Roy Nawfal 2112 894 89

Page 1 of 11







Contract Administration 2
Assignment 1
Individual Assignment

Roy Nawfal
2112 894 89

Roy Nawfal 2112 894 89

Page 2 of 11

1 INTRODUCTION
This report discusses the various steps taken during the contractual stages of a construction project.
It begins with an overview of contract administration and the responsibilities, followed by the
differing procurement strategies available and the key issues that require consideration in a
construction project.
This is followed by an example of a construction project and is related to relevant topics discussed in
the overview, outlining the methods partaken and issues that arise.
2 OVERVIEW
Construction law is the body of law specific to matters of building construction formed by an
amalgamation of tort, commercial, contract, planning and employment law.
2.1 CONTRACT ADMINISTRATION
The management of the process which follows the awarding of a contract. This includes the
assurance of compliance with the contractual terms and conditions, the documentation of
agreements, amendments and the general dealings between parties. Contract administration, also
known as contract management, is completed once the contract has been terminated, completed or
payment has been made and disputes resolved.
The essentials of contract administration for the principal:
- Hiring the right consultants
- Choosing the best process for project delivery
- Setting the time, cost and quality guidelines
- Outlining the scope of the project
- Helping in the creation of the project brief
- Making sure the tender documentation is correct and comprehensive
- Ensuring the contract given to the contractor is fair and reasonable
- Appointing the superintendent to supervise the construction and ensure the contract is
adhered to
- Understanding the possible changes in cost and time when altering the design
- Paying the contractor only what was agreed upon within the contract
- Monitoring the overall progress including cost, time, contingency, resources used
- Resolving any disputes that may arise or have arisen with ADR before it escalates to
litigation
The essentials of contract administration for the contractor:
- Adhering to the contract throughout the completion of the project
- Ensuring the subcontracts given to subcontractors are fair reasonable
- Supervising the subcontractors
- Paying the subcontractors
- Attempting to reduce the time needed for the project to lower costs overheads
- Efficient cost balancing of site overheads to allow additional resource costs
- Informing the principal of the efficient program organized for the use of resources and
labour required
Roy Nawfal 2112 894 89

Page 3 of 11

- Managing the time competently to allow for all necessary occurrences e.g. additional
planning, fabrication, unplanned mistakes
- Taking precautions to avoid complications, and if one was to arise, taking action to resolve
the problem and inform the principal non-contractor related issues that may have arisen.
- If required, managing extra time and the extra overhead costs
- Informing the principal whether or not to make a design alteration
- Monitoring progress and relating it to initial program to judge the overall project
progression.
- To supervise and ensure staff work within the specified contract guidelines unless expressly
specified otherwise by the principal or their representative/agent.
2.2 PROCUREMENT STRATEGIES
This is the process which is formulated to guide a project from its initial planning stages to final
construction and occupation by the relevant parties.
Two fundamental issues arise with the creation of a contract. The first is the general and specific risk
allocation that needs to be listed and finalised. The second is the method of contract administration,
the process and specifically how changes/alterations are to be recorded.
- Construct only/Traditional
This is the most basic procurement strategy. The principal consults a designer to
develop the project design. The contractor is then separately contracted by either
the principal, or by the consultant on behalf of the principal, to construct the
project.
The use of this method can cause miscommunication of the intended design leading
to delays in the project completion. Furthermore, the principal assumes the risks of
the design, design development and documentation, while the contractor only
assumes the risk of construction.
- Document and Construct
This is similar to the construct only in that two parties are separately consulted and
contracted by the principal but in this case, the contractor plays a more involved
role in the design of the project. Initially the principal prepares a design with the
consultant and it is then given to the contractor with the tender documents. The
consultant is then novated to the contractor, at which point they frequently engage
throughout the project to complete the documentation and design development for
the project. In this strategy, the contractor will usually assume the risks of the design
developments, documentation and the construction of the project.
- Design and construct
The principal contracts a contractor for the completion of a project. The contractor
will either have an in house or external designer that will communicate with the
principal to establish a conceptual design. This direct communication between the
contractor and designer lowers the risk of issues arising due to miscommunication or
delays before a decision is reached.
The contractor in this case assumes the risks of the design, the design alterations,
the documentation and the construction of the project.
The three preceding strategies can be individually combined with any of the following to complete
the contract.
Roy Nawfal 2112 894 89

