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What the is difference between construction and manufacturing?

Construction tends to be custom-built; manufacturing tends to be mass-produced and standardized.

From Hinze Construction Contracts

Roughly how much of a typical building construction job is done by subcontractors?

More than half.

From Hinze Construction Contracts

What resources do contractors manage?

Labor, materials, equipment, money and time.

From Hinze Construction Contracts

What is the most important resource contractors manage?

Labor, because it is responsible for the greatest fluctuations in total anticipated costs.

From Hinze Construction Contracts

What percentage of total construction contracts are privately funded?

70-80%

From Hinze Construction Contracts

What are some examples of projects that are privately funded?

Most buildings, railroads, and utilities.

From Hinze Construction Contracts

What are the primary means of funding private construction projects?

Expenditure of existing capital


Direct loans from outside


Sale of fixed assets


Issuance of additional shares of stock or corporate bonds


Endowments

From Hinze Construction Contracts

What are the primary means of funding public construction projects?

Appropriations from annual operating budgets


Special taxation for specific purposes


Bond issues


Endowments

From Hinze Construction Contracts

What are the four main construction categories?

Housing


Building (non-residential)


Engineering


Industrial

From Hinze Construction Contracts

What does housing construction consist of?

Residential units constructed by speculative bidders or contractors under contract by owner.

From Hinze Construction Contracts

What does building construction consist of?

Institutional, educations, light industrial, commercial, social, religious, farm, amusement, and recreational projects, both public and private

From Hinze Construction Contracts

What does engineering construction consist of?

All structures in which most of the planning and design is performed by engineers. Usually public projects.

From Hinze Construction Contracts

What does industrial construction consist of?

Projects associated with the manufacturer and production of a commercial project or service. Usually privately financed.

From Hinze Construction Contracts

What three entities are typically involved in a construction project?

Owner


Designer


Constructor

From Hinze Construction Contracts

What are the five types of contracting procedures?

General Contract Method


Separate Contracts Method


Force Account Method


Design-Build Method


Professional Construction Management Method

From Hinze Construction Contracts

What is the General Contract Method (Lump Sum)?

Contract is between owner and general contractor.


Design firm usually represents owner in drawing up contract documents.


Contractor manages construction

From Hinze Construction Contracts

How does bidding work for public works projects?

Sealed bids are submitted and opened on bid date. Lowest bidder gets contract.

From Hinze Construction Contracts

How is private sector bidding different from public?

Bids may be closed


Lowest bidder may not win


Owner can try to negotiate lower price

From Hinze Construction Contracts

What are typical services done by subcontractors?

Electrical, mechanical, roofing, masonry, ceramic tile, carpeting, wallpaper, insulation, drywall, suspended ceilings, millwork, mirrors, ornamental metals and resilient flooring.

From Hinze Construction Contracts

What is brokerage?

When the general contractor subcontracts all the work on a project.


Many jobs require general contractor to do at least 15-20% of the work.

From Hinze Construction Contracts

What is the Separate Contracts Method?

The owner contracts directly with specialty contractors for various portions of the work.


Owner manages construction.

From Hinze Construction Contracts

What is the Force Account Method?

No contracts are written.


The owner's own employees are solely responsible.


Usually for small/simple projects (like maintenance)

From Hinze Construction Contracts

What is the Design-Build Method?

Owner makes single contract for both design and construction.


Construction can begin before design is finished (fast tracking)

From Hinze Construction Contracts

What is the Professional
Construction Management Method?

Owner hires construction management firm (CM).


CM (usually) selects designer.


CM does not perform construction.


Good for large/complex projects (e.g. hospitals)

From Hinze Construction Contracts

What is a contract?

Agreement between parties that is enforceable by law

From Hinze Construction Contracts

What is common law?

Principles based on legal tradition rather than specific statues.


Used to resolve disputes for which no formal laws exist.

From Hinze Construction Contracts

What is an executed contract?

When both parties have fully performed in accordance with the contract's terms.

