1. © Awad S. Hanna, PhD, P.E.1 Estimating and Scheduling CEE 492 Lecture 2 Construction Contracts

2. © Awad S. Hanna, PhD, P.E.2 Introduction   What is a contract?   Legally binding document that describes the responsibilities and rights of the parties   How are contracts formed?   Owner issues Invitation for Bids (IFB)   Contractor prepares and submits bid   Owner reviews and accepts bid   A contract document is developed, reviewed, and agreed upon by parties   The contract is signed by parties

3. © Awad S. Hanna, PhD, P.E.3 Contract Documents   Contract documents include:   Contract Agreement   General Conditions   Special Conditions   Plans   Specifications   Change Orders

4. © Awad S. Hanna, PhD, P.E.4 Contract Documents   Contract documents Change Orders Specifications Plans Special Conditions General Conditions Contract Agreement

5. © Awad S. Hanna, PhD, P.E.5 Contract Documents   Plans   Design drawings, including all changes   Usually include   Civil (C-X)   Landscape (L-X)   Architectural (A-X)   Structural (S-X)   Mechanical (M-X)   Plumbing (P-X)   Fire Protection (FP-X)   Electrical (E-X)   Controls (EC-X)   Other specialty plans

6. © Awad S. Hanna, PhD, P.E.6 Contract Documents   Specifications   Technical information about materials, equipment, work methods, and quality of workmanship   Usually follows the CSI MasterFormat   Currently consists of 16 Divisions   01000 General Requirements   02000 Site Work   03000 Concrete   04000 Masonry   05000 Metals   06000 Wood and Plastics   07000 Weather Protection

7. © Awad S. Hanna, PhD, P.E.7 Contract Documents   Currently consists of 16 Divisions (continued)   08000 Doors, Windows, and Glass   09000 Finishes   10000 Specialties   11000 Equipment   12000 Furnishings   13000 Special Systems   14000 Hoisting Systems   15000 Mechanical   16000 Electrical   Divisions may be expanded in the future

8. CSI 2004 New Format   Consists of 50 Divisions   00000Procurement and Contracting Requirements   01000General Requirements   02000Existing Conditions   03000Concrete   04000Masonry   05000Metals   06000Wood, Plastics, and Composites   07000Thermal and Moisture Protection   08000Openings   09000Finishes   10000Specialties   11000Equipment   12000Furnishings © Awad S. Hanna, PhD, P.E.8

9. CSI 2004 New Format   2004 Divisions (continued)   13000Special Construction   14000Conveying Equipment   15000RESERVED FOR FUTURE EXPANSION   16000RESERVED FOR FUTURE EXPANSION   20000RESERVED FOR FUTURE EXPANSION   21000Fire Suppression   22000Plumbing   23000Heating Ventilating and Air Conditioning   24000RESERVED FOR FUTURE EXPANSION   25000Integrated Automation   26000Electrical   27000Communications   28000Electronic Safety and Security   29000RESERVED FOR FUTURE EXPANSION © Awad S. Hanna, PhD, P.E.9

10. CSI 2004 New Format   2004 Divisions (continued)   30000RESERVED FOR FUTURE EXPANSION   31000Earthwork   32000Exterior Improvements   33000Utilities   34000Transportation   35000Waterway and Marine   36000RESERVED FOR FUTURE EXPANSION   37000RESERVED FOR FUTURE EXPANSION   38000RESERVED FOR FUTURE EXPANSION   39000RESERVED FOR FUTURE EXPANSION   40000Process Integration   41000Material Processing and Handling Equipment © Awad S. Hanna, PhD, P.E.10

11. CSI 2004 New Format   2004 Divisions (continued)   42000Process Heating, Cooling and Drying Equipment   43000Process Gas and Liquid Handling, Purification and Storage Equipment   44000Pollution Control Equipment   45000Industry-Specific Manufacturing Equipment   46000RESERVED FOR FUTURE EXPANSION   47000RESERVED FOR FUTURE EXPANSION   48000Electrical Power Generation   49000RESERVED FOR FUTURE EXPANSION © Awad S. Hanna, PhD, P.E.11

12. © Awad S. Hanna, PhD, P.E.12 Contract Documents   Change orders   Written approval of a change to the scope of work, contract drawings, or specifications   After a change order has been signed by all parties, it becomes part of the contract documents

13. © Awad S. Hanna, PhD, P.E.13 Contract Pricing Methods   Fixed cost/lump sum contracts   Contractor agrees to perform the work for a predetermined price that includes profit   Scope of work is typically well-defined   Unit price contracts   Another form of fixed cost   Used when quantities of materials are not known, such as earthwork

14. © Awad S. Hanna, PhD, P.E.14 Contract Pricing Methods   Cost-plus-fixed-fee contracts   Contractor agrees to perform the work for the cost of materials and labor plus a fixed fee to cover overhead costs and profit   Fee is a fixed amount regardless of actual cost of work   Cost-plus-percentage-fee contracts   Contractor agrees to perform the work for the cost of materials and labor plus a percentage fee to cover overhead costs and profit   Fee is a percentage of the total cost of the project

15. © Awad S. Hanna, PhD, P.E.15 Contract Pricing Methods   Guaranteed Maximum Price (GMP)   Contractor agrees to perform the work for actual costs incurred plus a fixed fee subject to a ceiling price   Savings resulting from cost underruns are returned to the owner

16. © Awad S. Hanna, PhD, P.E.16 Procurement Methods   Competitive Bid   Invitation for Bid (IFB) is issued by owner   Contractors prepare bid plus alternates   Contract is typically awarded based on lowest responsive or responsible bid   Negotiated Bid   Bidders are often selected by owner   Bidders prepare price, schedule, and presentation on qualifications   Owner selects successful bidder and negotiates a final price

17. © Awad S. Hanna, PhD, P.E.17 Contract Formats   Standard contract forms are available from:   American Institute of Architects (AIA)   Engineers Joint Council Document Committee (EJCDC)   Associated General Contractors (AGC)   Design Build Institute of America (DBIA)   Consensus Format   Owners and contractors often attach supplements to the standard contract forms with additional contract conditions.

18. © Awad S. Hanna, PhD, P.E.18 Bonds   Bond   Used to guarantee the performance of the contractor   Bonding Cost   Ranges from 0.5% - 2%   Bid bond   Guarantees the successful bidder will enter into a contract with the owner   If contractor defaults, owner is paid the face value of the bond

19. © Awad S. Hanna, PhD, P.E.19 Bonds   Payment bond   Guarantees that the contractor will pay their subcontractors and suppliers   If contractor defaults, the subcontractor or supplier will be paid by the bonding company.   Performance bond   Guarantees the contractor will successfully complete the project   If contractor defaults, the bonding company will bring in another contractor to complete the work OR will pay the owner the additional cost of hiring another contractor.

20. © Awad S. Hanna, PhD, P.E.20 Insurance   Insurance is used by the contractor and owner to cover some of the risks on the project   Types of insurance   Builder’s risk   General liability   Property damage   Workers’ compensation   Others

21. © Awad S. Hanna, PhD, P.E.21 Degree of Risk   Degree of risk assumed by owner and contractor RISK Contract Contractor Owner Lump-sum Contract (No change in contract) Lump-sum Contract (Some changes in contract) Lump-sum Contract (many changes) Unit Price Contract Guarant’d Max Price Contract with Sharing Clause (50/50) Guarant’d Max Price Contract with Sharing Clause (25/75) Cost-Plus- Fixed-Fee Contract Cost-Plus- Percent- Fee Contract (or) Cost-plus w/ Guart’d max cost