Ministry of Transport
Ethiopian Roads Authority
1
URRAP-Training of Trainers for Contractors
and Coordinators
Contract Management and Administration
Tsegaye Borse(ERA)
(BSc. CoTM)
DAY 4- Tuesday August 06, 2013
2
Outline of the Presentation
A.
Introduction
–
–
B.
Contract and its Legal Framework
–
–
–
C.
Results of Neglected Contract Management
Learning Objectives
Definition of Contract and its nature
Primary Ingredients of Contract
So why do we need a written contract??
Project Delivery System, Contract Types
and Construction Risk
–
–
Types of Project Delivery System
Contract Types
Outline of the Presentation….cont’d
3
–
D.
Types of Risk in Construction Contracting
Contract Management and Administration
–
–
–
–
–
–
What do you mean by Contract Management and
Administration
Main tasks of Contract Management
What effective contract Management accomplishes??
Primary Roles and obligations of the Parties to the
Construction Contract
Types of Standard Conditions of Contract
Communications
Outline of the Presentation….cont’d
4
E.
F.
Claims Management and Dispute Resolution
–
Typical Claims Against the Owner
–
Typical Claims Against the Contractor
–
Likely source of construction Delay and Disruption
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Claims Analysis
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Claims Prevention Suggestions
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Dispute Resolution Mechanisms
Discussion Points and Feedbacks
–
Selected Contractual Issues
A.Introduction
5
–
Results of Neglected Contract Management
–
Learning Objectives
Introduction…..cont’d
6

Results of Neglected Contract Management
–
–
–
–
–
End user frustration because of poor contract performance
in timeliness & quality
Lack of contractor accountability
Implementing Agency acceptance of poor quality
Increased costs; and
Under or overpayment to a contractor
Keep the End in Mind at the Beginning!!!
Introduction…..cont’d
7

Learning O bjectives
–
–
–
–
–
–
Understand about Contract and contract management
Understand roles and responsibilities of parties under
General Conditions of Contract
Role, Relationships, expectations and communications
between the owner, design, contractor and supplier teams
Understand Contract types and Delivery systems
Construction Risk
Brain storming about claims and Dispute
8
B. Contract and its Legal Framework
─
Definition of Contract and its nature
─
Primary Ingredients of Contract
─
So why do we need written contract??
9
Contract and its Legal Framework…cont’d

Definition of Contract and its nature
–
A contract is a legally binding agreement between the
parties(t w o or more) identified in the agreement to fulfil
all the terms and conditions outlined in the agreement.
–
All construction is done within a contract except that is
done by a person for himself.
A contract determines the actions of the parties in their
dealings with each other. The parties to a contract are
bound to each other for a certain period of time by a
unique and exclusive relationship (pri vity of contract)
they have created for their mutual benefit.
–
10
Contract and its Legal Framework…cont’d
–
This contractual relationship persists until the contract is
discharged or terminated (because of impossibility,
agreement, bankruptcy, or breach of contract).
–
It is important that the construction contract, whatever
form it may take, accurately documents a “meeting of
the minds”; states clearly the roles and responsibilities
of the parties without overlaps or voids; and aims
squarely at achieving a quality project.
11
Contract and its Legal Framework…cont’d

Primary Ingredients of Contract
–
–
–
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–
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Mutual Agreement and Genuine Intention
Offer and Acceptance
Capacity to Contract
Consideration in a Contract
Lawful Object of a Contract
Contract Time
Contract and its Legal Framework…cont’d
12

Mutual Agreement and Genuine Intention
–
–
–
Mutual agreement is the fundamental and mutual
consent which is normally expressed by the parties to
a contract in the offer originally made by one, which
then is accepted by other.
Sometimes the acceptance of an offer may be
unspoken and indicated or accepted by an action,
rather than by actual words.
A contract may be defined as a promise enforcea ble
by la w, and there must be genuine intention on the
parties to take on obligations agreed in the contract.
Contract and its Legal Framework…cont’d
13

Offer and Acceptance
–
Offer and acceptance of the offer are natural
expressions of mutual agreement. As such, both the
offer and the acceptance must be identical to their
sub stance.
–
When an offer is made it should be accepted without
qualification. No change to an offer should be made in
the acceptance, and what is offered should be
accepted as it is offered. Otherwise, the offer should
be refused, and, if required, notice may then be given
that a different kind of offer is sought.
Contract and its Legal Framework…cont’d
14
–
An offer may be withdrawn at any time prior to its
acceptance.
–
Mutual agreement must be based on free assent
without duress or undue influence, so that there is a
real meeting of the minds of the parties. Anything less
than this may result in an invalid contract.
–
Once an offer is accepted, however, the offer cannot be
withdrawn because it has been changed by its
acceptance into a contract.
The primary purpose of a bid bond/security is to
guarantee the owner that the bidder whose bid he
accepts will enter into and perform the contract.
–
Contract and its Legal Framework…cont’d
15

