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141 Cards in this Set

  • Front
  • Back

4 construction categories

1 - housing (private)

2 - building (non-residential, public and private)

3 - Engineering (civil works projects, public)

4 - industrial (private)

5 types of contracting procedures

1 - General Contract Method

2 - Separate Contracts Method

3 - Self-performance Method

4 - Design-build method

5 - Professional construction management

General contract method

- between owner and general contractor

- owner represented by firm (contract documents)


all the work is subcontracted out

Advantages of General Contract

- reduce cost for owner when contractor has unique skill set

- only method that gives owner a firm idea of final cost prior to construction phase

- clearly defined roles for each party

- owner minimizes contractual liability for cost overruns and late project delivery

Disadvantages of General Contract

- often extends project duration

- leads to tight bid and small profit margins

- incentive for general contractors to cut corners on performance

- inflexibility - high probability of claims for owner

Separate contract method

- multiple prime contracts method

- owner contracts directly to specialty contractors for various jobs

- appropriate if owner has in house capabilities to manage construction project

- owner keeps profit that would have gone to general contractor

When to use separate contract method

- availability of competent construction mgr

- where required specialty work is restricted to a few types of construction

- not widely used

Self-performance method

- force account work

- owner self-perform construction work/do work in house

- no written contract

- just the owner and workers

- owner as manager

- appropriate for projects small in scope, simple, ongoing and maintenance projects

- criticized when public owners decide to do projects by self-performance

Design- build method

- also called turnkey construction

- single contract for both design and build

- utilizes construction firms experience in design

- similar to general contract, except contractor responsible for design as well

- popular in large industrial projects

Advantages of design-build

- owners keep savings in public sector and share savings in private sector

- eliminate potential for being embroiled in disputes between design and construction firm

Fast- tracking

- the overlap of design and construction that can occur in design build projects

professional construction management

- owner hires firm with construction expertise

- on large complex projects

- permits flexibility for changing

Risks of professional construction management contract

- CM is responsible to the owner to complete project on time and budget

- similar to GC method

- firm enters contract prior to design completion


- dispute resolution in court between two parties of a contract


- based on tradition or accepted practice over an extended course of time

Executed contract

- when both parties to the agreement have fully performed their duties

Executory contract

- when some portion of the agreement remains undone

bilateral contract

- consists of an agreement created by mutual promises made by contracting parties

unilateral contract

one sided contract in that only one of the contracting parties makes a promise, the other party exchanges something other than a promise - most commonly some stated performance

unreality of consent

- a formal contract is made and there was no meeting of the minds


threats forcing consent to an agreement


something of value. primary reason for someone to enter a contract


- contract becomes binding in spite of the fact that no formal agreement was made between parties concerned

- result of a court action asserting that an agreement or contract exists, based largely on the behaviour or actions of the parties involved

Sovereign immunity

- the government entity cannot be sued without its consent

eminent domain

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

- also called condemnation

tract of land, usually consisting of a series of connected parcels of property, that is used for the operation of a highway or public utility

right of way

notice to owner/notice of intent to lien

initial notification to owner of lien

lien discharged in two ways

foreclosure or elimination

partial release of lien

lien rights for certain portion of the work that have been paid are officially released

stop notice

permits works or material suppliers to notify owners that a general contractor has failed to pay them

criticism of liens

- they are complex and take a long time to process

- inconsistent between states

- no guarantee of payment and are often useless

- severe means of collection if the debt is small

how to avoid liens

- owners can post a notice of nonresponsiblity

- no lien contract

- owner can require the contractor to furnish an affidavit that all the bills related to a project have been paid

- owner can demand to see receipts

- owner can require GC to pay the subs before he gets paid

- owner can keep retainage

Agency agreements vs contracts

similar in that they contain the same basic elements

agency agreements consist of

1. agent

2. principle

Agent is appointed to act for the principle and is authorized to...

do only what the principle wants

Acts agents cannot perform

- anything personal in nature

- anything illegal

- immoral acts

- acts opposed to public policy

agent is responsible for actions if

they are not authorized by the principle

independent contractor

agent relationship where the owner is not responsible for the actions of the agent but only specifies a required result

9 ways an agency is terminated

- death of principle or agent

- destruction of the subject matter for which the agency was formed

- occurrence of a specified event

- fulfillment of the particular purpose of the agency

- bankruptcy of either party

- exipiration of a time period set in the agreement

- development making subject matter illegal

- mutual consent

- unilateral termination by either party

Contingent liability

- under the rules of this, an injured third party is not or should not be affected by a contract between two other parties.