Page 4 of 11

- Lump Sum
This payment method can be interpreted in two ways. The first is that the entire
contract is paid in full in a single payment. The second, and more commonly used, is
that a sum is agreed upon for multiple parts of work, and as each is progressively
completed a payment is made.
Although this method is appealing to principals due to the assurance that no excess
will need to be paid, it can cause disputes due to the unpredictability of changes that
can occur during a project causing negotiations as both parties defend their
finances.
- Re-measurement contracts: Schedule of rates and bills of quantities
This is similar to a lump sum method yet the finality of the sum differs. As with a
lump sum there is an overall sum agreed to, yet this sum is subject to a schedule of
rates and bills of quantities. A schedule of rates is a list of labour or material costs
per certain unit measurement e.g. $50/hr. per bricklayer. Although there may have
been a conceptual calculation made for the overall price of the project, the total
sum is quantified by the actual quantity of work done/materials used.
The bill of quantities only slightly differs from a schedule of rates by having an extra
column which includes the anticipated number of units necessary to complete the
project. This method is quickly losing popularity due to the common misconception
that the anticipated sum is what the final sum is to be.
The schedule of rates and bills of quantities method is more favourable than the
lump sum method due to its controlled flexibility if alterations occur during the
project. It allows the principal to ballpark the overall construction costs while giving
the contractor some freedom.
- Cost-Plus
Simply put, this method involves the principal paying the contractor the cost of the
construction as well as a sum for their superintendence. This sum can either be a
fixed fee/rate or a percentage of the overall project cost.
For the contractor this method is most favourable due to its lower assumption of
risk and flexibility of cost. This however is unfavourable for the principal due to the
unknown final cost that will arise from the construction of the project. This method
is mainly used when the construction cannot be assumed.
- Construction management delivery
The principal individually contracts all the subcontractors and is the superintendent
of the construction project. The contractor is only used as a consultant but all cost
and risk is on the principal.
This method is rarely used, only usually in cases where the principal is part of the
construction industry and understands in full what is required.
- Partnering
It is the process of two or more parties entering into a contract together for the
purpose of the completion of a single project. The parties establish guidelines
outlining the roles of the members of the partnership.
Issues that arise during the project could cause serious disputes and concerns within
the partnership.
- Alliancing
This is a step more dedicated than partnering in which the principal, contractor,
designer and possibly other consultants enter into a virtual corporation. This allows
the parties to be more involved in the project and concentrate on considering what
Roy Nawfal 2112 894 89

Page 5 of 11

is best for the project. Risk allocation is shared between all alliance partners and is
normally prominent in high risk project with no alternative strategies.
2.3 KEY ISSUES IN CONSTRUCTION CONTRACTS
A long list of issues can arise during a construction contract due to many foreseeable and
unforeseeable reasons. Some of the issues that arise involve the:
Tenders
Contract Documents
Implied Terms
Administration of the Contract
Site
Adjustment of the Contract Sum
Variations
Certificates and Payment
Time and Performance
Completion
Materials and Workmanship
Indemnities and Insurance
Contractual Provision for Default and Termination
A well-constructed contractual agreement will usually list a contingency that is to be employed in
the case of an issue arising.

Roy Nawfal 2112 894 89

Page 6 of 11

3 CASE STUDY: WESTFIELD GEELONG
Westfield Geelong is the largest shopping centre located. It is located opposite Market Square in the
Geelong CBD. It was initially opened in 1988 and was known as the Bay City Plaza before the
Westfield Group acquired it in 2003, then was named the Westfield Bay City until its redevelopment
in 2008 turning it into the Westfield Geelong shopping centre.
3.1 CHARACTERISTICS OF PROJECT
3.1.1 Type
It was an in-situ concrete construction. This is a very costly and complex method of construction
requiring the erection of formwork. It is a labour intensive method of construction.
This method was chosen because the construction of the shopping centre took place through the
winter and in-situ concrete construction can continue unaffected by the weather.
3.1.2 Size
The total retail floor area is 52 000 m with 187 stores and 1700 parking spaces.
Hired labour included 300 foremen in addition to subcontractors and 14 electricians.
3.1.3 Type of Contract/Procurement Strategy
Design and Construct
This procurement strategy agreement was made between the principal and the contractor.
Westfield Group wanted a quick solution so they could start profiting from the shopping centre, thus
design and construct was chosen for a quick construction and not much concern towards the overall
cost.
Novation
The design and construct contract entered by the Westfield group was with their internal Westfield
Design and Construction division. This meant that entering into this contract was a legal formality.
The contract also had a credit and deduction system. A system which outlined that if the clause
deadlines were missed then extra cost was incurred.
Lump Sum
The traditional lump sum method was used to pay the subcontractors that werent already hired by
the construction company.
3.1.4 Contract Value
Initially as the Bay City Plaza, the value was approximated around $144 million. The redevelopment
into the Westfield Geelong shopping centre cost approximately $200 million.
The initial budget was predict at $150 million but time complications occurred, and as per the
contract clause a credit and deduction system, a system which outlined that if the clause deadlines
were missed then extra cost was incurred, the cost increased.