Capacity to Contract
–
Capacity refers to the competency to make valid and
enforcea b le contracts.
A citizen who is
Not under the age of majority
– Sane, and not a drunkard
– Not under legal restraint
– Not restricted by his or her occupation or profession
has the greatest possible freedom to enter into and
make contracts
–
Contract and its Legal Framework…cont’d
16

Considerations in a Contract
–
–
–
–
Consideration is something of value given by one
party in a contract to the second party in exchange for
something else.
A contract is an agreement with consideration.
In contract law, consideration can be anything of value
and the law usually is not concerned with the amount of
value. Its sufficiency is a matter for the parties to bar
gain over and agree to.
Consideration can be a promise not to do something
such that the result will be of value to the other party.
Contract and its Legal Framework…cont’d
17

Lawful object of a Contract
–
–
The object of a contract must be lawful, for the law will
not enforce a contract for an illicit purpose.
It is more probable to see illegal work done under a
contract’s change order, because changes are not always
subjected to the same official scrutiny as the work originally
proposed and shown in the contract documents, and it is
possible that a change could be made to do construction
work that would be illegal (e.g. increase room’s seating
capacity beyond its legal limit).
Contract and its Legal Framework…cont’d
18

Contract Time
–
Time is the scarcest of all construction resources (capital,
labor, material, equipment, etc.).
–
Contract time affects contract sum since most costs
depend on time (e.g. costs of labor, equipment use, and
overhead costs).
Contract and its Legal Framework…cont’d
19

So why do we need a written contract??
–
–
–
–
–
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Basic lack of trust
Clearly establishes the risks and obligations of each
party
Provides means by which performance can be
assessed and measured
Provides means by which breaches can be identified
Provides means by which default can be established
Establishes the owner’s means of control
Establishes the contractor’s scope of work
20
Contract and its Legal Framework…cont’d
Discharge of a Contract:
– Contracts are said to be discharged when the
contracting parties are released form their contractual
obligations.
– Once the contract is discharged, the parties are no
longer bounded by its terms although the discharge
itself may result in enforceable rights.
– In general, there are four ways in which a contract may
be discharged:
Contract and its Legal Framework…cont’d
21
1.
2.
Performance
– parties have performed all their respective obligations,
as for example, when the contractor has carried out the
work fully in accordance with the contract and when the
employer has paid all amounts due to the contractor.
Frustration
– where the parties are unable to perform their
obligations owing to events outside their control,
force majeure; but contracts are not frustrated if there
become too difficult or too expensive to perform.
Contract and its Legal Framework…cont’d
22
3.
4.
Breach
– where one party fails to perform his contractual
obligations.
Agreement
– where both parties agree to terminate the contract
before complete performance.
23
C. Project Delivery System, Contract Types and
Risk
–
Types of Project Delivery System
–
Contract Types
–
Types of Risk in Construction Contracting
Project Delivery System, Contract Types and
Risk….Cont’d
24

Types of Project Delivery System
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Owner-provided delivery
Traditional Design Bid-Build
Construction Management
Design-Build
Design-Build variations
Fast Tracking
Project Delivery System, Contract Types and
Risk….Cont’d
25
–
–
Owners, designers, and contractors make the
decisions, provide the services, and perform the work to
deliver constructed projects. These activities are known
collectively as project delivery.
The generic term “project delivery system” describes
how the participants are organized to interact,
transforming the owner’s project goals and objectives
into a finished facility.
26
Project Delivery System, Contract Types and Risk….Cont’d

Types of Project Delivery System
Owner-provided delivery/Force Account

–
Mostly applicable to projects where the scope of the
work is within the owner’s range of skills,
experience, and resources.
–
Owners perform some or all of the design services and
construction work themselves.
–
E.g. simple modifications to an existing facility, projects
with limited cost or complexity,
repetitive
projects.
27
Project Delivery System, Contract Types and Risk….Cont’d

Traditional Design Bid Build
–
–
For many years, DBB has been the most common
method of project delivery for public projects, and for
many private projects as well.
Design Bid-Build is effective on projects


–
where the owner needs both professional design services and
construction services
where the designer does not require detailed knowledge of the
means and methods of construction.
DBB provides the owner with a high degree of control
and the most preferred project delivery system.
28
Project Delivery System, Contract Types and Risk….Cont’d

Construction Management
–
–
Many owners engage construction managers (CMs) to
assist in developing bid documents and overseeing project
construction.
CM:


Is a professional or a firm trained in the management of construction
processes.
Is generally interposed between the owner and some or all of the other
participants.
29
Project Delivery System, Contract Types and Risk….Cont’d

Design Build
–
–
–
Design-build provides the owner with a single point of
contact for project responsibilities, eliminating the need
to assist in resolving designer-contractor disputes.
With the contractor playing a major role in design, costs
are typically defined and maintained to a greater
degree, and the coordination of fast-track
management to achieve early completion is greatly
simplified.
The design-builder makes many decisions that owner
would make under DBB, due to delegation of greatly
increased authority
30
Project Delivery System, Contract Types and Risk….Cont’d

