the contractor must complete the project at an earlier date? Possible overtime costs to speed up work OR Add more work WITHOUT extending the completion date (resulting overtime, etc…)

7. Construction Engineering 221 7 Differing Site Conditions Also known as “changed conditions” or “concealed conditions” No implied contractual right exists for the contractor to collect for unforeseen conditions -- it needs to be in the contract Its called a “changed-condition clause”

8. Construction Engineering 221 8 Changed Condition Clause Why is a change-condition clause so important? the purpose of a change-conditions clause is to reduce the contractor’s liability for the unexpected and to mitigate the need for including a large contingency

9. Construction Engineering 221 9 Contingency What is “contingency” and what is its purpose in life?

10. Construction Engineering 221 10 Contingency Definition Contingency – something whose occurrence depends on chance or uncertain conditions; a possible, unforeseen, or accidental occurrence. In construction circles the “contingency” is the sum of money that the contractor adds to their bid that will cover any uncertainty they forsee in the project.

11. Construction Engineering 221 11 Owner-Caused Delays Why are owner-caused delays a concern to the contractor?

12. Construction Engineering 221 12 Owner-Caused Delays Three Reasons 1.Over all completion date – not usually a problem (contractor gets extension) 2.“Ripple” effect – consequential damages or impact cost from unchanged work that resulted from project delays. (Can anyone give an example?) 3.Work is deferred to another time period where costs are higher. (wages & materials)

13. Construction Engineering 221 13 Change Orders Changes “scope of work” Changes per what drawings & specifications Itemized cost breakdown per trade Contract time extensions (IF any) Valid only when signed by BOTH owner & contractor Technically a new contract Practically a revision to the original contract

14. Construction Engineering 221 14 Value Engineering What is Value Engineering?

15. Construction Engineering 221 15 Value Engineering Finding a better way to accomplish a construction project at less cost Can happen before and after the bid letting Before – owner, designer and contractor work together After – value engineering incentive clause Structure’s performance, safety, appearance or maintenance Contractor is able to share in cost savings Planning, design and constructability

16. Construction Engineering 221 16 What if…….. The contractor in his original estimate of the project had planned to transport concrete on site for a small pour with motorized wheelbarrows. On the day of the pour the contractor’s concrete pump is now available and is able to switch projects and pump the concrete rather than use wheelbarrows. Is this value engineering?

17. Construction Engineering 221 17 Is This Value Engineering? NO Any cost savings belongs to the contractor This is not a design change This is the contractor performing the work more efficiently

18. Construction Engineering 221 18 Examples of Value Engineering Your turn

19. Construction Engineering 221 19 Indemnification Indemnification (hold-harmless clause) Limited-Form Intermediate-Form Broad-Form

20. Construction Engineering 221 20 Termination of the Contract Material breach of contract By owner – failure to make payments or causes delays or owner is financially insolvent By contractor – nonperformance, faulty performance, not on schedule (not showing reasonable progress) Mutual agreement – both agree to end project

21. Construction Engineering 221 21 Notice to Proceed Formal notification by owner to contractor to begin work Establishes the first day “DAY 1” of the schedule (within 10 days of N.T.P.) A signed CONTRACT to build the project is NOT a NOTICE TO PROCEED

22. Construction Engineering 221 22 Subcontract Agreements No contractual relationship between subcontractor and owner Retainage is usually the same as in the prime contract – 10% Approval by the owner – disapproval not common

23. Construction Engineering 221 23 Word to the Wise “immediately in writing” (page 153) “authorized in writing” (page 154) “To proceed without written authorization may make it impossible (page 154) “promptly notify the owner in writing" (page 157) Keep detailed and separate cost records of the additional work involved. (page 157) “contractor must keep careful and detailed records” (page 158)

24. Construction Engineering 221 24 Student Chapter – AGC First meeting Wednesday Sept. 11 7:00 PM Special membership deal at first meeting only!