From Hinze Construction Contracts

What is an executory contract?

Some portion of the contract remains to be done.

From Hinze Construction Contracts

What is a bilateral contract?

Mutual promises made by contracting parties.

From Hinze Construction Contracts

What is a unilateral contract?

Only one party makes a promise, the other can choose whether to take them up on it.

From Hinze Construction Contracts

What is an express contract?

The terms, whether verbal or written, are clear, concise, explicit, and definite.

From Hinze Construction Contracts

What is an implied contract?

Terms are not clear but are established through inference and deduction.

From Hinze Construction Contracts

What is a joint arrangement?

Individuals are joined, in a legal and liability sense, as one party in an action.

From Hinze Construction Contracts

What is a several or separate contract?

Each party has a liability that is separate from the other parties.

From Hinze Construction Contracts

What is a joint and several (separate) contract?

Parties can be bound both jointly and separately.


If a lawsuit arises, however, it can only be filed jointly OR separately.

From Hinze Construction Contracts

What are the elements of a contract?

Meeting of the minds


Offer and acceptance


Consideration


Lawful subject matter


Competent Parties


Estoppel

From Hinze Construction Contracts

What is a meeting of the minds?

Parties agree to basic meaning and legal implications of the contract.

From Hinze Construction Contracts

What is unreality of consent?

When it is determined that a meeting of the minds never took place, because of:


Error


Misrepresentation (innocent)


Fraud (deceit or not fully disclosing truth)


Duress (threats)

From Hinze Construction Contracts

What is offer and acceptance?

An offer is made when one person signifies a willingness to enter into a contract under certain terms


Acceptance creates the contract, provided it is done as specified in offer.

From Hinze Construction Contracts

What is a counteroffer?

Acceptance that is not definite, unqualified and unconditional.


After a counteroffer is made, the original offer is void, unless the original offerer agrees to reinstate it.

From Hinze Construction Contracts

What is consideration?

Something of value received by one of the parties in exchange for something else that is of value.

From Hinze Construction Contracts

What is lawful subject matter?

The subject of the contract must be definite and clearly defined.


It cannot violate any fundamental dictates of common law.

From Hinze Construction Contracts

What are competent parties?

Anyone acting in good faith except:


minors


insane people


drunken people

From Hinze Construction Contracts

What is estoppel?

A principle by which a contract becomes binding in spite of the fact that no formal agreement was made between the parties.

From Hinze Construction Contracts

What are the forms a contract can take?

Only real estate contracts must be in writing.


However, it is best to put all contracts in writing to clarify scope of services, consideration, and time frame.

From Hinze Construction Contracts

What are assignments of contracts?

When one party to a contract transfers the rights for obligations to another party (e.g. giving portion of money you will be paid to bank in return for loan)

From Hinze Construction Contracts

What is real property (real estate)?

Land and any attachments.


Most construction projects are improvements to real proptery.

From Hinze Construction Contracts

What is a lien?

Legal claim placed on property, giving the party filing the lien the right to retain possession of the property until a debt payable is satisfied.

From Hinze Construction Contracts

What is a tax lien?

The right of the government to retain possession of the property until the tax on it has been paid.

From Hinze Construction Contracts

What is eminent domain?

The right of the federal government or a state or other public agency to take possession of private property and appropriate it for public use.

From Hinze Construction Contracts

How is eminent domain exercised?

First, there must be due process of law.


Second, landowner must receive fair compensation, usually determined by judicial proceedings.

From Hinze Construction Contracts

What is the purpose of eminent domain?

To benefit the public in general.

From Hinze Construction Contracts

What is condemnation?

The exercise of eminent domain.

From Hinze Construction Contracts

How can land for highways be obtained?

Purchase


Eminent domain


Prescription (taking private land that has been used as public road for more than 7 years)


Dedication (owner granting use of private property)

From Hinze Construction Contracts

What is a right-of-way?

A tract of land, usually a series of connected parcels, that is used for operation of highway or public utility.

From Hinze Construction Contracts

What is an easement?