Design Build variations
–
–
–
–
Funding Option variations
Turnkey
Developer Financed Projects
Turnkey V ariations
31
Project Delivery System, Contract Types and Risk….Cont’d

Funding Option variations
– Private capital and developer participation offer private
owners several variations on design-build.
– Lease-develop-operate arrangement: The owner
gives a private operator a long-term lease to use,
operate, and expand an existing facility.
– Public-private
partnership or wrap around:
Ownership of or fiduciary responsibility for a project is
assigned to a private party. That party designs, builds,
and may even own, operate and maintain the new
facility.
32
Project Delivery System, Contract Types and Risk….Cont’d

Turnkey
– Turnkey adds to the design-builder’s responsibilities the
operation and/or maintenance of the completed
project.
– Turnkey delivery has the potential for bringing a new
project on line more quickly.
– Three forms of turnkey project delivery:



Design-build-operate-transfer
Design-build-operate-maintain
Design-build-own-operate-transfer
Project Delivery System, Contract Types and
Risk….Cont’d
33

Developer Financed Projects
–
For highly specialized projects and circumstances,
financing from a private or public developer or other
third parties can offer additional variations on designbuild and turnkey project delivery, each with new roles
for owners, designers, and contractors.
Project Delivery System, Contract Types and
Risk….Cont’d
34

Turnkey V ariations
– V ariations on turnkey add financing as a key
component. While financing arrangements are unique
for each project, developer financed projects generally
resemble one of the turnkey delivery methods:



FDBT (Finance, design, build, transfer)
FDBOT (Finance, design, build, operate, transfer)
FDBOOT (Finance, design, build ,own, operate, transfer)
In each case, the transfer of the project occurs only after the
developer’s interests and financial obligations have been
satisfied.
35
Project Delivery System, Contract Types and Risk….Cont’d

Fast Tracking
–
–
–
–
Fast-track approach compresses the schedule by se
quencing the start of construction on underlying project
elements (e.g. foundation, basic supporting structures)
before final design is complete for interior or adjacent
elements.
Fast-tracking is not a method of delivery, rather, it’s a
management strategy within delivery methods.
While often successful in achieving schedule reductions,
problems on fast-track contracts can create a domino
effect on follow-on contracts for the project.
Fast-track is more successful on projects that are
straightforward and have a high level of
predictability
36
Project Delivery System, Contract Types and Risk….Cont’d
The owner usually considers the following factors to
decide how project resources are to be organized:
− Past practices, traditions, and experience;
− The advice of consultants;
− Funding sources and constraints;
− The effective use of staff and working capital;
− The interests of other project stakeholders.
37
Project Delivery System, Contract Types and Risk….Cont’d

Contract Types
−
Competitive Bidding(Lump Sum, Unit Price)
−
Negotiated Cost-Plus(Various Types)
−
Combination(CM administered)
38
Project Delivery System, Contract Types and Risk….Cont’d
39
Project Delivery System, Contract Types and Risk….Cont’d

Lump-sum
−
−
−
−
−
−
−
−
−
One price for the whole contract
Lump sum includes costs plus overheads and profits
Higher risk to contractor
Price quoted is a guaranteed price as per contract
documents.
Payment based on a scheduled percentage scheme (monthly
progress claims)
The contractor is free to use means and methods to complete
the work and responsible for proper performance
Work must be well defined at bid time.
Low risk on the owner, Higher risk to the contractor
Cost known at outset
Project Delivery System, Contract Types and
Risk….Cont’d
40

Unit Price
−
−
−
−
−
−
−
Quote Rates / Prices by units
No total final price
Re-negotiate for rates if the quantity or work considerably
exceeds the initial target
Payment to contractor is based on the measure.
Unbalanced bids
Higher risk to owner
Ideal for work where quantities can not be accurately
established before construction starts
41
Project Delivery System, Contract Types and Risk….Cont’d
−
−
−
−
Require sufficient design definition to estimate quantities of
units
Contractors bid based on units of works
Time & cost risk (shared)
 Owner : at risk for total quantities
 Contractor : at risk for fixed unit price.
Large quantities changes (>15-25%) can lead to increase or
decrease of unit price.
42
Project Delivery System, Contract Types and Risk….Cont’d

