1. CONSTRUCTION CONTRACTS DOCUEMENTS
BY LECTURER Maha Muhaisen
APPLIED CIVIL ENGINEERING DEPT

2. Resources
Construction Documents and Contracting, Joseph D. Coleman , 2004, Prentice Hall
Construction Contracts, Keith Collier, 1987, Prentice Hall
“Construction Management”, by Daniel W. Halpin and Ronald W. Woodhead, 2nd Edition , John Wiley & Sons
Fidic Conditions of Contract for Construction, FOR BUILDING AND ENGINEERING WORKS DESIGNED BY THE EMPLOYER, 2005
Fidic Tendering Procedures, prequalification, tendering and award the contract, 1994.
Handouts and lecture notes

3. Grades Research Projects & homework 30 % Midterm Exam. 30%
Final Exam %

4. Course Outline
Introduction to construction project stages, overview of the construction contracting methods, and contracts types.
Bidding document
Invitation to bid
Instruction to bidders
Information to bidders & bid data
Biding Forms
General conditions of contract
Specific condition of contract
Specification
BOQ
Drawings
Contract forms
Methods of Tendering, Bidding and Awarding
Contract Documents and Conditions
FIDIC Form of Contracts

5. Introduction to Construction Project Stages Lecture (1)

6. Major Project Phases
The major phases in the project cycle that are common to most design and construction projects are :
Project Planning
Design
Schematic Design
Design Development
Contract Documents
Construction Procurement (Bidding Phase)
Construction
Post Construction

7. Construction Project Characteristics
Construction projects are different than other types of projects due to the following characteristics;
Construction projects are complex undertaking.
Every construction project is unique.
Construction projects involve a lot of uncertainties, lack of information and variables.

8. Project Life Cycle
Most of Construction projects life-cycle have common characteristics, Construction projects start with low cost and resources, high risk and uncertainty.
The life-cycle of a typical construction project could be summarized as following :
Stage I : represents the project formulation, feasibility studies, and the strategic decisions needed for project continue.
Stage II : represents planning, basic design, budgeting, tendering and placing the project major contracts.
Stage III : involves the construction phase of the project, equipment installation and testing.
Stage IV : represents the final phase in the project which includes the project turnover, final testing and start-up.

9. Project Life Cycle

11. Lecture (2)

12. Construction Contracting Method (delivery methods)
Traditional Approach (D-B-B):
The most common delivery system is called “the traditional or standard approach” or “design-bid-build”, in which the employer assigns the design and construction phases to two different firms (consultant/designer and contractor).
Appointing Main Contractor
Appointing Consultant
Constructing
Designing

13. Traditional Approach (D-B-B):
For many years, DBB has been the most common method of project delivery for public projects, and for many private projects as well.
Design Bid-Build is effective on projects
where the owner needs both professional design services and construction services
where the designer does not require detailed knowledge of the means and methods of construction.
DBB provides the owner with a high degree of control. That’s why it is the preferred project delivery system for owners who:

14. Traditional Approach (D-B-B):
The owner defines project goals and objectives, secures the financing, and specifies the standards and contract terms.
The owner may perform planning, conceptual design and full design, or may engage an outside design professional (designer) for some or all of these tasks.
During this planning and preliminary stage, owner and designer work as a team to obtain required permits and conduct necessary site investigations.
The designer prepares the construction bid documents to reflect the owner’s project goals and objectives, the project’s site conditions, and sound engineering practices.
Prospective contractors prepare their bids from these complete and specific bid documents.
The bidders submit their proposals to the owner, who determines the most responsive (typically the lowest) bid meeting project requirements.
In certain circumstances, owner may be justified in selecting a contractor outright and negotiating contract terms directly.

15. Advantages of D-B-B Approach
Applicable to a wide range of projects.
Well established and easily understood.
Clearly defined roles for all parties.
Provides the lowest initial price that competitive bidders can offer.
Extensive litigation has resulted in well established legal precedents.
Insurance and bonding are well defined.

16. Disadvantages of D-B-B Approach
Least-cost approach requires higher level of inspection.
Initial low bid might not result in ultimate lowest cost or final best value.
Designers may have limited knowledge of the true cost and scheduling implication of design decisions.

17. Design-Build Approach
Design-build approach is a project delivery system involving a single contract between the project employer and a design-build contractor covering both the design and construction of a project. The design-builder performs design, construction engineering, and construction according to design parameters, performance criteria and other requirements established by the employer or his representative.
Appointing design & construction contractor
Tendering
Designing
Constructing

18. Design-Build Approach
The owner contracts with a single entity to provide the design and to construct the project according to that design.
The contract might be negotiated with a single design-builder or result from competitive proposals.
The selection can be based on low price or on a set of value criteria (experience, staff, bonding capacity, etc.).
Design-build provides the owner with a single point of contact for project responsibilities, eliminating the need to assist in resolving designer-contractor disputes.
With the contractor playing a major role in design, costs are typically defined and maintained to a greater degree, and the coordination of fast-track management to achieve early completion is greatly simplified.
The design-builder makes many decisions that owner would make under DBB, due to delegation of greatly increased authority.

