construction engineering 221 contracts & contractor procurement
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Construction Engineering 221
Contracts & Contractor Procurement
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Changes
Standard practice (expect it – it’s a part of the process)
Owner has the right (within original scope) Change clauses – regulate how a change is
suppose to take place Equitable adjustment of price and time If not – claims and disputes procedures
Be careful – “changes” need to be changes Who’s asking and are they in line w/ the scope
of work Has the change clause been followed?
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Constructive Change
What is it?
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Constructive Change
A constructive change to the contract is the result of an action, or lack of action, of the owner or its agent that can be construed as a change to the contract even though the owner did not issue a formal, written change order. When the contractor is orally directed to do work different from, in addition to, or in a different manner from the mandated by the contract, a constructive change has taken place and the owner is responsible for additional cost or time.
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EXAMPLES of CONSTRUCTIVE CHANGES
Owner gives verbal direction to change the design of the project Use wallpaper in lieu of paint on walls
Contractor usually is required to confirm owner’s direction in writing with a request for a formal contract change order for additional costs
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Acceleration
What happens when the owner creates expectations that the contractor must complete the project at an earlier date?
Possible overtime costs to speed up work
OR Add more work WITHOUT extending the
completion date (resulting overtime, etc…)
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Differing Site Conditions
Also known as “changed conditions” or
“concealed conditions”
No implied contractual right exists for
the contractor to collect for unforeseen
conditions -- it needs to be in the
contract
Its called a “changed-condition clause”
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Changed Condition Clause
Why is a change-condition clause so important? the purpose of a change-conditions
clause is to reduce the contractor’s liability for the unexpected and to mitigate the need for including a large contingency
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Contingency
What is “contingency” and what is its purpose in life?
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Contingency Definition
Contingency – something whose occurrence depends on chance or uncertain conditions; a possible, unforeseen, or accidental occurrence.
In construction circles the “contingency” is the sum of money that the contractor adds to their bid that will cover any uncertainty they forsee in the project.
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Owner-Caused Delays
Why are owner-caused delays a concern to the contractor?
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Owner-Caused Delays
Three Reasons1. Over all completion date – not usually a
problem (contractor gets extension)2. “Ripple” effect – consequential
damages or impact cost from unchanged work that resulted from project delays. (Can anyone give an example?)
3. Work is deferred to another time period where costs are higher. (wages & materials)
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Change Orders
Changes “scope of work” Changes per what drawings &
specifications Itemized cost breakdown per trade Contract time extensions (IF any) Valid only when signed by BOTH owner
& contractor Technically a new contract Practically a revision to the original
contract
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Value Engineering
What is Value Engineering?
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Value Engineering
Finding a better way to accomplish a construction project at less cost
Can happen before and after the bid letting Before – owner, designer and contractor
work together After – value engineering incentive clause
Structure’s performance, safety, appearance or maintenance
Contractor is able to share in cost savings Planning, design and constructability
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What if……..
The contractor in his original estimate of the project had planned to transport concrete on site for a small pour with motorized wheelbarrows. On the day of the pour the contractor’s concrete pump is now available and is able to switch projects and pump the concrete rather than use wheelbarrows.
Is this value engineering?
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Is This Value Engineering?
NO Any cost savings belongs to the
contractor This is not a design change This is the contractor performing the
work more efficiently
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Examples of Value Engineering
Your turn
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Indemnification
Indemnification (hold-harmless clause)
Limited-Form
Intermediate-Form
Broad-Form
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Termination of the Contract
Material breach of contract By owner – failure to make payments or
causes delays or owner is financially
insolvent
By contractor – nonperformance, faulty
performance, not on schedule (not showing
reasonable progress)
Mutual agreement – both agree to end
project
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Notice to Proceed
Formal notification by owner to contractor to begin work
Establishes the first day “DAY 1” of the schedule (within 10 days of N.T.P.)
A signed CONTRACT to build the project is NOT a NOTICE TO PROCEED
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Subcontract Agreements
No contractual relationship
between subcontractor and owner
Retainage is usually the same as in
the prime contract – 10%
Approval by the owner – disapproval
not common
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Word to the Wise
“immediately in writing” (page 153) “authorized in writing” (page 154) “To proceed without written authorization
may make it impossible (page 154) “promptly notify the owner in writing"
(page 157) Keep detailed and separate cost records
of the additional work involved. (page 157)
“contractor must keep careful and detailed records” (page 158)
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Student Chapter – AGC
First meeting Wednesday Sept. 11 7:00 PM
Special membership deal at first meeting only!
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