Roy Nawfal 2112 894 89

Page 7 of 11

3.1.5 Scope of Works
The initial construction, Bay City Plaza, was 67 stores and capable of 1121 car parks. The Yarra street
extension required the demolition of several odd small business including pubs, vacuum cleaning
stores, a hotel. The redevelopment expanded the Bay City Plaza by 120 stores and 579 car parks.
3.2 KEY ISSUES RELATIVE TO THE ADMINISTRATION OF THE CONTRACT
3.2.1 Tender Stage

The biggest problem that arose, and most common in large constructions, is time. The involvement
of 3 parties in a contract will always give cause to changes and disputes. The design plans are never
final and ever changing, and the need for documentation and agreement on all the changes delayed
the progress of the Westfield construction project greatly. Furthermore, the Westfield Geelong
contract stated that any variations must be at least 14 days in advance. This slowed down
communications even further and added tension towards the need to finalise the plans and begin
construction.

The Tender stage was fairly straight forward due to Westfield group housing its own construction
and retail divisions. Communication was much more efficient with tender issues quickly being
resolved. As afore mentioned, the tender process was more a formality due to it being an internal
agreement. Such steps as a public tender, the bidding process, offers and counter offers, were all
bypassed.

The only issue that was prominent in this stage, and also in the construction stage, was the constant
disagreement over the plan layout.

3.2.2 Construction Stage
During the construction, the project faced some issues with the Geelong Union.
The first was the height restrictions evoked in the Geelong CBD.
The city has a policy position under Design and Development Overlay Schedule 14 which
requires Town Planning approval for any dwelling that exceeds 7.5m in height
The plans made during the project would now have to also be relayed through the Geelong Union to
acquire approvals.
A bigger problem which required care and even more paperwork was the heritage sites in the area.
The Geelong Union caused delays as they required some bricks to be reinforced by steel beams and
protected. Other bricks were to be replaced and some to be retendered. The Geelong Union was
very specific about the works and caused a great amount of delay on the overall project progression
and forced even more changes to the plan. With the contract clause stating that all changes must be
14 days in advance, this was a time consuming and tedious process. In an attempt to speed the
construction process areas were sublet, such as the concreters being brought in to design and
complete the job.
Another issue that caused delays was the method of documentation. The contract stated that a web
used computer program acted as an independent holder of the plans and documents.
Communication became a big issue as the designs were not completed. With over 200 drawing
variations made, there was a growing problem of people having the wrong plans even with the
dating and stamping of the drawings. Subcontractors were building with outdated plans and with at
Roy Nawfal 2112 894 89

Page 8 of 11

some points 400 personnel occupying the workplace, it was hard to keep track. The design and
construct method was initially a method that made the intercommunication between the contractor
and design team a simpler one, but with all large construction, a large amount of time was spent on
the unanimous agreement of the parties. The time taken to resolve the plans, continued over the
length of the project. Plans were agreed upon and finalised only to be then changed, demolished
and planning reinitiated which then took more time and extra cost.

Two incidents occurred during the construction. In April, a there was a fire in the complex and in
May, a subcontractor was pinned against one of the steel beams while operating a cherry picker and
sustained injury. A minor dispute also took place between the subcontractors and contractor but
was resolved before escalating into a strike.
3.2.3 Post Completion/Future

After the completion of the project, the contract outlined a 56 week period throughout which defect
claims can be made. To act as a warranty if anything needed to be fixed, 10% of every claim made
was kept, and when the project was completed, 2.5% of the kept claims were released. No claims
have been made in regards to the standard of completion and thus far no disputes have been had.
If any redevelopment or demolition was to be done to the Westfield Geelong shopping centre it
could cause issues to the surrounding area. The quick method of construction used does not account
for the deconstruction or renovation of the shopping complex, thus if any were to take place, the
process would be costly, time consuming and difficult.
3.3 ISSUE RESOLUTION
3.3.1 Tender Stage
The tender process was a rather smooth one due to its internal nature. The difficulties in plan
alterations and lack of finality is an ever occurring challenge faced in the architecture and
construction industry due to the varying subjective views and the differing priorities and necessities.
The only true solution to the issue of disagreement is patience and compromise. In this case, it was
better than most with no real disputes erupting again due to it being an internal project.