Grants a specific right of use to non-owners (neighbors, utilities, governments, etc.).


If the land is sold, the easement generally is transferred with the land.

From Hinze Construction Contracts

What is zoning?

Division of a city into areas.


Each area has a particular designation regarding the use of land within it.

From Hinze Construction Contracts

What are typical zoning restrictions?

Lot size


Setback from boundary


Types of buildings


Height of buildings


Density of population

From Hinze Construction Contracts

What is the purpose of zoning?

To ensure an orderly development of the community and maintain the quality of life (health and welfare) for a cities inhabitants.


Zoning is basically master-plan of city.

From Hinze Construction Contracts

What are mechanic's liens?

Right for a worker to place a claim on land on which work was performed.


Also can be used by materials suppliers.


Can be discharged through payment of foreclosure.

From Hinze Construction Contracts

What is an agency?

Consensual agreement by which a person can let someone else do something for them.

From Hinze Construction Contracts

How does an agency agreement work?

A principal authorizes an agent to act on his behalf.


An agent negotiates with third parties on behalf of the principal.


The negotiated agreement binds the principal and the third parties.

From Hinze Construction Contracts

Who is the owner's agent in a construction project?

Typically, the landscape architect, architect, or engineer.


They are liable to owner if harm is caused through their negligance.

From Hinze Construction Contracts

How can a construction agency agreement be created?

Law or contract


Ratification


Estoppel

From Hinze Construction Contracts

What types of actions by an architect or engineer are considered negligent?

Errors in plans and specifications


Misrepresentation of skills


Errors in judgment (sometimes)

From Hinze Construction Contracts

What is the role of the contractor in a construction project?

He is an independent contractor, not an agent. The owner can not interfere with his methods, only specify the final result

From Hinze Construction Contracts



What is unilateral termination of an agency agreement?

Either party may quit the agreement at any time; however, damages may be due unless there was a justifiable cause for termination.

From Hinze Construction Contracts

What is contingent liability?

A third party (not an employee) is not affected by the contract. In other words, an injured person can sue the owner, even if the injury was the contractor's fault.

From Hinze Construction Contracts



Who is responsible for a tort committed by a subcontractor?

The general contractor, via the rules of contingent liability.

From Hinze Construction Contracts

When can a third party sue the landscape architect?

If the LA was performing actual supervision on the job site, even if they said little or nothing about the method of work.


As a result, the word "inspection" or "observation" is used instead of "supervision"

From Hinze Construction Contracts

What are the types of business organizations found in the construction industry?

Proprietorships


Partnerships


Corporations

From Hinze Construction Contracts

What is a proprietorship?

Firm owned by an individual. They are seen as the same in the eyes of the law.

From Hinze Construction Contracts

What is a partnership?

Two or more people carrying on a business. They divide all profits.


The partnership pays no income tax. The partners are responsible to pay this tax.

From Hinze Construction Contracts



How are creditors paid when a partnership ends?

Outside creditors


Loans made by the partners


Each partner's capital investment


Remaining profits divided among partners.

From Hinze Construction Contracts

What is a limited partner?

Provides no services and has no vote.


Provides cash and shares in profit and losses


Has very little liability beyond losing money invested in firm.

From Hinze Construction Contracts

What is a silent partner?

Partner who is unknown to the public.

From Hinze Construction Contracts



What are joint ventures?

Two or more construction firms working together.


Special partnership, often made for one project only.


Very popular in industry.

From Hinze Construction Contracts

What is a corporation?

Entity created by law in which individuals form unit under a special name.


Corporations may own property, incur debts, and bring suit or be sued.


Limited liability of owners.

From Hinze Construction Contracts

What are the rights of corporate stockholders?

Enact bylaws


Shade dividends


First right to purchase new shares


Get money if corporation ends


Immune from liability of corporation


Right to inspect corporate records


Right to sue corporation.

From Hinze Construction Contracts

What happens to corporate profits?

Taxed by government.


