BCEE 451

Construction Engineering
Lecture 3- Contracts and Documents
Instructor: Dr. Jian Li Hao

Winter 2015

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Learning Outcomes
Define what a construction contract is
Understand the use of various contract
documents
Distinguish the different types of specifications
applicable in construction
The steps to develop specifications

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Description of a Contract
A construction contract is an agreement between two
(or more) parties that is enforceable by law
One party must agree to perform work for the other
party and received payment (consideration) for the work
A contract must be for a service that is legal
Although there is no actual requirement that a contract
must be written, realistically it is better to be written!
e.g. the sale of land.

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Description of a Contract
For a contract to be valid and enforceable by law,
it must meet the criteria listed below:
- Mutual Agreement: there must be a mutual
understanding or meeting of the minds
- Offer and Acceptance
- Consideration:
- Legality:
- Capacity to enter into an agreement:

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A Special Note about Canadian Law
Canadian Law governing competitive bidding is
strict
No negotiation is allowed if competitive tendering
is indicated in the advertisement to bidders
When bidders submit their bids a series of
bidding contracts or contracts are formed
When the contract is awarded, bid bonds are
returned an bidding contracts cease to be.

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Bid Bond
A Bid Bond acts as a form of security to ensure that
the contractor chosen by a tendering authority will
enter into the construction contract with the
owner

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Tendering Authority
(Obligee)
Surety pays obligee if
Contractor refuses to enter
Into Contractor B
Surety
Indemnitors
Contractor
(Principal)
Tendering Authority chooses
Contractors bid and Contractor
Refuses to enter into construction
Contract
The surety may bring
an action against the
principal for monies
paid under the bond
As a condition to issuing the bond, the surety
will often require indemnity agreements,
often from the owners of the principal,
And will recover from the indemnators
event that it pays under the bond
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Surety Obligation: CCDC 220-2002
The condition of this obligation is such that if the principal shall have
the bid accepted within the time period described in the obligees bid
documents or, if no time period is specified in the obligees bid
documents, with ___ ( ) days from the closing date as specified in the
obligees bid documents, and the principal enters into a formal contract
and gives the specified security, then this obligation shall be void;
otherwise, provided that the obligee takes all reasonable steps to
mitigate the amount of such excess costs, then the principal and the
surety will pay the obligee the difference in money between the amount
of the bid of the principal and the amount for which the obligee legally
contracts with another party to perform the work if the latter amount be
in excess of the former.

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 http://www.jml.ca/wp-
content/uploads/publications/ConstructionBondsWh
atEveryContractor.pdf

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Contract Documents
Contract documents can be thought of as the planning
mechanism for the project objective of scope
They describe the owners requirements and how they
will be accomplished
While there are many documents that make up a
contract, the five essential documents include: The
agreement, The General Conditions, The Special
Conditions or Supplementary Conditions, The drawings,
and The Specifications.
In addition to the above 5 documents, we can add The
Bidding Documents.
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Bidding Documents
Documents that support the solicitation process
and include:
- Invitation to bidders
- Instructions to bidders
- The tender form

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Bidding Documents
Invitation to Bidders
The purpose of an advertisement/invitation to bidders
is to notify contractors that a bid is requested.
It usually gives enough information to allow bidders to
determine whether they are interested or not.
The advertisement is usually brief and contains the
following information:
- A description of the work
- The name and address of the owner
- The character of bids (e.g. unit price versus lump sum)
- The name of the designer
- How to obtain, and the cost of drawings and specifications
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Bidding Documents
Instructions to Bidders
Instructions to bidders are included in each set of contract
documents, usually as the first section of the specifications.
The purpose of this document is to ensure that all bidders
get the same information.
Usually, the information in the advertisement is repeated,
but in more detail.