19. Design-Build Approach
For many owners, delegation of responsibilities leads to satisfactory projects. However, if the parties are inexperienced and do not cooperate, the transfer of control and risk can be disappointing.
The owner may need to restructure his/her internal procedures to accommodate design-build approach.
Compared to DBB, this involves a significantly different set of requirements and expectations for process, timelines and communications.
A clear understanding and documentation of design-build processes enhances the quality of design-build projects

20. Advantage of Design-Build Approach
Innovation and quality improvements through:
- Alternative designs and construction methods
suited to the contractor’s capabilities
- Flexibility in the selection of design, materials, and
construction methods.
Earlier schedule and cost certainty

21. Disadvantage of Design-Build Approach
Reduced opportunities for smaller, local construction firms.
Fewer competitors and increased risk may result in higher initial costs.
Elimination of traditional checks and balances. Quality may be subordinated by cost or schedule considerations.
Less Engineer control over final design.
Higher procurement costs.
Traditional funding may not support fast-tracking construction or may require accelerated cash flow.
Accelerated construction can potentially overextend the workforce.

22. Others Turnkey Turnkey Variations Direct Labor Approach.
Construction management

23. Turnkey
Turnkey adds to the design-builder’s responsibilities the operation and/or maintenance of the completed project.
Turnkey delivery has the potential for bringing a new project on line more quickly.
Three forms of turnkey project delivery:
Design-build-operate-transfer
Design-build-operate-maintain
Design-build-own-operate-transfer

24. Turnkey Variation
Variations on turnkey add financing as a key component. While financing arrangements are unique for each project, developer financed projects generally resemble one of the turnkey delivery methods:
FDBT (Finance, design, build, transfer)
FDBOT (Finance, design, build, operate, transfer)
FDBOOT (Finance, design, build ,own, operate, transfer)
In each case, the transfer of the project occurs only after the developer’s interests and financial obligations have been satisfied.

25. Assignment (1)
Describe the turnkey methods, turnkey variation methods, direct labor approach, and construction management method, highlighting on advantage and disadvantage of each one.

26. Lecture (3)
The contract, and contract types, overview of the construction documents.

27. Contract Definition
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

28. Introduction to contracts
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

29. Content of the contract
Identify the parties
Promises and responsibilities
Scope of work
Price and payment terms
Commercial terms and conditions
Project execution plan.

30. Major Contract Types (traditional)

31. Lump Sum Contract One price for the whole contract
Lump sum includes costs plus overheads and profits
Higher risk to contractor
Price quoted is a guaranteed price as per contract documents.
Payment based on a scheduled percentage scheme (monthly progress claims)
The contractor is free to use means and methods to complete the work and responsible for proper performance
Work must be well defined at bid time.
Fully developed plans and specifications

32. Lump Sum Contract/ advantage
Low risk on the owner, Higher risk to the contractor
Cost known at outset
Contractor will assign best personnel
Contractor selection is easy.

33. Lump Sum Contract/disadvantage
Changes is difficult and costly.
Contractor is free to use the lowest cost of material equipment, methods.

34. Unit Price Quote Rates / Prices by units No total final price
Re-negotiate for rates if the quantity or work considerably exceeds the initial target
Payment to contractor is based on the measure.
Unbalanced bids
Higher risk to owner
Ideal for work where quantities can not be accurately established before construction starts.

35. Unit Price contract
Require sufficient design definition to estimate quantities of units
Contractors bid based on units of works
Time & cost risk (shared)
Owner : at risk for total quantities
Contractor : at risk for fixed unit price.
Large quantities changes (>15-25%) can lead to increase or decrease of unit price.

36. Unit Price / Requirement
Adequate breakdown and definition of work units
Good quantity surveying and reporting system.
Adequate drawings.
Experience in developing BOQ
Payment based on the measurement of the finished works.
Quantity sensitive analysis of unit prices to evaluate total bid price for potential quantity variation.

37. Unit Price / advantages
Suitable for competitive bid
Easy for contract selection
Early start is possible
Flexibility : quantities and scope can be easily adjusted

38. Unit Price / disadvantages
Final cost not known from the beginning (BOQ only is estimated)
Staff needed to measure the finished quantities and report on the units not completed.
Unit price sometime tend to draw unbalanced bid. (For Unit-Price Contracts, a balanced bid is one in which each bid is priced to carry its share of the cost of the work and also its share of the contractor’s profit.
Contractors raise prices on certain items and make corresponding reductions of the prices on other items ,without changing the total amount of the bid)

39. Cost Plus
Actual cost plus a negotiated reimbursement to cover overheads and profit.
different methods of reimbursement :
Cost + percentage
Cost + fixed fee
Cost + fixed fee + profit-sharing clause.
Higher risk to owner
Compromise : guaranteed maximum price (GMP) reduces risk to owner while maintain advantage of cost plus contract.
By using this type of contract the contractor can start work without a clearly defined project scope, since all costs will be reimbursed and a profit guaranteed.