After tax, profit invested in company and/or given as stock dividend.

From Hinze Construction Contracts

Who controls a corporation?

Board of directors.


They are supposed to make decisions that serve the company, not their personal gain.

From Hinze Construction Contracts

What are the powers of a corporation?

Buy and sell property


Sue and be sued


Enter contracts


Invest funds


Lend or borrow money


Make bylaws


Appoint officers


Distributes profits.

From Hinze Construction Contracts



How are creditors paid when a corporation dissolves?

Outside creditors


Bondholders


Stockholders

From Hinze Construction Contracts

What is ultra vires activity?

Corporate contracts that go beyond the scope of its powers.


May make contract unenforceable.

From Hinze Construction Contracts

What is a holding company?

"Supercorporation" that can control companies because it holds dominant interest.


Corporation now becomes subsidiary of holding company.

From Hinze Construction Contracts



What is a municipal corporation?

Agency of state or local government.


Profit held for public's use.


Not immune from liability.

From Hinze Construction Contracts



What is the basis of a criminal lawsuit?

Violation of the law.

From Hinze Construction Contracts



What is the basis of a civil lawsuit?

Contract matters and torts.


Civil lawsuits are more common on construction projects.


Usually there's no specific law about issue that has arisen.

From Hinze Construction Contracts



How does a court go about resolving a contract dispute?

Look at previous decisions


Look at obvious intent of agreement



From Hinze Construction Contracts

What is an exculpatory provision?

One party is asked to assume liability that would not normally be assumed.


Usually when owner shifts liability to contractor.

From Hinze Construction Contracts



What are torts?

Wrongs not addressed by statutory law or contract obligations.


Injury or damage caused by action or inaction.


Must prove that one party had a duty to the other party that he failed to fulfill.

From Hinze Construction Contracts



What is standard of care?

Conduct expected of someone acting in a given capacity.




A failure to act with proper standard of care can be a tort.

From Hinze Construction Contracts





What is the attractive nuisance doctrine applied to construction?

Construction sites may attract people, so precautions must be taken so they cannot enter and injure themselves.

From Hinze Construction Contracts



What is a surety bond?

A guarantee provided by a firm that the contractor will fulfill the terms of the contract.

From Hinze Construction Contracts



What three parties are in a surety arrangement?

Surety (obligates bonding company to pay if principal does not perform; e.g. bonding company)


Principal (principal debtor, i.e. contractor)


Obligee (person to whom promise is made, i.e. owner)


Can also occur between general contractor and subs

From Hinze Construction Contracts



What is the difference between a surety bond and insurance?



In a surety, the benefit goes to a third party, not the one buying the policy.


Surety is more like a loan, and the fees are more like interest.


Risk is not transferred. If something goes wrong, the surety can go after the principal

From Hinze Construction Contracts

What is the Miller Act?

Surety bonds required on all federal and federally assisted projects valued at over $25,000.

From Hinze Construction Contracts

What is a bid bond?

Gives assurances the contractor will enter into a binding construction contract and will provide the required payment and performance bonds.


Usually 5% of contract amount

From Hinze Construction Contracts

What is a performance bond?

Pays if contractor does not perform properly. Usually worth 50-100% of contract price.

What is a payment bond?

Protects owner if contractor doesn't pay subs and suppliers.



In public works projects, subs must stop working if not paid unless there is a bond.

What is a performance bond?

Pays if contractor does not perform properly. Usually worth 50-100% of contract price.

What is a payment bond?

Protects owner if contractor doesn't pay subs and suppliers.



In public works projects, subs must stop working if not paid unless there is a bond.

What is a bonding limit?

Maximum amount of work contractor can undertake at one time.

How are bids on public works projects announced?

Notice must be placed in newspapers, etc. and in public places.


All bidders must be treated alike


Pre qualification may be required.

What is value engineering?

Procedure to analyze if cheaper methods are available.

How are landscape architects usually paid?

Fee basis


Historically a percentage of the cost of construction

Who owns the design done by a LA?