Cost plus
−
−
−
−
Actual cost plus a negotiated reimbursement to cover overheads
and profit.
Compromise : guaranteed maximum price (GMP) reduces risk to
owner while maintain advantage of cost plus contract.
By using this type of contract the contractor can start work
without a clearly defined project scope, since all costs will be
reimbursed and a profit guaranteed.
In this type of contract the contractor is reimbursed at cost with
an agreed-upon fee up to the GMP, which is essentially a
cap; beyond this point the contractor is responsible for covering
any additional costs within the original project scope
43
Project Delivery System, Contract Types and Risk….Cont’d
Types of Construction Risks
−
Legal Risk
−
Associated with drafting of the construction contract
and documentation
−
Dispute Risk
−
Without a detailed understanding of the terms and
conditions of contract
−
Design Risk
−
Defective and deficient drawing and specifications.
−
Design risk is proportional to the time which is made
available to produce the design documentation and
sufficient time to establish the client need
44
Project Delivery System, Contract Types and Risk….Cont’d
−
Buildability Risk
−
Ease of convertibility of
specification into a built form
−
Procurement risk
Biddability risk
−
Related with the project delivery system chosen
−
The risk associated with bidders misinterpreting what
is often directly related to the quality of the tender
documentation and the time which has been made
available to prepare it.
−
Were there are omissions from the specifications and
drawings there is likely to be higher degree of
uncertainty as to the quality and quantity of work to
be undertaken, the bidder needs to make suitable
allowance in his contract price
−
the
drawings
and
45
Project Delivery System, Contract Types and Risk….Cont’d
Primary source of risk
−
By those who have construction obligations
−
By circumstances outside the control of controlling parties
−
By compliance with statutory obligations
46
D.Contract Management and Administration
–
What do you mean by Contract Management and
Administration
–
Main tasks of Contract Management
–
What effective contract Management accomplishes??
–
Primary Roles and obligations of the Parties to the
Construction Contract
–
Types of Standard Conditions of Contract(Emphasis on
MoWUD 1994)
47
Contract Management and Administration….cont’d
What do you mean by Contract Management and
Administration


Contract Management :
The art and science of managing a contractual agreement
throughout the contracting process.
− All activity that occurs in the contracting process
− Using procurement tools in the contract formation process to
develop specifications a contract that effectively addresses
the established contract objectives
− Within contract management there are two key; components
(Contract administration &Contract compliance)
−
48
Contract Management and Administration….cont’d

Contract Administration
−
Manages the contractual relationship with the contractor in
accordance with the contract specifications, scope of work
and performance requirements.
−
The management of all actions, after the award of a
contract, that must be taken to assure compliance with
contract
49
Contract Management and Administration….cont’d

Main tasks of Contract Management
−
−
−
−
−
−
−
−
−
−
−
Obtains commitments from subcontractors
Establishes a contract administration plan
Plans and conducts a pre performance conference
Monitors, measure and reports progress
Read and analyze the contract
Evaluate organization’s ability to comply
Function as focal point for internal support/team-members
Protect the financial interests of the organization
Manages contract changes
Resolves disputes
Ensures timely delivery
50
Contract Management and Administration….cont’d
−
−
−

Manages the invoice and payment process
Documents decisions and events
Closes out or terminates the contract
What effective contract Management accomplishes??
−
−
−
−
Serves customers by providing them with a controlled
effective job and good communications
Establishes clear expectations of both parties
Anticipates and handles disputes as they arise
Ensures compensation for the deliverables achieved.
51
Contract Management and Administration….cont’d

Primary Roles and obligations of the Parties to the
Construction Contract
STAKEHOLDER
Employer/Client/Owner
Contractor
Engineer/Designer/Supervisor
MAJOR ROLES/OBLIGATIONS
−
Make Payment
−
Give Possession of Site
−
Ensure Construction information is available timely
−
Perform Work in a workable manner
−
Deliver the Work on time
−
Abide by the Contract Conditions
−
Responsible for the project design
−
administers the contract and supervises the works
52
Contract Management and Administration….cont’d
General Rule
Contractor is Not Liable for:
Design
Contractor is Liable for:
Workmanship
Ensuring that works are fit for the Ensuring that materials are fit for
purpose for which they were purpose and free of defects
intended
Ensuring
that
specifications, Ensuring that all materials and
fulfill
the
instructions
and
design
are workmanship
appropriate for the purpose for specification, instructions and design
which the works are intended
53
Contract Management and Administration….cont’d
Types of Standard Conditions of Contract(Emphasis
on MoWUD 1994)

