construction engineering 221 contracts & contractor procurement

Construction Engineering 221

Contracts & Contractor Procurement

Construction Engineering 221 2

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?


Constructive Change

What is it?


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.


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


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…)


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”


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


Contingency

What is “contingency” and what is its purpose in life?


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.


Owner-Caused Delays

Why are owner-caused delays a concern to the contractor?


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)


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


Value Engineering

What is Value Engineering?


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


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?


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


Examples of Value Engineering

Your turn


Indemnification

Indemnification (hold-harmless clause)

Limited-Form

Intermediate-Form

Broad-Form


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


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


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


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)


Student Chapter – AGC

First meeting Wednesday Sept. 11 7:00 PM

Special membership deal at first meeting only!

construction engineering 221 contracts & contractor procurement

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