On public projects, the owner.


On private projects, usually the architect, unless the contract states otherwise.

When is value engineering done?

Design phase by consultant and construction phase by contractor who has been awarded the contract.

What is a constructability review?

Assessment of problems anticipated during construction.

What are addenda?

Changes to plans after bidding has begun.

What are alternates?

Variations on base project for which bidders must also place bids.

What info is asked for on the bid form?

Price


Time of completion of construction


Bid surety


Agreement to provide contract surety


Acknowledgement of having reviewed addenda


List of subcontractors to be used


Experience record and financial information


Declaration about fraud


Statement about site examination


Signature

When can a bid be withdrawn?

Usually at any time prior to opening of bids.

What is post qualification?

Determining that winning bidder has necessary qualifications.

Typically how long is there between bid opening to contract award?

30 to 60 days

What are the parts of construction contract documents?

Construction agreement


Drawings


General conditions


Supplementary provisions


Technical specifications


Addenda

Who owns the design of a project?

On public works projects, the owner. On private projects, the designer, unless the contract says otherwise.



What are the general conditions on CD's?

Establish rights, authority, and obligations of owner, owner's representative, and the contractor.



What are the supplementary conditions on CD's?

Amend and augment general conditions on topics like start date for construction and cleaning requirements.

What are specifications on CD's?

All contract documents with the exception of the drawings, including:


invitation to bid


instructions to bidders


general conditions


supplementary conditions


bid proposal form


bid bond form


contract bond form


list of prevailing wages


noncollusion affidavit


technical specifications

What are technical specifications on CD's?

Written descriptions of the quality of various aspects of the construction project.


Used to modify or clarify what is shown on the drawings.

In case of conflict between plans and specifications, what will govern?

Specifications.

What is the organization of technical specifications?

CSI format:


bidding and contract requirements


Division 1: general requirements


Division 2: sitework


Division 3: concrete


division 4: masonry


division 5 metals


division 6: wood and plastics


division 7: thermal and moisture protection


division 8: doors and windows


division 9: finishes


division 10: specialties


division 11: equipment


division 12: furnishings


division 13: special construction


division 14: conveying systems


division 15: mechanical


division 16: electrical

What are the basic criteria for a good specification?

Technical accuracy and adequacy


Definite and clear stipulations


Fair and equitable requirements


Easy to use format


Legal enforceability

What are design specifications?

Details method, materials, etc.


Owner warrants by implication that the specs will produce the desired results if they are followed by the contractor.


Contractor not liable if turns out badly.

What are performance specifications?

Stipulates results of finished product rather than methods and materials.


Responsibility for design rests with the contractor

What are performance and design specifications?

Contractor is told how to do a task and then told to warrant that the results will be satisfactory.




Not a good type of spec because it's unenforceable.

What are closed specifications?

Private sector only; i.e. gives specific manufacturer and model.


Public works contracts must specify at least three.

What are open specifications?

Give variety of choices to contractor.

What are "or equal" specifications?

Closed spec followed by words or equal.




Better wording is "or approved equal," which lets architect decide if it's is acceptable.

What are all-inclusive specifications?

Spec with vague wording like "as directed by architect"

What are reference specifications?

References standard like ANSI; often set up standard procedure and specific quality.

What are standard specifications?

Developed by owner for all similar projects.

What are the obligations of the contractor during the construction period?

Submittals (shop drawings, materials samples, etc.) Must meet specifications.


Operating/maintenance manuals


As-built drawings



Who is responsible if the architect approves a contractor's substitution, but it doesn't meet the specifications?

Usually the contractor, who is required to insure that submittals meet the standards of the specs.

What terms should be covered in a construction contract?

Principals (owner, owner's rep, contractor)


Scope of work


Completion date plus time-based penalties/bonuses


How payments will be made

What are the three types of construction contracts?

unit price


cost plus


lump sum

What is a unit price contract?

bid lists prices based on units of work instead of per item (i.e. 200 units of concrete instead of 1 sidewalk). Usually for civil work

What is unbalancing the bid?