Widely used general conditions of the contracts include:
−
FIDIC, General Conditions of the Contract for Construction
−
Institute Of Civil Engineers (ICE), General Conditions of the Contract
for Construction
−
American Institute of Architects (AIA), A201- General Conditions of
the Contract for Construction.
−
The Engineers Joint Contract Documents Committee (EJCDC), C700 - Standard General Conditions of the Construction Contract.
−
NEC
−
PPPAA for domestic contracts- 2006
−
MoWUD 1994
54
Contract Management and Administration….cont’d
Ministry of Works and Urban Development (MoWUD)
DECEMBER 1994
55
Contract Management and Administration….cont’d
MoWUD GCC – Categorizations
−
−
−
−
−
−
−
−
−
Definitions and Interpretations [Clause 1]
Engineer and Engineer’s Representative [Cl 2]
Assignment and Subletting [Cl 3-4]
Contract Documents [Cl 5-7]
General Obligations [Cl 8-33]
Labour [Cl 34-35]
Materials and Workmanship and Tests [Cl 36-40]
Commencement Time and Delays [Cl 41-48]
Maintenance and Defects [Cl 49-50]
56
Contract Management and Administration….cont’d
−
−
−
−
−
−
−
−
−
−
−
Alterations, Additions, and Omissions [Cl 51-54]
Measurement [Cl 55-57]
Provisional Sums [Cl 58]
Nominated Subcontractor [Cl 59]
Certificates and Payments [Cl 60-62]
Remedies and Powers [Cl 63-64]
Special Risks [Cl 65]
Frustration [Cl 66]
Settlement of Disputes [Cl 67]
Notices [Cl 68]
Default of Employer [Cl 69]
57
Contract Management and Administration….cont’d
−
−
Changes in Costs and Legislation [Cl 70]
Other Matters [Cl 71-75]
58
Contract Management and Administration….cont’d
CoPA, Sub-Clause 5 – Priority of Contract Document
−
−
−
−
−
−
−
The Contract Agreement
Appendix to contract and Addendum (if any)
Condition of particular Application part II
Standard condition of contract for construction of Civil Works
projects. (MoWUD Dec, 1994 part)
Technical Specification special provision
The standard specification (if any)
Other documents, as listed in the Appendix to contract.
59
Contract Management and Administration….cont’d
Sub-Clause 8 – Contractor General Obligations
−
−
−
Contractor to execute and maintain the Works and provide all
labour (including the supervision), materials, Plant/machineries,
etc … subject to the provision of the contract … the necessity of
which is specified in the contract or reasonably inferred
from the contract (c25)
Full Responsibility for the adequacy, stability, and safety of all
site operations and methods of construction
Contractor Shall inform the employer/engineer of any error,
omission, fault, & other defects in the design of or
specification which are discovered when reviewing the contract
documents or in the process of execution of the Works
60
Contract Management and Administration….cont’d
Sub-Clause 10 – Performance Bond
−
−
−
−
Letter of acceptance  within 30 days performance bond in
the sum of 10% of CP
Reduced to 5% at the completion of works
for the due & proper performance of the contract and
observance of all provisions, conditions, & stipulations
Bond shall not be released until the employer has given a
certificate in writing that all outstanding matters in dispute
b/n the employer & the contractor have been settled
CoPA: Without limitation to the provisions of the preceding paragraph, whenever the Engineer determines an
addition to the Contract Price as a result of a change in cost and /or legislation or as a result of a
variation amounting to not more than 25 percent of the portion of the Contract Price payable, the Contractor, at
the Engineer's written request, shall promptly increase the value of the performance security by an equal
percentage
61
Contract Management and Administration….cont’d
Sub-Clause 11 – Site Inspection
− Contractor deemed to inspected & examined the site & its
surroundings & to have satisfied himself as to all
− matters necessary for the due performance of the contract
including, risks, contingencies, & all other circumstances
which may influence his tender
− Form & nature of the site
− Geological, hydrological subsurface & climatic conditions
− Details, locations & levels of all existing & projected utilities &
services / above and below ground/
− Nature & carrying capacities of existing & projected roads
− The extent & nature of the work, materials, labour, and all
things necessary for the completion of the works, etc
62
Contract Management and Administration….cont’d
CoPA: Whenever an Opinion is made available to the
Contractor in respect of any data provided to the Contractor
by Employer, the Contractor shall be solely responsible for
ascertaining the correctness of such Opinion and the
Employer shall in no manner be liable in this regard.
−
In particular and without limiting the generality of the
aforesaid, the Contractor shall not rely upon such opinion
or interpretation for any claim with respect to additional
time or cost under the Contract
63
Contract Management and Administration….cont’d
Sub-Clause 12 – Sufficiency of Tender
− Contractor deemed to have satisfied himself as to:
− the correctness & sufficiency of his tenders for the works, of
the rates & prices stated in the priced BoQ …
− Rates & prices shall cover all the obligations under the
contract, all matters and things necessary for the proper
execution & maintenance of the works
− but if the contractor encounters,
− Physical conditions other than climatic conditions
− Artificial obstructions
− which conditions and obstructions could not have been
reasonably foreseen by an experienced contractor (in the
opinion of the eng)
64
Contract Management and Administration….cont’d
Engineer to certify and employer to pay: the additional cost to
which the contractor incurred by the reason of such conditions
including the proper & reasonable cost of complying with
any instruction of the engineer proper & reasonable
measures to be taken
Sub-Clause 13 – Work to be to the satisfaction of the
Engineer
− “save in so far as it is legally & physically impossible”
− Contractor to execute & maintain the works in strict
accordance with the contract – to the satisfaction of the
engineer
− Contractor to take instructions only from the engineer
(channels of communication) Core of contract
management
−
65
Contract Management and Administration….cont’d
−
Contractor to comply with & adhere strictly to the
engineer’s instructions & directions on any matters whether
mentioned in the contract or not, touching or concerning the
works
Sub-Clause 14 – Program to be Furnished
Within 15 days of letter of acceptance
− To be revised at intervals of three months clause 46,
engineer to notify the contractor if rate of progress is to slow
to ensure timely completion of the works
i.e. to expedite progress so as to complete the works
−
66
Contract Management and Administration….cont’d
Sub-Clause 20 – Care of the Works
− Contractor
responsibility for care of works – from
commencement of works till completion of works
− Responsibility passed to the employer – from completion of
works till issue of maintenance certificate
− “save and except the EXEMPTED Risks defined”
− Any damage/loss or injury from excepted risks  cont may
repair & make good at the expense of the employer
− Exempted risks – war, hostilities, invasion, act of foreign
enemies, rebellion, revolution, military power, civil war, riot,
disorder (not contractors), use or occupation by the employer,
cause due to engineer’s design, ionizing radiations, pressure
waves --- or other forces of nature which an experienced cont
could not foresee
67
Contract Management and Administration….cont’d
Sub-Clause 40 – Suspension of works
−
−
−
−
−
Instruction to suspend any work/part of it contractor to
suspend the progress of the work
Such suspension will be contractor’s risk if:
provided in the contract or by the default of the contractor
for the proper execution of the works/ safety reasons (not
arisen from any act/default of the Eng/Emp – not exempted
risks)
Suspension lasting >90 days (no order to resume works) & if
not contractor’s risk contractor to require permission within
28days
68
Contract Management and Administration….cont’d
−
−
−
no permission contractor may treat the suspension as
Omission of the work – variation as per clause 51
abandonment of the contract by employer – if it affects the
whole of the works (clause 69)  28 days notice
mandatory
69
Contract Management and Administration….cont’d
Sub-Clause 44 – Extension of Time for Completion
a.
(amount of) extra or additional work of any kind
b.
any cause of delay referred to in the conditions
c.
exceptional adverse climatic conditions
d. other special circumstances of any kind whatsoever which
may occur other than through a default of the contractor
fairly entitle cont an EOT for completion of works
NB: (a) and (d) require notification within 28 days or as soon as
practicable – plus full & detailed particulars
−
any cause of delay  “if contractor suffers delay and/or
incurs cost ...” Ex: Sub clause 6(4) – delays of drawings,
42(1) – possession of the site, etc
70
Contract Management and Administration….cont’d
CoPA 44: "Neither rains falling within the rainy seasons as
occurs in the country, nor floods caused by such rains shall be
deemed exceptional weather conditions such as may fairly entitle
the Contractor to an extension of time for the completion of the
Work.
−
Similarly in respect of the provision of Clause 12 of these
Conditions, neither such rains nor such floods shall be
deemed to be adverse physical conditions;"
71
Contract Management and Administration….cont’d
Sub-Clause 48 – Certification of Completion of Works
−
Substantially completed project (passing satisfactory tests)
notice by Contractor to Engineer (accompanied by an
undertaking to finish any outstanding works)  Engineer to
issue the certificate or to give instructions specifying
works to be done (within 21 days)
−
If Engineer fails to certify within 21 days, default of the
Employer sub clause 69(1)b Employer refusing any
required approval to issue any such certificate
72
Contract Management and Administration….cont’d
Sub-Clause 51 – Alterations, additions and omission of works
a. Increase/ decrease in qty of any work included in the contract
b. Omissions of any such work
c. Changes in the character/quantity/kind of any such work
d. Change the levels, positions, lines & dimensions of any part
of the works
e. Execution of additional works of any kind necessary for the
completion of works
− No such variations shall invalidate/vitiate the contract
− Value of variations to be taken into account in ascertaining the
amount of the contract price
− Order to be in writing; if verbally, to be confirmed in writing
73
Contract Management and Administration….cont’d
Art. 3031 of the Civil Code – Alterations required by
Client. - 1. Rights of client
− The client may demand that alterations be made in the work
as originally planned where such alternations can technically
be made and are not such as to impair the solidity of the work.
Art. 3032. – 2. Effect
− The client may require a reduction in the price as originally
agreed where the alterations required by him reduce the
expenses of the contractor.
− The contractor may require an increase in the price and his
remuneration as originally agreed, where the alterations
required by the client increase his expenses, work or
liability.
74
Contract Management and Administration….cont’d
Art. 3033. – 3. Contractor refusing alteration
−
−
−
The contractor may refuse the alterations required by the
client where such alterations affect plans, schemes or other
documents on which the parties had agreed.
The contractor may also refuse the alterations where they are
of such a nature or importance that they constitute a work
absolutely different to the agreed work.
The work shall be deemed to be absolutely different to the
agreed work where it implies an alteration exceeding by
twenty per cent of the value at which the original work was
or could have been estimated.
75
Contract Management and Administration….cont’d
Sub-Clause 52 – Valuation of variation
− Rates & prices contained in the contract to be used
− if not appropriate, new rate to be agreed upon b/n the cont
and the eng failing to agree, by the eng (reasonable &
proper rates/prices having regard to circumstances)
− notice to be delivered ASAP by cont to claim extra payment or
a varied rate/price otherwise no inc/dec or adjustment be
− notice of intention to vary a rate/price  by the eng …
76
Contract Management and Administration….cont’d
Intention by the
engineer of the
variation
<30days
Cont to give a
varied rate to
the engineer
<15days
Engineer to give his
comments on the
varied rate
Engineer may forward the
rate for approval by MoWUD
CoPA…Employer
77
Contract Management and Administration….cont’d
Sub-Clause 52(3) &(5) – CP Adjustment/Claims
Variations exceeding 10% of CP

