Construction Management - Chapter 5

Front 1

Contracts

Back 1

A contract is a mutually binding legal agreement that obligates the seller to provide specific products, services or results adn obligates buyer to pay seller

Front 2

What are the main components of a contract

Back 2

1.) Statement of work
• Schedule
• Period of performance
• Roles & responsibilities
• Pricing and payment
• Inflation adjustments
• Acceptance criteria
•Time Extensions
•Change Order
•Changed Condition
•VE Change Proposal
•Suspension, Delay, Interruption
•Liquidated Damages
•Penalty & Bonus
3
• Acceptance criteria
• Warranty
• Product support
• Fees
• Bonds (Performance/payment)
• Termination
• Dispute resolution mechanism
Progress Payments & Retainage
•Acceptance & Final Payment

Front 3

Name all the types of contracts

Back 3

1. Lump Sum
2. Unit Price
3. Cost-Plus-A-Fee
Cost + % of cost
Cost + fixed fee
Cost + fixed fee + profit sharing
Cost + fixed fee + GMP
Cost + Sliding fee

Front 4

Which type of contracts are competitively bid

Back 4

Lump sum and unit price

Front 5

Define Lump Sum and the requirements of the contracts

Back 5

Contractor agrees to perform the work for a predetermined Fixed Prices that includes profit

REQ: Complete plans and specs and well defined scope

Front 6

Advantages to owner of LUmp Sum

Back 6

1.) Final cost is determined before contract
2,) Min risk to owner
3.) min involvement from owner
4.) Owner benefits from price competition

Front 7

Disadvantages of a lump sum contracat

Back 7

1.) overall design build is long
2.) contractor tends to choos the cheapest solution
3.) Owner has min control over performance
4.) Changes lead to expensive disputes
5.) Adversary relations between owner and contractor

Front 8

What types of contracts use LS

Back 8

Buildings - Not subsurface contracts

Front 9

Define Unit PRice COntracts and requirements

Back 9

Contractor bids fixed prices for specified unit of work that includes profit

REQ: Complete plans and specs and approximate quantities

Front 10

Advantages for owner of a unit Price contract

Back 10

1.) Activities can start with out exact quantities
2.) Bidding is speedy and inexpensive
3.) flexibility of varying quantity of work
4.) owner benefits from price competitiion

Front 11

Disadvantages to owner for UP Contract

Back 11

1.) Total Cost is not determined at contract
2.) More risk in case of increased quantities
3.) Additional site/workshop staff needed to measure quantities
4.) Possibility of unbalanced bids

Front 12

Define Cost Plus Contracts and requirements

Back 12

Contractor agrees to perform work for all reimbursable costs plus a fixed or variable fee covering profit & overhead

REQ: Design and quantities need not be completed
Competent and trustwothy contractor

Front 13

Applications of COSt pllus contracts

Back 13

Confidential nature, new technology, difficult to determin, contactors market

Front 14

Advantages of COST +

Back 14

1.) reduced design build time
2.) Flexibilty in dealing with changes
3.) Minimized adversary relationships between owner and contractor
4.) Owner has more control on work

Front 15

Disadvantages to Owner on Cost +

Back 15

1.) Total cost not detemined
2.) Less economical in a competitive market
3.) Increased involvement of the owner
4.) possibility for contractor to abuse the agreement

Front 16

Name the types of cost plus contracts

Back 16

1.) Cost + % fee
2.) Cost + FF
3.) Cost + fluctuating gee
4.) Cost + Fee+ Profit sharing
5.) Caranteed Max Price
6.) Cost plus sliding fee

Front 17

Advantages of Cost + %

Back 17

1.)The clients pay for what they get
2.)The contractor is assured of a profit
3.)The cost of tender preparation is reduced

Front 18

DISAdvantages of Cost + %

Back 18

1.)Contractor not encouraged to use most economic solution
2.)Can easily get abused

Front 19

Advantages of Cost + FFq

Back 19

1. Contractor is assured of a fixed profit,
2. Contractor is rewarded to use most economical solution

Front 20

Cost plus fluctuating fee

Back 20

Fee is rewarded based on different price ranges

Front 21

Prime Cost + FF+ Profit sharing

Back 21

Common 25% for contractors = Share the amount of profits

Front 22

Target contracts

Back 22

Incresed incentive to contractor to minimize costs

Dis -= Difficulty in agreeing on a target cost
Scope changes require renogotiations of target
Scope needs to be relatively defined in order to set target
Bonus for saving, no penalty for overruns

Front 23

GMP

Back 23

Profit sharing
Contractors gaurntee they wont go over. IF they do they absorb the cost

Front 24

Cost Plus sliding fee

Back 24

Bonus for underrun - Penalty for overrun
Fee = R*(T2-A)

Front 25

Name the conditions for a fixed price contract

Back 25

1.) Fully defined scop
2.) Low uniqueness
3.) High importance on cost
4.) Buyers market condition
5.) Stable economic conditions
6.) Normal project duration
7.) High importance on timing
8.) Low buyers resources

Front 26

Name the conditions for a reimbursable contract

Back 26

1.) NOt Fully defined scop
2.) unique
3.) Low importance on cost
4.) Sellers market condition
5.) UNStable economic conditions
6.) LONG project duration
7.) LOW importance on timing
8.) HIGH buyers resources

Front 27

Traditional PM to activity sequencing

Back 27

All the designed work is completed then the building starts. ALl build activities occure aftert all design work is completeded no overlap

Front 28

Phased Sequencing

Back 28

Design is completed tehn construction starts. Packages do not have overlap. Design and build phases overlap, but for each work package, build starts after design

Front 29

Fast track sequencing

Back 29

The phases overlap. ANd in each package you have overlap. THis will take the shortest amount of time. Design and Build phases overlap for each activity buidl starts before design is finalized

Front 30

Name the three sequencing phases

Back 30

Tranditional, Phased, Fast track

Front 31

Traditional

Back 31

Longest, single contractor

Front 32

Phased

Back 32

Shorter, multiple contractors, requires PM

Front 33

Fast Track

Back 33

Shortest, Multiple contractors, Requires PM, Difficult to manage, Inadequate desgin and schedul, highest risk, can lead to longest time duration