Construction process Types of contracts Halmstad University Construction management Piotr Mazur Paulina Wawryca Paweł Bilski

Types of contracts Contract – is an agreement between two or more persons (individuals, businesses, organizations or government agencies) to do, or to refrain from doing, a particular thing in exchange for something of value.

Types of contracts 1) Fixed-price contracts - Lump-sum contract - Unit price contract 2) Cost plus contracts - Percentage of costs - Fixed fee - Fixed fee with maximum cost - Incentive fee 3) Design and build contracts (all-in contract or turnkey contract) 4) Construction management contracts - Cost-plus fee - Guaranted maximum price

Lump-sum contractsUnit-price contracts Fixed-price contracts Lump-sum contract – in this type of contract, engineer or contractor agrees to do the described and specified project according to the drawings and specifications for a fixed price Unit-price contract – specify the amount to be paid for each unit of the work, but not the total amount. It is used when quantity of the work cannot be accurately estimated in advance.

Cost-plus contracts Percentage of costs Fixed fee Fixed fee – max.cost Incentive fee A contract where the purchaser agrees to pay the cost of all materials and labour, contractor and profit. We can divide them into: a)Percentage of costs – contractor is paid a fee that is a percentage of the cost b)Fixed fee – contractor is paid a fixed sum which is independent of the final cost c)Fixed fee with guaranteed max. cost - the contractor guarantees the max. Total cost for the project d)Incentive fee – contractor is paid a fee which is dependent of the final cost

OWNER Design/build firm Design depConstr. dep Sub-contractor Design and build contract (all-in contract or turnkey contract) – in this type of contract, the owner select one contractor that both design and builds the project.

OWNER Deisgn firm Construction manager Construction firm(s) Contract relation Management relation In this type of contract a Construction Manager (CM) is selected to work on the project through design and construction. The CM provides advice during design, manages cost and schedule, can engage contracts for work with subcontractors and is responsible for completing the building project. CONSTRUCTION MANAGEMENT CONTRACT

Construction management contracts: a)Cost-plus fee – the owner pay to the CM the actual cost of the construction (based on competitive bids for each trade subcontract b)Guaranteed Maximum Price (GMP) – the owner and the contractor agree to a project cost guaranteed by the contractor as maximum. The cost cannot be exceeded, and contractor is responsible for any additional cost

CONSTRUCTION PROCESS

The Construction Process consists of six stages: 1. Concept 2. Contracts and Bid Documents 3. Bidding 4. Construction 5. Construction payments 6. Completion

1. CONCEPT  Planning and Architectural Programming  Schematic Plans

2. CONTRACTS AND BID DOCUMENTS  Contract/Working Drawings/Plans  Architectural Plans  Structural Plans  Mechanical Plans  Technical Specifications  Contract Form  Contract Specifications  Bidding requirements

3. BIDDING The following is the sequence of events to prepare a contract bid:  The contractor obtains a copy of the plans and specifications from the owner in order to prepare a formal estimate of the construction cost or bid (experienced construction personnel prepare the bids).  The contractor reviews the contract plans and specifications to determine how to build the project and to consider all the limitations or conditions the owner requires for the project.

3. BIDDING  The contractor solicits bids from subcontractors, estimates their direct material and labour costs, and evaluates the ultimate profit potential of the contract. The amount of the bid covers the estimated costs and a profit for the construction project.  The owner evaluates all of the submitted bids and then awards the contract.  The contract document and specs contain the project start and completion dates, the progress billing procedures, the insurance requirements, and other pertinent information.

4. CONSTRUCTION  Building permits  Subcontractors  Scheduling of subcontractors  Shop drawings  Project submissions  Change orders

5. CONSTRUCTION PAYMENT

6. COMPLETION

References and further reading - A. Walker, 2002, Project Management in Construction - B. Hjort, 2010, Construction Methods and Management Compendium - ml# der/A11.pdf - construction.html

QUESTIONS: 1. What is the definition of a „contract”? 2. What are the different types of contracts? 3. Describe fixed-price contracts. 4. What is the sequence of events to prepare a contract bid? 5. What are the six stages of construction process? 6. Who schedules the subcontractors?