−
On certified completion of the whole of the works  if
the reduction/increase of the CP is greater that 10% of CP 
the amount of the CP shall be adjusted considering all
material & related factors including the contractor’s
site/general overhead cost of the contract!!
Arising from the aggregate effect of all variation orders & all
adjustments upon remeasurement of estimated quantities
Claims
−
−
Contractor to submit all claims for additional payment & of all
extra/additional order once every month; with particulars
Engineer to authorize payments notwithstanding the cont’s
failure to comply with condition.
78
Contract Management and Administration….cont’d
Sub-Clause 60– Monthly Payment
−
Every month to be submitted, comprising of:
−
quantities & value of executed permanent works
− value of materials on site intended to form part of the
permanent work together with supporting invoices
−
value of temporary works (if included in the BoQ)
− amounts reflecting any changes in cost (pursuant to clause
70)
− amounts approved in respect of day works
−
Employer to pay within 30 days of the date of eng
certificate
Subject to 10% (5%) retention – to all the above payments
79
Contract Management and Administration….cont’d
−
Eng may correct/modify/withhold any approved payments
from latter PCs – for mistakes made on PCs, works not
carried out to “his satisfaction”, damages on
materials/plants etc
80
Contract Management and Administration….cont’d
Sub-Clause 63– Default of the Contractor
− If the contractor becomes bankrupt, assigns the contract
without the consent of the employer, goes into
liquidation, etc OR
− If the engineer certifies to the employer that the cont (in his
opinion):
 Abandoned the contract
 Failed to commence works without reasonable excuse or
suspended the progress of works for 28 days (after notice)
 Failed to remove condemned materials for 28 days (after notice)
 Is not executing the works in accordance with the contract or is
persistently & flagrantly neglecting to carryout his obligations under
the contract
1.
81
Contract Management and Administration….cont’d
 Has sublet any part of the contract – to the detriment of good
workmanship or in defiance of the engineer’s instruction 
default
of
the
contractor