Pricing items earlier in the construction phase a little higher. The overall cost remains the same but the contractor gets more money at the beginning.

What are cost plus contracts?

Overhead and profit are a percentage of the costs.


Owner has little idea what final cost will be; must monitor contractor to follow his progress.

What are lump sum contracts?

Most common.


Contractor gets one price for whole project.


Plans must be complete before contractor can bid.

Does an owner have right to make unilateral changes to contract?

No. They are called "extras" and must be agreed upon by all parties to contract.

What does the changes clause in a contract say?

Owner has right to make changes


Contractor must perform work


Change must be in written form and signed


Predetermined method for increasing price and/or duration of contract.

What is a change order?

Change directed by owner with a directive for contractor to perform.


Essentially a mini-contract for a specific piece of work.


Must be within general scope of original contract.

What is a change proposal?

Suggestion for a change that has not yet become a change order.

What is a field change?

A change that does not affect contract price or timing.


Do not require direct owner approval.

What is a cardinal change?

Change outside of general scope of original contract.


Contractor is not obligated to agree to perform cardinal change.

What is required for the contractor to get extra payment for a change?

That the change order be made in writing by the owner.

What is the difference between extra work and additional work?

Extra work goes beyond original drawings and specs.


Additional work is work that must be undertaken to meet contract requirements.

Under what circumstances does a contractor get paid for additional work?

If the change should not have been anticipated, was not open to observation, and could not be discovered until work had begun

Who is authorized to issue a change order?

Owner. The architect is not usually entitled to issue it on his own.

What are changed conditions?

Conditions of site are different that described.

What is most common cause of changed conditions?

Subsurface conditions, such as high water table, unstable foundation materials, rock where softer materials were expected, and undisclosed utility lines.

Who is responsible for how the site conditions are represented in the contract?

The designer, during site analysis.

What is a prebid site investigation?

Contractor is encouraged to visit site prior to submitting a bid.

How is the construction duration determined?

Either by total number or working days, or with a specific deadline.

When does a contractor submit a schedule of work?

After award of contract and prior to starting work. Usually before the preconstruction conference.

What forms does the schedule of work take?

A progress schedule or critical path schedule.

What is a controlling item?

The item which must be completed either partially or completely to permit continuation of progress.

What is a preconstruction conference?

Contractor, owner, various government officials meet to discuss anticipated potential issues of construction.

What days are excluded from working day contracts?

Saturdays, Sunday, holidays, and days on which weather conditions delay construction. Also if any condition over which the contractor has no control causes suspension of work.

When is work on Saturday generally allowed?

When it's a makeup day, where the contractor is making up lost time.

When can a contractor begin work on a project?

Only after he has received a written "notice to proceed" or "letter of intent" from the owner.

What part of the contract deals with the damages the owner will receive if the contractor does not finish on time?

The liquidated damages provision. It states the amount per day the contractor will lose.

Are liquidated damages a penalty?

No. It is a representation of the costs incurred by the owner for a late project completion.

What are the three types of construction delays?

Delays caused by contractor or contractor's agents


Delays caused by owner or owner's agents


Delays caused by force majeure of acts of God.

Can the owner fire the contractor because of delays?

Yes, but it's a very drastic measure. There must be many rounds of notifications and warnings first.

Can a contractor fire the owner for owner-caused delays?

Only if it is a delay in making a payment.

If a contractor is granted an extension of time for circumstances beyond his control, will he also get monetary damages?

Not usually, unless there has been a change order.

Can an owner impose a penalty for lateness in addition to liquidated damages?

Yes. It's a penalty if it's an amount greater that the anticipated costs to owner due to delay could possibly be.

How enforceable are penalty provisions?

Usually not unless there is also a bonus clause (paying the contractor extra per day of early completion)

What is a no-damage-for-delay clause?

States that the contractor cannot get any payment from the owner for delays, even if they're the owner's fault.

