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CONTRACTING
WHAT IS A CONTRACT
Architect/Engineers (A/E)
Prime/General Contractor
Sub-contractors
Suppliers
Banks & Financial Institutions
Specialized Service Agencies
Labor
Regulatory agencies
General Public
Flows from the contract but is not in the form of explicit statement
Come from long-standing, commonly held understandings that are
implied by the contract
Tort Liability
Based on tort law
A tort is a civil wrong
Central Concept: in living our daily lives, we cannot, with
impunity, either intentionally or unintentionally conduct
our affairs in a manner that will injure or damage others
Does not depends on the existence of a contract
Many individuals believe that their liabilities are limited
to those resulting from breach of the provisions in the
contracts to which they are party
A mistaken notion is that tort liability arises only when a
person knowingly and intentionally acts in a manner that
injures or damages another
An intentional tort may constitute a criminal act in
addition to a civil wrong
Nature of Contractual
Services
Design Only
Construct Only
Design & Construct
Turnkey
Construction Management Services
Nature of Contracts
Owner Architect Contracts and Owner Engineer
Contracts
Owner Construction Manager Contracts
Owner Contractor Contracts
Subcontracts ; Purchase Orders; Insurance Contract
PURCHASE ORDERS
Intended for transactions that involve the sale of goods by a
seller and delivery of those goods to a contractor buyer at the
site of a construction project.
Should be distinguished from the provision of services or the
performance of work involving labour at or on the
construction site
For example, providing fabricated structural or reinforcing
steel
PURCHASE ORDERS
Goods or Provision of Services?
Whether a particular transaction constitutes the sale of
goods or the provision of services?
Treat all transactions involving the provision of significant
amounts of on-site construction labour as a construction
operation requiring the use of a subcontract agreement
Transactions that do not involve the provision of significant
amounts of labour at the site should be treated as the sale of
goods. It should be handled with a purchase order
In India, Sale of Goods Act. 1930 applies
PURCHASE ORDERS
Use of purchase orders for certain jobsite services
That involve minimal labor like provision and collection of
trash containers
Purchase order quantity limitations
PO can be limited to a one-time transaction or may
provide for a continuing supply of goods on an asrequired basis
PO for continuing supply may be open ended or limited to
stipulated maximum quantity.
PURCHASE ORDERS
Conflicts with sellers sales quotations
The fine print on the back of the preprinted vendors sales
quotation document conflicts with similar fine print on the
back of preprinted purchase order document boilerplates
Both vendors and contractors/purchasers try to obtain the
most favorable terms
Drafter of PO should ensure that the conflicts are avoided
Flow-Down Language from Prime Contracts
PO may contain explicit flow-down language intended to
make all applicable provisions of the prime contract also
apply to the PO
SUBCONTRACT AGREEMENTS
A prime contract between an owner and a prime contractor
must exist before a construction subcontract can exist
Prime contractor decides to lay off or subcontract, a portion
of the work to another contractor called a subcontractor
Prime contractor still retains the original liability to the owner
for the performance of the work.
Subcontract work can be directly spelled out in the prime
contract or it may be work incidental to the contractor
INSURANCE CONTRACTS
Primary parties
Construction Contractor the insured
Insurance Company the carrier
Additional Parties additional named insured
Policies for the construction industry
Workers compensation and employers liability policies
Public (or third-party) liability policies
Builders risk policies
Equipment floater policies
Miscellaneous policies for special situations and needs
Named Exclusions
Additional Names Insureds
Deductibles
Policy Term
Subrogation
Policy Cancellations
Other issues
Claims-Made Vs. Occurrence Policies
Premium Escalation and Diminished Coverage
BIDDING DOCUMENTS
Normally begins with an advertisement
Identifies the project for which bids are desired
The owner
Time and place of bid opening
Instructions to potential bidders on how to obtain a full set
of contract documents
Invitation for Bids (IFB) or Request for Proposals (RFP)
IFB used when bidders must strictly confirm to drawing
and specs.
RFP when bidders may propose variations for the project
BIDDING DOCUMENTS
IFB or RFP typically include:
A description of the contract work
The identity of the owner
The place, date, and precise time of the bid opening
The penal sum of the required bonds (bid bond,
performance bond etc.)
A description of the drawings and specs, their cost, and
where they may be obtained
Rules regarding withdrawal, modifications, late bids etc.
BIDDING DOCUMENTS
Instructions to Bidders
Bid Form
Bidders complete this document, sign, seal and turn it in
Constitutes the offer
To constitute a responsive bid, the bid form must be
completely filled, signed and sealed in accordance with the
IFB or RFP and Instructions to Bidders
BIDDING DOCUMENTS
Bid Forms Contents
A definitive statement of the general terms and
conditions of the offer
The format of the commercial terms applying to the offer
Supplementary information that the owner may want to
know about the bidder
Requirement for public projects
Bid security
SPECIFICATIONS
The technical requirements for each division of work in the
contract will be completely detailed in specifications
Conforms to Uniform Construction Index or Masterspec
format
Should be carefully drafted so that both parties to the contract
have a mutual understanding of the precise technical
requirements
DRAWINGS
Complement the specifications
Should be sufficiently clear to adequately show exactly what
is to be built
Certain features may be shown in fairly general terms,
requiring the contractor to prepare the detailed drawings
In fixed-priced bids should be adequately sufficient and clear
REPORTS OF INVESTIGATION OF
PHYSICAL CONDITIONS
Often concern the geotechnical aspects of subsurface
conditions
Usually appear in the form of written evaluations and soil
boring logs
Other examples are weather records, stream flow hydrographs
etc.
Is such material to be considered part of the contract
documents?
Owners often use disclaimers, to escape liability
STANDARD FORMS-OF-CONTRACT
American Institute of Architects (AIA) Contracts
Standard form of Agreement Between Owner
and Contractor
Most widely used form for fixed-price building
construction works in USA.
FIDIC - International Federation of Consulting
Engineers
http://www1.fidic.org/resources/contracts/whic
h_contract.asp
Sub-consultancy Agreement
CPWD
MES
State PWD
Model Standard Contract For Domestic Construction CIDC
ONE-OF-A-KIND CONTRACTS
Created for a particular project
Little about them is standard or traditional
Fixed Price
Lump Sum
EPC, Turnkey, Design Build
Cost Reimbursable
Cost plus percentage fee (CPPF)
Cost plus fixed-fee (CPFF)
Cost plus incentive fee (CPIF) (Also called as Target Estimate)
Guaranteed Maximum Terms (GMP)
Concessions
Measurement Contract
Contract is Broken Down into a series
of bid items, each for a discrete
element of work of the project
The two parties are not bound by the
total value of work. They are bound by
each individual rates
Payment is based on actual measured
quantity of work
Most common type is Item Rate
Item
UOM
Descripti
on
Quantit Rate
y
Amoun
t
Remark
s
Mode of payment
Same as item rate
Contractor's
profit
16.5
Total cost to
owner
13.5
16.5
16.5
16.5
13.5
1.35
14.85
16.5
1.65
18.15
13.5
14.5
16.5
17.5
13.5
1.75
15.25
16.5
0.25
16.75
13.5
1.35
14.85
16.5
16.5