breach
of
the
contract…………..SEE
PORCEDUR
FOR
DECLARING DEFAULT
82
Contract Management and Administration….cont’d
enter upon the site & works
–
Employer to give 14 days
written notice
Employer
–
expels contractor from site
–
may himself complete or employ other cont
–
may use temporary works, plants to complete
May sell any of materials, plants, temporary
–
works  applying proceedings of sale, to the
–
Eng to fix, determine & certify:
–
–
satisfaction of any such sums due to him
–
Amounts reasonably earned or
accrue to the cont
–
–
value of unused or partially used
materials, plants, or temporary works
–
Eng to ascertain & certify payment:
–
cost of execution & maintenance
–
Damage for delay in completion
–
–
all expenses incurred by the employer
If the amount exceeds the sum payable
–
to the cont  cont to pay to the employer or
–
a debt by the cont to the employer & shall be
–
recoverable accordingly!!
–
If not  contractor entitled for the balance!!
–
83
Contract Management and Administration….cont’d
−
Employer
entry
&
expulsion

contractor
not
entitled/employer not liable to payment (any Money) on
account of the contract, until the expiration of the period
of Maintenance!!  withholding the money due to the
con if any!
84
Contract Management and Administration….cont’d
Sub-Clause 69– Default of the Employer
− Contractor entitled to terminate his employment under the
contract in the events of the employer (giving 30 days prior
notice)
− Fails to pay the contractor the amount due under any
certificate of the engineer within 30 days after the same
shall have become due.
− Interferes with or obstructing or refuses any required approval
to issue payment certificate, completion certificate,
work certificate, maintenance certificate
− Becomes bankrupt or goes in to liquidation …
− Gives a formal notice to the contractor that for unforeseen
reasons due to economic dislocation, it is impossible to
continue to meet his contractual obligations and for
convenience???
85
Contract Management and Administration….cont’d
Sub-Clause 71– Warranties in Respect of Defects
−
Unless otherwise provided, the Contractor shall be LIABLE to
the Employer for any defects of the construction of the works
DURING TEN YEARS FROM THE DAY ON WHICH THE
EMPLOYER HAS ENTERED INTO THE POSSESSION OF
THE WORKS
86
Contract Management and Administration….cont’d

