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Understanding Construction Documents
Module 2 – Construction Contracts
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• About the Instructor
• About the Sponsor
Understanding Construction Documents
• Seminar Discussion Forum
Understanding Construction Documents
Module #2 of 12
Module 2 of 12: Construction Contracts
Presented By:
Paul W. Just, III, RA, CSI, CCS, CCCA
Architect Paul Just, Inc.
Description:
Based upon the CSI Manual of Practice Construction
Documents, Fundamentals and Formats module, this
second of a dozen modules provides an overview of the
project delivery process and prepares candidates for the CSI
Construction Document Technology (CDT) Examination.
AIA/CES Info:
Provider #J624 - Course #AEC010 - LUs - 1; HWS - No;
Difficulty - Intermediate
State CEU Info:
Contact your respective State Department of Professional
Regulations
Expiration date:
April 15, 2005
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Understanding Construction Documents
Module #2 of 12
How to Use This Online Learning Course
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Read and review the material contained in this seminar.
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Understanding Construction Documents
Module #2 of 12
Learning Objectives
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At the end of this seminar, participants will be able to:
– Understand methods of contractor selection.
– Understand different Project Delivery Methods, including:
»
»
»
»
»
Single Prime or Multiple Prime;
Construction Management;
Project management;
Design - Build; and
Owner - Builder.
– Understand Competitive Bidding and Direct Selection
» Subcontractors;
» Material Suppliers.
– Understand Basis of Payment
» Stipulated Sum;
» Unit Price;
» Cost Plus Fee.
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Understanding Construction Documents
Module #2 of 12
What is the Contract (FF/040)
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An agreement between two or more parties representing a promise to be
performed for consideration; and
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Other documents which further explain the work to be performed.
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Slide 5 of 23
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Understanding Construction Documents
Module #2 of 12
Parts of the Contracts
•
Necessary Parts
– The parties of the contract, as identified in the Agreement by name.
– The parties make promises that constitute the offer.
– The parties agree to the terms and conditions by which they commit
themselves, by signing.
– Both parties receive consideration for their promise.
– The parties have the legal authority to negotiate.
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Slide 6 of 23
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Understanding Construction Documents
Module #2 of 12
Contractual Relationships
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Contractual Relationships Between Parties
– Agreement between owner and contractor is primary construction contract.
Architect has a third-party relationship with the Contractor.
– “Tripartite” relationship between owner, contractor, and design
professional (FF/040.2, Figure FF/CO-1).
– Secondary type of contract are the sub-contracts between the architect
and their consultants and the contractor and their sub-contractors.
– Contractor must ensure that subcontracts cover promises made in the
Owner - Contractor agreement.
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Understanding Construction Documents
Module #2 of 12
Contractual Relationships
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Contractual Relationships Between Parties.
– The Construction Agreement:
» Agreement is the written document signed by the owner and contractor;
» Agreement is legal instrument binding parties;
» Advantages of using standardized agreement forms.
Familiarity with the forms.
Recognized customs resulting from longtime use.
Legal precedents of interpretations.
Uniformity of terminology.
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Slide 8 of 23
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Understanding Construction Documents
Module #2 of 12
Contractual Relationships
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Contractual Relationships Between Parties.
– Conditions of the Contract for Construction:
» Defines basic rights, responsibilities, and relationships of parties involved in
construction process;
» Contains greater detail than the Agreement;
» Is only modified by the issuance of the Supplementary Conditions of the Contract.
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Slide 9 of 23
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Understanding Construction Documents
Module #2 of 12
Types of Construction Contracting
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Method of Contractor Selection.
– Competitive Bidding (FF/040.3, FIGURE FF/CO-2):
» Method Most Often Used;
» Publicly Funded Projects.
Owner generally is required to select lowest responsible bidder.
Open to any financially able bidder.
» Privately Funded Projects.
Owner may also consider qualifications, experience, financial condition, and
performance history.
Bids solicited ONLY from selected bidders at owner’s option.
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Understanding Construction Documents
Module #2 of 12
Types of Construction Contracting
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Method of Contractor Selection.
