lOMoARcPSD|16826706 Construction Contracts and Specifications Civil Engineering (Cebu Institute of Technology – University) Studocu is not sponsored or endorsed by any college or university Downloaded by Raymond Rabara (xyz.rabara@gmail.com) lOMoARcPSD|16826706 Construction Project Contracts and Specifications Construction contract is simply an agreement between two or more parties to provide services in exchange for payment. Not much is needed to form a binding contract. Legally speaking, only 4 things are needed to form a valid construction contract: 1. 2. 3. 4. An offer Acceptance Consideration (i.e., money, or something of value) Legality (you can’t contract to break the law!) In the construction industry, one project can involve multiple different contracts. We refer to this as the contract chain. An owner will have a contract with a general contractor, a GC will then have a contract with a sub, a sub may have a contract with a material supplier, and so on down the chain. Construction contracts don’t need to be overly complicated documents. However, there should be enough detail to give both parties a clear picture of their agreement. A well-drafted contract should include all of the general project information, such as the “general conditions,” the parties involved, a general project timeline, a detailed scope of work, how substantial completion is defined, and more. Common Types of Construction Contracts: 1. Lump-Sum/Fixed Price Contracts - this is the simplest form of a construction contract. Under these types of agreements, the customer agrees to pay a specified amount for the completion of the work. A line-item cost breakdown isn’t required. 2. Cost-Plus Contracts - these contracts require that a contractor be reimbursed for all costs incurred on the project (costs). In addition to that, there is a certain percentage of those costs which constitute the contractor’s profits (plus). 3. Time & Materials Contracts - This is an agreement where the contractor is paid an hourly rate for labor, the actual cost of materials and equipment, and an additional amount to cover overhead and profit. 4. Unit Price Contracts - unit price contracts are an arrangement where the customer pays a fixed, agreed-upon amount for completion of each unit of work. Instead of pricing the entire project, the contractor is based on individual “chunks” of work. 5. Guaranteed Maximum Price (GMP) Contracts - This is a cost-type contract, where there is an agreed-upon limit to how much the customer will be obligated to pay. These types of contracts will typically include a contingency fund as a safety valve in case unforeseen costs increase the contract price. Construction specifications are a part of the construction contract. They detail the work, materials, and installation required to complete a project. The specs are a subcontractor’s field guide on what materials to use, how to install them, and the desired level of quality. Downloaded by Raymond Rabara (xyz.rabara@gmail.com) lOMoARcPSD|16826706 A thorough set of specifications can help everyone on the project reduce costs, wasted time, and disputes. The more information provided, the better the chance of work getting done correctly. As a result, correct work means fewer defects, which means fewer change orders which means fewer disputes over additional compensation. Furthermore, having a clear set of specifications divisions helps facilitate coordination and communication between all project participants. There will be a substantial decrease in the time spent on requests for substitutions or clarifications concerning materials or installation. Lastly, when provided in advance, a solid set of specs can lead to more accurate bids, resulting in fewer cost overruns. Types of Construction Contract Specifications: 1. Prescriptive Specifications - provide step-by-step details and instructions on how the types of materials to be used and the desired installation methods. 2. Performance Specifications - will provide all of the operations requirements to complete a project. Instead of giving detailed instructions on how to achieve the desired final product, performance specs will describe the anticipated result. This leaves a broad amount of discretion to decide how to perform, as long as the desired outcome is achieved. Accordingly, performance specs will invariably include extensive testing provisions to ensure that the project meets all the operational requirements. 3. Proprietary Specifications - these third types of specifications are the rarest of the breed. They are used when a specific type of product or material is required for installation. Typically, proprietary specs are used when doing renovations to an existing structure, and the client needs to match the improvements to the completed portion. Downloaded by Raymond Rabara (xyz.rabara@gmail.com)