Roy Nawfal 2112 894 89

Page 9 of 11

3.3.2 Construction Stage
Although the Geelong Council has been known the be militant in their strictness and adherence to
the policies, the designers shouldve been well aware of the restrictions of the area prior to
beginning a design, and to work within the constraints.
Heritage delays have always arisen in large redevelopments because of the want to preserve
historically significant structures. This issue does not have a resolution but needs the patient
acceptance and adherence. A way to avoid the unpredictable delays of heritage related issues is the
pre-emptive time allocation for said delays. Allowing the consideration of the buildings heritage
before beginning the planning and construction wouldve allowed the entire process to go
smoother.
The method of documentation, though aspirational in its use of a computer program, was not as
closely monitored as it shouldve been. This was probably the largest cause of delays in the overall
project. With approximately 300 variations being made, there must have been a clear system for
revealing the latest plans to follow or perhaps a centralised plan that needed changes made to it. If a
centralised single plan had the variation alterations on it with saves being made at intervals to
ensure past variations arent discarded, then there wouldnt have been 200+ plans and thus
eliminating the possibility of the wrong plan being used. Furthermore the project manager should
have been more aware of the stages of construction occurring so as communicate with the
construction manager and discover which areas of the project needed to be stopped or delayed to
await further instruction.
3.3.3 Post Completion/Future
Care should be taken during the redevelopment or demolition of the structure. Prior to
commencement a comprehensive study and understanding of the structure should be done as to
understand the extent of the heritage bricks, the method of construction used and the best method
of deconstruction and the necessary steps needed for a safe and efficient demolition, disposal and
reuse of the materials.
4 DISCUSSION
4.1 PROCUREMENT STRATEGY CHOSEN
Requirement: The main aim for the procurement strategy was for a quick solution where cost was
not an issue.
Considerations: Westfield Group has an internal division called Westfield Design and Construction
which handles construction projects.
By reviewing the considerations and the requirements, a process of elimination can be partaken to
allocate the appropriate method.

Roy Nawfal 2112 894 89

Page 10 of 11

Construct Only (For an explanation, refer to 2.2):
This method involves the principal separately contacting the designer to complete a design then
contacting a contractor purely for the completion of the construction. This strategy is not suitable
since the contractor, principal and designer are all the same company. Furthermore this strategy
isnt suitable due to the time consuming nature of it. The plan is required to be finished prior to
construction, and the communications method with the principal acting as the middle man makes
for a tedious and inefficient interaction.
Document and construct (For an explanation, refer to 2.2):
This is a middle ground between a design and construct method, and a construct only method. This
alteration is for the risk allocation which can be disregarded for the purposes of this contract due to
it being an internally organised project, thus any risk assumed will be assumed by the company
regardless whether it is the contractor or the principal. Also there is no need for the separation of
the designer and contractor. Evidently, the separation of designer and contractor at the beginning
would also cause unnecessary time delays.
Design and construct (For an explanation, refer to 2.2):
By process of elimination, this method is best suited for this construction project. This method is
most efficient when the contractor has an in-house design team, which WDC has, and is time
efficient. This description best meets the criteria that was sought after by the Westfield Group and
thus would be the ideal choice.
4.2 METHOD USED TO PAY SUBCONTRACTORS
Lump Sum (For an explanation, refer to 2.2):
This was the chosen method used to pay the subcontractors. Usually this method of payment is
unpopular due to its set and unchanging sum. This payment method is not as conscious of unforseen
changes as other payment methods and this can be seen by the debacle that occurred during the
construction stage of the project (refer 3.2.2). Due to the ever changing design that usually occurs in
Design and Construct strategies, the inflexible lump sum payment method was not the most ideal
choice.
Schedule of rates (For an explanation, refer to 2.2):
In my opinion this wouldve been the better method of payment. It is more flexible than the lump
sum method and factors in delays, extra time, and allows mistakes and variations to be made to the
construction and the overall time taken without requiring amendments. If the subcontractors had an
agreed upon sum per hour then the small dispute that arose need not have. This method is usually
much more popularly used in the payment of subcontractors.

Roy Nawfal 2112 894 89

Page 11 of 11

References:
1. Contractual Procedures: In The Construction Industry, 5
th
edn, Allan Ashworth, 2006, Person
Education Limited, Essex, England.
2. Pillsbury Law > Resources > Publications & Presentations > Top 10 Issues in Construction
Contracts. 2014. Pillsbury Law > Resources > Publications & Presentations > Top 10 Issues in
Construction Contracts. [ONLINE] Available at:
http://www.pillsburylaw.com/publications/top-10-issues-in-construction-contracts.
[Accessed 13 August 2014].
3. Writing the introduction. 2014. Writing the introduction. [ONLINE] Available at:
http://www.monash.edu.au/lls/llonline/writing/business-economics/marketing/2.2.2.xml.
[Accessed 13 August 2014].
4. Contract administration - Master Builders. 2014. Contract administration - Master Builders.
[ONLINE] Available at: https://www.masterbuilders.asn.au/contracts-and-disputes/contract-
administration. [Accessed 13 August 2014].
5. Department of Housing and Public Works | Home . 2014. Department of Housing and Public
Works | Home . [ONLINE] Available at: http://www.hpw.qld.gov.au/Pages/default.aspx.
[Accessed 13 August 2014].
6. Construction Law In Australia, 3
rd
edn, Ian Bailey & Matthew Bell, 2009, Thomson Reuters,
Sydney, Australia.