– Direct Selection or Negotiated Contract:
» Usually used for privately funded projects;
» Owner gets advice from Design Professional to select competent Contractor;
» Total price and payment method are negotiated between Owner and Contractor.
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Understanding Construction Documents
Module #2 of 12
Types of Construction Contracting
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Number of Contracts.
– Single Prime (Figure FF/CO-2); or
– Multiple Prime (Figure FF/CO-3).
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Contract Types.
– Construction Management (Figure FF/CO-4).
– Project Management.
– Design - Build (Figure FFF/CO-5).
– Owner - Builder (Figure FF/CO-6).
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Basis of Payment.
– Stipulated Sum.
– Unit Price.
– Cost Plus Fee.
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Slide 12 of 23
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
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Number of Contracts:
– Single Prime Contract (FF/040.3, Figure FF/CO-2).
» Most common form of construction contracting.
» Involves competitive bidding.
» Considered simplest type of Contract to administer.
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
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Number of Contracts:
– Multiple Prime Contracts (FF/040.6, Figure FF/CO-3).
» Work divided among several Prime Contractors.
» Frequently issued with phased or fast track construction.
» Separate set of documents may be developed for each Contract.
» Thorough coordination between Prime Contractors is more difficult.
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Slide 14 of 23
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
Contract Types
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Construction Management (CM) 9FF/040.6, Figure FF/CO-4).
– For either single or multiple prime contracts.
– CM hired by Owner to oversee and administer project.
– Usually the CM does not perform any of the Work, emphasis is on
oversight and administration of all work.
– CM may also be General Contractor.
– Owner’s agent may be involved in the project to coordinate with the CM.
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
Contract Types
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Project Management (PM).
– Similar to CM but includes coordination of design and planning stages.
– Used for both public and private projects.
– Used for complex projects to reduce the time required for design and
construction.
» Multiple Structures.
» Extensive Site Improvements.
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Slide 16 of 23
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
Contract Types
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Design-Build (DB) (FF/040.7, Figure FF/CO-6).
– Owner contracts with a single entity for design and construction.
– Typically provided by General Contractor in association with a Design
Professional, as a team.
– Also known as a “turnkey” project.
» Contract may be extended to include:
Selection;
Procurement; and
Installation of furnishings, furniture and equipment.
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
Contract Types
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Owner - Builder (OB) (FF/040.7, Figure FF/CO-6).
– Includes most large-scale project developers;
– Owner also serves as Contractor to build project;
– May sometimes include an in-house Design Professional; or
– OB may contract for design services only.
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Slide 18 of 23
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
Construction Subcontracting
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Between General Contractor and subcontractors.
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Includes material suppliers.
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References to Contract Documents compliment the written Agreement.
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Subcontractors perform designated/specific portions of work.
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Slide 19 of 23
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
Basis of Payment
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Stipulated Sum (or Lump Sum).
– Competitively Bid Projects:
» States cost by stipulated sum, a not-to-exceed amount;
» Simplest method of slating cost for the work.
– Direct Selection:
» Single amount for completing entire Contract, is the Agreement;
» Amount may be negotiated by the parties.
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
Basis of Payment
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Unit Price.
– Used where exact extent of work is unknown or cannot be fully
determined:
» Work may be divided into like items and approximate quantities shown or stated
for each unit price item;
» Unit prices can be used for both competitively bid and negotiated projects.
– Typical for civil engineering projects, underground work or where scope of
work is unknown.
– Bidders provide unit prices (per square foot, lineal foot, cubic yard, etc.) for
work which are used to calculate actual final cost:
» Contractor is paid according to unit price and quantities verified.
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Understanding Construction Documents
Module #2 of 12
Factors to Consider
Basis of Payment
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Cost-Plus Fee.
– Contractor is reimbursed by Owner for actual cost of labor & materials for
the Work, plus an additional fee (%) for overhead and profit.
– Can also include guaranteed maximum price with stipulation for fee
adjustment.
– May include shared savings for early completion.
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Understanding Construction Documents
Module #2 of 12
Conclusion of This Module
This Online Learning Seminar is
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Congratulations on your participation in this second of
12 Understanding Construction Documents Modules.
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