- it can sue the owner under the premise that the owner is jointly or wholly liable


firms owned by an individual

structure is whatever owner wants


association of two or more persons to carry on a business

- pays no income tax

- cannot own real property in its own name

- each partner assumes unlimited personal liabilty to third parties

limited partner

-contributes cash or property to the business and shares in the profits and losses

-provides no service and holds no vote

silent partner

remains unknown to the public

joint ventures

two or more construction firms join to build a project

advantages of joint ventures

- increase bond capacity

- gain familiarity with the local labor market be enlisting the services of a local firm

- increase capabilities

- pool equipment resources

- increase available capital


legal entity created to act as an individual while protecting the owners and stockholders of the firm

expulpatory provision

one party, typically the contractor, is asked to assume liability that would not otherwise be assumed

Strict interpretation

court tries to interpret the provision, as much as it can within reason, against the party that seeks protection under the provision

conditions must be met for a tort to occur

- one party owes a duty to another party

- the party does not conform to the standard (breach in performance of the duty)

- the second party is harmed by the act or failure to act

- there is a clear casual relationship between the act and the harm that results

6 examples of torts

- defamation of character through libel or slander

- unlawful entry onto another's premises

- unwarranted seizure, alteration, or destruction of another's property

- unauthorized use of another's patent, trademark, or copyrights

- violation of another's freedom through nuisance and negligance

- failure to exercise care in the exercise of one's duty to another

standard of care

conduct that is expected of someone acting in a given capacity


legally protected interest is overtly invaded or violated in some way

attractive nuisance

occurs when a child wanders on to a construction site due to curiosity and the owner may be liable

arrangment of the three parties in a surety bond

surety - the bond company obligated to perform or pay when principle doesn't perform

principle - general contractor whose performance is promised or guaranteed

obligee - owner who is promised the performance

lump sum projects are particularly vulnerable for the following reasons...

- prices can increase

- labor difficulties can arise

- subsurface conditions may be different than expected

- government policy may change, affecting the ability to borrow

bid bond as liquidated damages

owner will retain full amount of the bid bond when low bidder does not sign the contract and provide the required additional bonds

12 things typically in notice to bidders

- nature or type of project

- location of project

- type of contract for construction

- bonding requirements

- dates in which to perform work

- terms of payment

- estimated construction costs

- time, manner, and place to submit bids

- location to obtain bid documents

- deposit required on bid documents

- owners right to reject any and all bids

- requirements regarding wage rates

private sector advertisements for bids

- owner can choose a contractor by any means

- public advertising is frequently used to obtain the advantages of open and free competition

- owner can elect to negotiate with a particular contractor

- owner can create a select bidders list who are then asked to bid on the project

advantages of bid process

- owner benefits from competitive market place

- owner has appearance of being impartial

- process full embraces the fundamentals of free market

- may be only viable method for some government agencies

disadvantages of bid process

- accurate costs cannot be known until the design is completed

- bids that exceed owners budget cannot be readily accomodated

- various parties tend to be adversarial under this process

- errors or ommisions in the design may lead to costly change orders

value engineering

specific procedure

- critically analyze various aspects of contract documents in relations to owners objectives

- determine if alternate methods or materials might be more appropriate

typical instructions relative to the writing of bid


- bids must be submitted on forms provided

- erasures must be initialed by the signer

- all items in the bid schedule must be priced

- alternatives are not considered unless called for

- discrepancies between the unit price and the extended amount are discussed

- can the bid be mailed?

- can bid modifications be made?