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Bidding Documents
The following should be included in the instructions to bidders:
1) Detailed estimate of quantities for unit price contract; or scope of
work for lump sum contracts.
2) The required completion time of the project
3) The required qualifications of the bidders
4) The procedure to be followed in submitting a bid
5) The disposition of the late bids
6) The procedure to be followed in awarding the contract
7) Definition and disposition of bid and contract surety;
8) Procedure for withdrawing bids
9) Rejection of bids
10) Responsibility of accuracy and interpretation of bidding information
11) Unique features of the project
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Bidding Documents
Tender Forms (Proposals)
The tender form is a structured proposal that facilitates a
standard response from all interested parties.
The tender form establishes intent on the part of the
contractor to enter into a contract to complete the work
specified at the cost indicated in the proposal
A proposal is the contract document in which the bidder
offers to perform the work
If the proposal is properly prepared, it will contain the five
essentials of a contract

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Bidding Documents
In a standard design-bid-build scenario:
- The proposal may be prepared by the designer for a contractor to
complete and sign;
- The proposal is often furnished by the owner for either the
contractor or the designer to complete and sign.
- The proposal ensures that all bidders are proposing to do exactly the
same work.
Although it varies with the contracting method, proposals
often include the following information:
- The price
- The time of the project start and completion
- A listing of all contract documents
- A statement that the site has been visited
- Possibly a list of subcontractors
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- The name of the company and signature of a signing officer
Contract Documents
The Agreement
The most important document form a legal standpoint is
the agreement.
- It is sometimes called the contract itself, but since so many
documents are referred to as contract documents, the agreement is a
better term.
The form of agreement can be standardized and used for
many project, or a unique document can be prepared for
each project.

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 Contract Documents
The most generally accepted documents in the Canadian
construction industry are developed by the Canadian Construction
Documents Committee (CCDC)

The purpose of the agreement is to record in written form those

items agreed to by the owner and the contractor.

It is simply a letter that constitutes legal evidence that a contract

exists, and forms the basis for its enforcement.

The agreement usually has two parts where the first part includes
the following: a short introductory paragraph which:
Defines the parties involved in the contract
Gives the date of the agreement
States that each party agrees to what follows 18
Contract Documents
The second part contains:
- The elements of the contract and defines the work to be undertaken
- The consideration to be paid and sometimes the method of payment
- The time of completion
- Provision of liquidated damages
- A complete listing of the contract documents that define and
describe the project
A final paragraph confirming the agreeemnt and providing
space for the signatures of the parties and witnesses
completes the agreement.

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Contract Documents
The General Conditions
The general conditions define the responsibilities of the
parties involved in the contract, i.e. the owner and the
general contractor.
It describes the guidelines that will be used in the
administration of the contract.
The standard forms of general conditions that have been
developed by different organizations are familiar to all
parties involved in construction contracts.
The wording is not only clearly understood, but also has
been tested in the courts.
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Contract Documents
Examples of clause content in standard form general conditions include:
Definitions
Assignment and subletting
Contract documents
General obligations
Rights and responsibilities of the owner
Duties and authority of the engineer (or representative)
Rights and responsibilities of the contractor
Labor
Workmanship and materials
Commencement time and delays (with respect to bidding)
Liquidated damages and limitations of damage for delayed completion
Payments and certification of completion
Maintenance and defects
Remedies and powers
Insurance and bonds
Notices
Tax matters
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Termination oc contract
Contract Documents
Supplementary (Special) Conditions:
General conditions are intended to apply to many different
projects
They reflect the owners normal practice or best practices
of the industry with respect to standard documents
The purpose of supplementary or special conditions is to
provide an extension of the general provisions of the
contract to fit the specific project at hand.
They serve as amendments or augmentation to the
General Conditions

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Contract Documents
Items included in the Supplementary Conditions are
entirely subject to the discretion of the owner and
may include topics such as:
Location of the Work, Scope of the Work, Examination of the Site, Laying
out of the Work, Commencement, execution and completion, Security,
Owner Furnished Materials and Equipment, Taxes, Rates of Wages,
Temporary Facilities, Plan of Operation, Field Office, Payment, Schedule,
Drawings Furnished, Permits, Insurance, Cleaning Up, Site Visits, Traffic
Control Requirements, Actions to be Taken in the Event of discovery of
artifacts or items of historical value, and Site Visits.

