guc arct 702 legislations lecture 10 - contract issues for architectural firms 7-12-2017

GUC – German University in Cairo

Architecture and Urban Design

ARCH 702 Legislation, Professional Practice and Contracts

Fall 2017

Instructor: Dr. Yasser Mahgoub

Contracts

1

The Contract!

The Most Important Document That You’ll Never Ever Use…

Hopefully

The Contract!

A legal agreement between owner and architect that clearly

communicates a project’s terms and conditions, determine

responsibilities of each party and set expectations for schedule and

payment for services.

Contract Basics

Contract Basics

• Why have a written contract? – Mutual understanding

• Better understanding promotes better relationships

– Establishing your own rules • Law will govern over silent issues

– Sizing up your client • Understand your clients attitudes and motivations

– Identifying and allocating risk • Candid discussion of risk fosters agreement between

parties

Contract Types

• Oral Agreements

• Letter Agreements

• Consultant-Drafted Agreements

• Client-Generated Agreements

• Professional Associations Standard Agreements

• Continuing Service Agreements

Contract Basics

• First Comes the Proposal – Following an initial meeting to discuss the basics of

the project, the architect will follow up with a Letter of Proposal.

– a letter – identifies each party – location of the property involved – brief description of the project – scope of services to be performed – proposed compensation structure – a call-to-action for what’s next in the process

Contract Basics

• The Handshake

– simplest agreement

– Verbal

– no written documents!

– no legal contract

– no legal protection

– should be avoided at all costs!

Contract Basics

• Letter of Intent – prepared by the architect

– forwarded to the owner

– thoroughly defines the services

– signed by the architect

– requires no signature or written confirmation from the owner

– minimal legal protection

– followed up with more formal legal agreements

Contract Basics

• Letter of Agreement

– one or two page document outlining:

• the project description

• the basic terms and conditions of the agreement

• defined responsibilities for each party

• basic compensation structure

– prepared by the architect and signed by both parties

– offers limited protection

Contract Basics

• Architect-Prepared Contract

– prepared in-house by the architect

– reviewed by an attorney

– more beneficial to the relationship between owner and architect

– fully developed legal contract

– thoroughly developed terms and conditions

– provides adequate legal protection for both parties

Contract Basics

• Contract Documents

– legal documents prepared by architectural profession organizations

– very formal legal format

– very formal legal format of the documents may be intimidating to some residential and small commercial clients, often resulting in additional review by the owner’s attorney

Contract Basics

• Elements of a Contract

– Agreement - offer is accepted

– Consideration - the inducement or motive

– Legal form - neither illegal nor against public policy

– Competent parties - legal age, mentally competent and have authority

– Legal purpose

Project Delivery Methods

Project Delivery Methods

• Traditional Methods

– Design-Bid-Build

• Traditional form of project delivery characterized by its three phases, dual contracts and linear sequencing of the work.

– Negotiated Design Team

• Sometimes referred to as design-assist, it brings the contractor into the design process.

Project Delivery Methods

• Construction Management – Construction Manager as Advisor

• A construction manager is brought to the design team who acts as advisor to the owner.

– Construction Manager as Agent • The construction manager is given the authority to act

on the owner’s behalf.

– Construction Manager as Constructor • The construction manager is hired to act as project

coordinator and general contractor.

Project Delivery Methods

• Design-Build

– Design-Build

• Single point of responsibility for the project.

– Design-Build as Developer

• Design-build entity takes on some responsibilities of real estate development.

Methods of Compensation

Methods of Compensation

• Time-based Methods – Multiple of Direct Salary Expense

– Multiple of Direct Personnel Expense

– Professional Fee plus Expenses

– Hourly Billing Rates

• Other Methods – Stipulated Sum

– Percentage of the Cost of the Work

– Square Footage, Unit Cost, Royalty

Design Contract Administration

• Agreements influence internal methods of contract document preparation

– Bidding and Negotiating

– Fast-track projects

– Specifications and drawings

– Multiple prime contracts

– Work by owner

Construction Contract Administration

• Agreements influence construction administration duties

– Lump sum vs. cost plus (with or without guaranteed maximum price)

– Construction observation responsibilities

– Division of responsibility with construction administrator

– Payment schedules and procedures

– Project closeout requirements

END