- submission policy must be followed

12 rules to bidding

1 - follow instructions as in last card

2 - contractor MAY be required to submit an experience record

3 - instructions clearly list all documents part of the bid document

4 - construction time period spelled out

5 - instruction indicate who is responsible for geotech

6 - requirements of bid guarantee outlined

7 - insurance to be provided by contractor is stipulated

8 - bonding requirements given

9 - conditions for handling bid irregularites are stated

10 - where and when to deliver bids

11 - closed or public opening of the bids indicated

12 - a prebid conference MAY be described


modifications to the base bid

- consist of changes in structure of project, quality of material, inclusion of additional items, deletion of specified work items

- bidders are asked to state the changed amount due to the alternate

- gives owner more flexibility

10 common things on a bid form

- price (lump or unit)

- time of completion

- bid surety

- agreement to provide contract surety

- acknowledgement of having reviewed addenda

- list of subcontractors

- experience record

- declaration regarding fraud and collusion

- statement regarding site examination

- signature

notice to contractor may be called either

notice of award

- start date is usually specified here

notice to proceed

construction contract documents include....


1. construction agreement

2. drawings

3. general conditions

4. supplementary conditions

5. technical spec's

6. addenda

On public works projects the design ownership is assigned to the,...


On private works projects the design ownership is assigned to either the owner or designer in the....

contract you idiot

Project Manual consists of...


1 - bidding documents

2 - general conditions

3 - supplementary conditions

4 -technical specifications

Another name for General Conditions

Boiler Plate

General Conditions do the following...

establish the rights, authority and obligations of the contracting parties: the owner, the owner's representative, and the contractor

Supplementary conditions

more specific for the job being constructed

serve the function of amending and augmenting the general conditions and thus tend to be more specific

Specifications in the broader term of the contract....


1 - invitation to bid

2 - instruction to bidders

3 - general conditions

4 - supplementary conditions

5 - bid proposal form

6 - bid bond form

7 - contract bond form

8 - list of prevailing wages

9 - noncollusion affidavit

10 - technical specifications

stipulates ground rules for the work to be performed and defines the scope of work to be performed within the specification sections

General Spec's

describes the product or products and the development and manufacturing process to be used in producing them

Product Specs

Describes the preparation, workmanship, installation, erection, and application procedures to be employed along with quality requirements and performance criteria that must be satisfied

Execution Specs

This governs in the case of a conflict between plans and specs


in the case of a conflict between the plans and specs the conflict will be resolved by the....


Another names for Design specifications

method and materials specs

prescriptive specs

material and workshop specifications

Design Specifications

particular kind or type of material is to be used, a particular dimension is required, installation method given etc.

Performance spec

results or performance of finished product is specified

Performance and Design Spec

instructed how to do task and how it should perform

Closed Spec

requires a specific item or system - ensures only products of a particular type are used

Propreitary spec

states what is to be provided without any allowance for alternatives

multiple proprietary spec

models of more than one manufacturer are specified

Open specification

nonrestrictive in that they permit a wide variety of choices

Equal specification

proprietary spec with the words 'or equal' afterwards

approved equal

the more acceptable 'equal' specification

reference specification

make items, establish tests, or formal procedures a part of the contract documents be reference

the submittal procedure

- GC reviews contract docs and prepares submittals list

- Supplier, GC, Subs prepares submittals

- GC reviews submittals and submits to owners rep.

- GC notified of acceptable submittal

- GC notifies appropriate parties of submittal approval

3 types of construction CONTRACTS

1 - unit price

2 - cost plus

3 - lump sum

When unit price contracts are appropriate

- when project is fairly well defined

but actual quantities may be difficult or impossible to estimate with accuracy after construction has started

Balanced Bid

- anticipated costs for the various bid items are accurately reflected in the unit prices that are submitted

unbalanced bid

unit prices of the various bid items are altered so that they do not reflect the true cost of those items

payment in unit price contract

- usually contractor will request payments on the basis of measurements of in-place quantities

disadvantages of unit price

- owner is not certain of the actual cost of the project until the project is completed

- plans must be reasonably complete in order for the bidders to develop unit prices for all the bid items

cost plus contract

- owner is reimbursed for most of the direct expenditures related to the project plus an allowance for overhead and profit

positives of cost plus contract

contractor almost always assured of not losing money

when a cost plus contract is approppriate

- used when the actual costs of a project are difficult to estimate with accuracy

- plans may not be complete

- project cannot be accurately portrayed

- project could be needed to be complete within a fairly short time period and the plans and specs cannot be completed before construction starts