40. Cost + Percent of Cost Fee = percentage of the total project cost
Advantages
Disadvantages
profitable for the contractor
No incentive to finish job
quickly
Owner does not know total
price
Larger the cost of the job, the
higher the fee the owner pays

41. Cost + Fixed Fee
Fee = percentage of the original estimated total figure
Utilized on large multi-year jobs
Ex: WW treatment plant Facility (Cost = $20 million, Fee = 1%)
$20 Million 1% fee = $200,000 Million
Advantages
Disadvantages
Fee amount is fixed regardless
of price fluctuation
Expensive materials and
construction techniques may
be used to expedite
construction
Provides incentive to complete
the project quickly

42. Cost Plus Fixed Fee Most common form of negotiated contracts
COST = expenses incurred by the contractor for the construction of the facility
Includes: Labor, equipment, materials, and administrative costs
FEE = compensation for expertise
Includes: profit

43. Cost + Fixed Fee + Profit-Sharing Clause
Rewards contractors who minimize cost
Percentage of cost under GMP is considered profit
and shared with the contractor
Guaranteed Maximum Price (GMP)
% of profit sharing is specified in contract
Advantages
Disadvantages
Provides incentive to the
contractor to save money
Contractor must absorb any
amount over the GMP
Plans & specs. need to detailed

44. Cost + Fixed Fee + Profit-Sharing Clause
variation of this type of contract is called a guaranteed maximum price (GMP).
In this type of contract the contractor is reimbursed at cost with an agreed-upon fee up to the GMP, which is essentially a cap; beyond this point the contractor is responsible for covering any additional costs within the original project scope
An incentive clause, which specifies that the contractor will receive additional profit for bringing the project in under the GMP.

45. Construction Documents
Bidding requirements
Notice to Bidders
Instruction to Bidders
Proposal Form
Contract Documents
Contract Forms
Conditions of the Contract
Specifications
Drawings
Addenda
Change Orders
Agreement.

46. Construction 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

47. CONSTRUCTION DOCUMENTS

48. CONSTRUCTION DOCUMENTS 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.

49. 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
Bid Package is prepared by:

50. 2-1 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

51. 2-1 Instruction to bidders (cont’d)
See attached example for ITB.

52. 2-2 Bid Data Sheet (BDS)
Definitions, Engineer’s Authority to Issue Variations, Performance Security, Inspection of Site, Program to Be Submitted, Cash Flow Estimate
Bid Security, Minimum Amount of Third Party Insurance
Time for Issue of the Notice to Commence, Time for Completion
Amount of Liquidated Damages, Limit of Liquidated Damages
Amount of Bonus for Early Completion, Limit of Bonus
Defects Liability Period, Amount of Interim Payment Certificates
Percentage of Retention, Limit of Retention Money, Amount of Advance Payment
Start Repayment of Advance Payment, Monthly Recovery of Advance Payment
Number of Copies of Statement of Completion and Final Statement
Procedure for Settlement of Disputes
Notice to Employer and Engineer
Origin of Materials and Plant

53. 2-3Evaluation and qualification
This section contains all the criteria that the Employer shall use to evaluate bids and qualify Bidders if the bidding was not preceded by a prequalification exercise and post qualification is applied.
In accordance with items specified in ITB, no other methods, criteria and factors shall be used. The Bidder shall provide all the information requested in the forms included in (Bidding Forms) section..

54. 2-3Evaluation and qualification (con’d)
1- evaluation : describe the Adequacy of Technical Proposal, in case of Multiple Contracts, the conditions governs, Completion Time,
2- Qualification : describe the Eligibility, financial situation, staff, experience , equipments.