What delays are exempt from the no-damage-for-delay clause?

Delays not contemplated (act of god)


Active interference from owner


Delays of unreasonable duration


Fraud or bad faith

What is acceleration?

Either actual (i.e. owner orders contractor to hire more workers) or constructive (i.e. owner's refusal to give time extensions for excusable delay).

When must the contractor make notices of delays, changes, and work suspensions?

Promptly. And no claims may be made after the final payment has been accepted.

What is a suspension of work clause?

Addresses contractor's ability to get damages associated with owner suspensions. Usually allows contractor to recover costs, but not to profit from suspensions.

What are the two types of termination of construction clauses?

Default of contractor clause


Termination for convenience of owner clause





What is a termination for convenience clause?

Allows contractor to recover costs incurred for work completed up to the point of termination.



What is a termination for default clause?

Lists conditions under which owner will terminate contract and make a claim against contractor for damages.


Contractor must be given notice prior to termination and usually has about 10 days to try to fix the situation.

What is substantial completion and who determines it?

Project is less than fully complete but owner can occupy it.


Determined by designer.

Will liquidated damages be assessed if a job is only substantially complete by the project deadline?

No.

What payment is made at substantial completion?

Last periodic payment to contractor.

How much is the retainage and when is it released?

5-10%, and only upon final completion.

What is a punch list?

Minor work items that must be addressed before the project is acceptable to the owner.


Developed on joint visit between contractor and designer.

What is the ripple effect?

The cost impact of change or delay on one work item is not limited to that item but has an effect on various portions of the project.

When are payments generally made in the construction industry?

Monthly.


The cost of the construction is so high, the contractor could never finance it himself to completion.

What are periodic progress payments?

The monthly payments the contractor receives. These must be defined contractually.

How are payments made in unit-price contracts?

Based on precise measurement of in-place field quantities.


Designer must verify measurements and approve payment.

How are payments made in cost-plus contracts?

Contractor is reimbursed for direct expenditures, plus an allowance for profit and overhead.


Again, must be approved by designer.

How are payments made in lump sum contracts?

Based on the schedule of values submitted by the contractor at the beginning of the project, which gives a cost breakdown of all work items.


After schedule of values has been accepted, payments are simply based on which items have been performed.

What is the order of the end phase of construction

Major work items completed


Punch list prepared


Project considered substantially complete/owner may occupy/warranty begins/time of completion is marked/liens may now be filed/last periodic payment is requested.


Punch list items addressed


Final inspection conducted


Final completion defined


Project is accepted


Release of retainage is requested


Final payment is made

What is retainage?

5-10% of total cost


Kept till end as incentive for contractor to finish properly and promptly


Should never be released prior to final completion

If the contractor defaults, who gets the retainage?

The surety because they are now the one responsible for completing the job.

How are subcontractor progress payments made?

When work is done, designer has approved it, and owner has paid the contractor in full for it.

What is a warranty?

Certification than an aspect of the contract is in fact as it was promised to be.


Often asked of manufacturers.


Warranty usually valid for a specific time period.

What is a maintenance bond?

Guarantee contractor will repair defects within specified time of completion of construction.


Usually 1 year.

What is an express warranty?

Stated in contract that general contractor guarantees work is performed according to stated standards.


Contractor's responsibility includes work of subs and quality of materials used.


If material warranty ends before contractor's warranty, he is liable.

When does warranty begin?

Either at substantial completion or at final completion.

What is implied warranty?

No stated warranty in contract, however, contractor has implied responsibility to provide the owner with a facility that complies with the plans and specifications. Any other problems are the fault of the designer.

Does acceptance of the contractor's shop drawings release the contractor from responsibility?

No, unless the owner was fully aware the shop drawings altered the original plans.

If the owner/designer accepts the contractors work, is the contractor relieved of responsibility for later problems?

Yes, for defects that should have been detected during a reasonable inspection.




No, for hidden defects, which remain the contractor's fault.

Does a building inspector's approval relieve the contractor of responsibility?

No.