- almost exclusively in the private sector

disadvantages of cost plus contracts

- owner has little idea of what actual cost of project will be

- owner must maintain additional staff to monitor the progress of contractor

most simple and used contract in the construction industry

lump sum contract

payment in lump sum

contractor asked to break down the project into a variety of work items and to allocate the appropriate payment to be made for each item

advantages of lump sum

- plans are completed

- price is what it will be

- good for limited budgets

disadvantages of lump sum

- construction of project is delayed while plans are completed

- errors in plans will be costly because they result in extras

it is common for changes clauses to include the following items....


- owner has the right to make changes within the general scope of the contract

- contractor is obligated to perform the work necessitated by the change

- the change must be in written form and must be signed

- an adjustment to the contract price and/or contract duration will be assessed by some means, or can be predetermined

A change issued by the owner

change/change order

Can be authorized by personnel in the field without direct owner approval

field change

process of change order

- Owner issues modification

- GC reviews proposed change

- GC finalizes estimate for changes

- Owner evaluates price proposed

- owner issue form change order to the GC agreed price/cost-plus basis OR owner decides not to issue change order

Cardinal changes

changes that are not within the general scope of the original contract and are not covered in typical changes clauses

- considered a breach of the contract to force a contractor to perform

additional work must be from a change that...


- should not have been anticipated

- was not open to observation

- could not readily be discovered until work under the contract was undertaken

signatures on change orders

- owner

- architect

- contractor

calender days

every day that takes place

3 types of delay categories

- delays caused by the contractor or contractor's agents

- delays caused by the owner or the owner's agents

- delays caused by the force majeure or acts of god

only time a contractor can terminate a contract due to delays

- when the owner delays in issuing a certificate or a delay in making payments

no damage for delay clause

protects owner from paying any damages to contractor for delaying a project

actual acceleration

consists of a direct order by the owner to hire additional works, work overtime, or work extra shifts

constructive acceleration

does not result from a direct order but is construed as acceleration because of the owners refusal to grant time extensions for an excusable delay

punch list

correction of minor deficiencies

typical project completion phase


1 - major construction work items are completed

2 - punch list prepared

3 - substantial completion

- owner may occupy

- warranty for project begins

- time of completion marked

- time is marked for filing liens

- last periodic payment is requested

4 - punch list items addressed

5 - final inspection conducted

6 - final completion defined

7 - project accepted

8 - release of retainage requested

9 - final payment

typical subcontractor agreement provisions (3)

- subcontractors will be paid:

1 - after completion of the work

2 - after acceptance by architect/engineer

3 - after full payment of the work by the owner


an aspect of a contract is in fact as it was promised to be

maintenance bond

gaurantees that the contractor will rectify defects in workmanship or materials

- 1 year maintenance bond is normally included in the performance bond without additional charge

implied warranty

does not mean that the contractor guarantees that the completed project will be suitable for its intended purposes - rather


warning - buyer be aware


insurance companies can seek recovery from the third party at fault


payment or consideration for an insurance contract


money returned to clients with relatively low losses

three types of hold harmless agreements

1 - limited form indemnification

2 - intermediate form indemnification

3 - broad form indemnification

limited form indemnification

contractors negligence agreement, the owner is held harmless for claims caused by operations or negligence of the contractor or subcontractor

intermediate form indemnification

joint negligence, the owner is held harmless when both parties are negligent

broad form indemnification

owner is held harmless against all losses caused by or contributed by the owner, architect or othersc

certificate of insurance

means by which a contractor can demonstrate to the owner that specific forms of insurance have been obtained

claims clause

permits the contractor to present disputes to the owner without having to resort to litigation as a first step

- allows contractor to request additional compensation


occurs before conflict becomes larger

both parties calmly discuss an issue and listen carefully to eachother's comments


when negotiations fail and there is no contractual guidance for dispute resolution, the parties will find themselves in a lawsuit


oral testimony in court


voluntary approach to establishing teamwork among contracting parties

- disputes resolved at the lowest managerial level

disputes review board

generally consists of 3 individuals who meet whenever one of the contracting parties on a project desires a hearing on an issue of conflict