55. 2-4 Bidding forms letter of bid (bid form) Form of bid security
Technical proposal forms (personnel, equipment)
Bidders qualification forms as bidders data, JV information, Historical Contract Non-Performance, Current Contract Commitments , Historical Financial Performance, Average Annual Turnover, General and specific Experience,

56. See attached file

57. CONSTRUCTION DOCUMENTS

58. CONSTRUCTION DOCUMENTS
Contract documents (graphic and written) describe the proposed construction (the ‘Work’) that results from performing services, furnishing labor, and supplying and incorporating materials and equipment into the construction
Contract Forms
Conditions of the Contract
Specifications & BOQ
Drawings
Addenda
Change Orders

59. A. CONTRACT FORMS CONTRACT FORMS Agreement Performance Bond
Payment Bond
Certificates

60. B.CONDITIONS OF CONTRACT
Define basic rights, responsibilities, and relationships of the parties involved in the construction project.
2 types: General Conditions and Supplementary Conditions
GENERAL CONDITIONS
General clauses that establish how the project is to be administered.
Contain basic expressions of rights, duties, and limitations of the entities involved.
Usually in the form of published standard documents that include principles common to most construction Contracts.
SUPPLEMENTARY CONDITIONS
Modify or supplement general conditions as need to provide for requirements specific to a project. They are not standardized documents and are prepared for specific project needs.

61. A Agreement
The written document signed by the owner and the contractor that is the legal instrument binding the parties to the contract.
Defines the relationship and obligations between owner and contractor.
The agreement is quite brief and appears to consist mostly of statements of fact, whereas the general conditions section deals primarily with matters that pertain generally to be construction work and the persons involved.
In other words, the agreement appears to consist of statements and the general conditions appear to be terms, or conditions.

62. Agreement (cont’d) 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
International construction documents are also often based on industry-prepared standard forms.

63. AGREEMENT FORM SEE ATTACHED WORD FILE FOR EXAMPLES
A number of organizations prepare recommended standard general conditions and associated forms. Such as:
ENAA (Engineering Advancement Association of Japan)
FIDIC (International Federation of Consulting Engineers)
ICE (Institute of Civil Engineers, United Kingdom)
JCT (Joint Contracts Tribunal)
SEE ATTACHED WORD FILE FOR EXAMPLES

64. A.2 .Bonds / Guarantees FORMS
1- PERFORMANCE BOND / security
The Contractor, upon receiving the Letter of Acceptance, shall obtain and provide to the Employer before signing the Contract, the Performance Guarantee in the value of ten percent of the Contract Sum, as a guarantee of the proper execution of the Works in accordance with the Contract. This guarantee shall be issued by a licensed bank or financial institution acceptable to the Employer. The guarantee shall be prepared in the form included in part B of these conditions. The obtaining of such guarantee shall in all respects be at the expense of the Contractor.The Performance Security shall be provided to the Employer no later than the date specified in the Letter of Acceptance and shall be issued in an amount specified in the PCC (particular conditions of contract), by a bank or surety acceptable to the Employer, and denominated in the types and proportions of the currencies in which the Contract Price is payable.
The Performance Security shall be valid until a date 28 days from the date of issue of the Certificate of Completion in the case of a Bank Guarantee, and until one year from the date of issue of the Completion Certificate in the case of a Performance Bond.
In general , it is 10% of contract value
Defect liability
CERTIFICATES
Includes certificates of insurance, certificates of compliance with applicable laws and regulations.

65. Advanced payment bond
Provide a guarantee that subcontractor, material suppliers, and others providing labor, material goods, and services to the project will be paid.
The Employer shall make advance payment to the Contractor of the amounts stated in the PCC by the date stated in the PCC, against provision by the Contractor of an Unconditional Bank Guarantee in a form and by a bank acceptable to the Employer in amounts and currencies equal to the advance payment. The Guarantee shall remain effective until the advance payment has been repaid, but the amount of the Guarantee shall be progressively reduced by the amounts repaid by the Contractor. Interest shall not be charged on the advance payment.

66. Advanced payment bond (cont’d)
The Contractor is to use the advance payment only to pay for Equipment, Plant, Materials, and mobilization expenses required specifically for execution of the Contract. The Contractor shall demonstrate that advance payment has been used in this way by supplying copies of invoices or other documents to the Project Manager.
The advance payment shall be repaid by deducting proportionate amounts from payments otherwise due to the Contractor, following the schedule of completed percentages of the Works on a payment basis. No account shall be taken of the advance payment or its repayment in assessing valuations of work done, Variations, price adjustments, Compensation Events, Bonuses, or Liquidated Damages.

67. Defect liability Security
After primary taking over, 5% guarantee is submitted to employer for defect liability, valid for 365 days or as stipulated in PCC.

68. INSURANCE Certificates
Insurance for Works and Contractor’s Equipment,
Insurance against Injury to Persons and Damage to Property ,
Insurance for Contractor’s Personnel

69. General Conditions of contract
The conditions are intended to govern and regulate the obligation of formal contract.
Although the headings and topics included within different sets of GCC vary, there is a certain similarity of subject matter

70. Contents of GCC Definitions Contract documents
Rights and responsibilities of owner
Duties and authorities of engineer
Rights and responsibilities of contractor
Sub-contractor, Separate contractors
Time
Payments and completions
Changes in the work
Protection of persons and property
Insurance and bond
Disputes
Termination of contract
Miscellaneous provisions