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Contract Documents
Drawings
Drawings are essential in defining and describing the
scope of a project.
They are the means by which the designer conveys the
physical, quantitative, and visual description of the project
to the contractor.
Drawings define what is to be done, the specific location
of project components with all applicable dimensions and
details required to complete the work
Drawings are typically referred to as plans and blueprints

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Canadian Construction Documents
Committee (www.ccdc.org)
A national joint committee responsible for the
development, production, and review of standard Canadian
Construction Contracts, Forms and Guides
Formed in 1974
Including two owner representatives from each of the
public and private sectors, as well as appointed volunteer
members of the following four national organizations:
- Association of Consulting Engineers Canada (www.acec.ca)
- Canadian Construction Association (www.cca-acc.com/en/)
- Construction Specifications Canada (www.csc-dcc.ca)
- Royal Architectural Institute of Canada (www.raic.org)

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Why Use CCDC Documents?
Relied upon as familiar industry standards.
Provide balance, uniformity and standardization for bidding
and contracting procedures.
Protect the interests and preserve the rights of all parties
involved in a construction project, without assigning undue
risk to any one party.
Develop in a collaborative environment that allows for the
serious consideration of the rights, interests, and obligations
of all parties.

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Who Uses CCDC Documents?
All construction industry participants
- Owners, design professionals, construction managers, legal
professionals, contractors and subcontractors, and engineers.

CCDC Documents are being used by public contracting

authorities, including:
- Provincial and municipal governments, as well as the private sector
on both large and small projects for both new construction and
renovation.

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Specifications
In addition to drawings, specifications are also essential to
defining and describing the scope of a project.
Specifications are also known as technical provisions
Supplement drawings by providing information that cannot be
shown in graphic form, or information that is too lengthy to be
placed within the drawings.
Specifications guide bidders in the preparation of cost
proposals as well as field execution of the work.
Specifications also guide the contractor through the
processes of ordering materials and construction and
installation of the facility.

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Specifications
Specifications provide information regarding:
- The quality of materials
- The quality of workmanship
- Erection and installation methods
- Test and inspection requirements and methods
There are two main types of specifications:
- Performance Specifications
- Prescription Specifications

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 Specifications
Performance Specifications
- State how the finished product must perform without dictating how the
contractor must do the work. In other words, they focum on the end
result.
- An example of performance specifications would be a requirement for
concrete that has a 28-day strength of 3,500 psi. It is the contractors
responsibility to provide concrete that meets the requirement.
Prescriptive Specifications
- State how the work is to be performed and therefore focus on the
method rather than the end result.
- An example of a prescriptive specification would be to place wall studs
16 inches on center and nail using a specific pattern.
- By using a prescriptive specification the designer assumes liability for
the performance of the product and essentially warrants the
performance of the product. 30
Contractual disputes of a technical nature may be
most expeditiously and effectively solved through:
a) A lawsuit
b) Court appeals
c) Contract renegotiations
d) Arbitration

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Contractual disputes of a technical nature may be
most expeditiously and effectively solved through:
a) A lawsuit
b) Court appeals
c) Contract renegotiations
d) Arbitration

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Dispute Resolution Methods
Avoidance
Negotiation
Mediation
Dispute Review Boards
Arbitration
Litigation
Self-help

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Dispute Resolution Methods

An Owner and a Contractor

have a site meeting to
resolve some open issues.

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Avoidance
Even avoidance is not avoidance
In construction we have many reasons to avoid
confrontation
In construction, 99% of avoidable disputes
become bigger

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Negotiation
Dispute resolution between the parties involving
only the parties
Casual
Formal
Resolution
Regardless of how

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Thank

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Q and A?

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