Communications(Meetings in Construction)
−
−
−
−
−
−
−
−
−
−
Pre-construction Meetings:
Procedural Meeting:
Site Mobilization Meeting
Utility Coordination Meeting:
Authorities Having Jurisdiction (AHJs):
Progress Meetings
Contractor/Subcontractor Meetings:
Pre installation Meetings:
SAFETY Meetings:
Other Meetings:
87
Contract Management and Administration….cont’d
−
−
Closeout Meeting:
Pre default meeting
Preconstruction meetings are important for:−
−
Introducing the project team,
Establishing the ground rules for communication, and
explaining the administrative process. In many cases, a single
meeting is all that is required; however, large, complex, or
multiprime contractor projects may require more than one
meeting.
A procedural meeting:
−
may
cover
administrative
procedures,
such
as
communication, submittals, testing, and inspection. A
second mobilization meeting may address use of the site
88
Contract Management and Administration….cont’d
Site Mobilization Meeting
− Access to the site, such as construction entrance and
egress locations, including access roads, parking
restrictions, and security.
− Environmental controls such as silt fences, biobags,
inlet protection, temporary seeding and mulching, and
oil booms and containment systems when working over
or near water.
− Use of site and existing facilities by contractor and
owner, including access to buildings or areas, use of
elevators, and maintenance of fire exits. For public
infrastructure projects, this might involve traffic control,
detours, and barriers.
89
Contract Management and Administration….cont’d
−
−
−
Identification of benchmarks and data, including survey
and layout of work.
Occupancy and use by owner, tenants, and public
during the construction stage, including partial use and
occupancy of completed work, and the related
coordination of insurance requirements
Site mobilization meeting is a tool for laying effective
management of site by addressing pre construction
activities required by participants of the project.
Typically held at the site, this meeting concerns issues
about site use.
90
Contract Management and Administration….cont’d
Utility Coordination Meeting
− On a projects where significant utility relocation work is
required, it is prudent to have a utility coordination
meeting.
− This
meeting is usually held shortly after the
preconstruction meeting. Participants may include
representatives from the utility providers serving the
project.
− Identifying the best time for each utility provider to
perform their work
− Identifying the interface with other utility providers for work
that must occur concurrently
− Establishing how long each utility provider’s work will take
91
Contract Management and Administration….cont’d
−
−
−
−
−
−
Identifying the primary contact person
Establishing how much notification (lead time) each
utility provider will require to mobilize
Identifying whether there are related costs that have
not been identified
Determining or confirming who will do the locating work
for each utility provider
Identifying special inspection requirements.
Regardless of the project extent, a utility coordination
meeting might be required by utility providers as a
precondition of future connection to utilities.
92
Contract Management and Administration….cont’d
Pre-installation Meeting
− Ascertain access to the work
− Review
conditions of proper installation and
environmental conditions
− Identify conditions detrimental to the installation
− Review preparation procedures, including protection
of adjacent work
− Review
coordination with other work such as
substrates, connections, transitions, and existing and
surrounding conditions
− Evaluate delivery schedule and progress schedule
93
Contract Management and Administration….cont’d
Safety Meeting
− Several different types of safety meetings may occur on
a project. Contractors hold weekly safety meetings,
at which the supervisors and workers gather before
start of shift and discuss a selected safety topic.
− Sometimes a contractor invites OSHA Consultative
Services to visit the project and do a safety
consultation.
94
Contract Management and Administration….cont’d
Closeout Meeting
− The closeout meeting is used to review requirements
for the completion of the contract and to obtain
submittal of the necessary final documents. Separate
meetings may be required for substantial
completion, final completion, and warranty
reviews.
− Many of the closeout documents are prepared during
construction, even though their submission is not
required until the project is nearing completion. These
documents might include record documents, O&M data,
manufacturer certification of installations, and interim
inspections and testing.
95
Contract Management and Administration….cont’d
−
−
−
−
−
−
−
−
Completion time for correcting defective work
Inspections by AHJs
Certificate of use or occupancy and transfer of
insurance responsibilities
Partial release of retainage
Final cleaning
Preparation for final inspection
Closeout submittals
Record documents
96
Contract Management and Administration….cont’d
Pre-default Meeting
−
The performance bond provides the most important
protection for the owner by guaranteeing that if the
contractor defaults, the surety will either complete the
contract in accordance with its terms or provide
sufficient funds, up to the penal amount of the bond, to
fund such completion.
97
E. Claims Management and Dispute Resolution
—
Typical Claims Against the Owner
—
Typical Claims Against the Contractor
—
Likely source of construction Delay and Disruption
—
Claims Analysis
—
Claims Prevention Suggestions
—
Dispute Resolution Mechanisms
98
Claims and Dispute Resolution….cont’d
Typical Claims Against the Owner

−
−
−
−
−
−
−
−
Poor project planning
Scope changes
Constructive change orders
Errors and omissions
Contract accelerations and stoppages
Site access or availability
Other construction interference and delays
Strikes and acts of God
99
Claims and Dispute Resolution….cont’d
Typical Claims Against the Contractor

−
−
−
−
Late completion - liquidated damages
Out of specification materials
Defective work
Property damage
100
Claims and Dispute Resolution….cont’d
Likely Sources of Construction Delay and Disruption

Excusable/Neutral Delay
Non-Excusable Delay
Delay or deferment in granting
Possession of Site
Late Mobilization & Commencement
Unforeseeable ground conditions
Shortage of Resources
Instructions (e.g. additional work,
opening up for inspection and testing)
Delayed Contractor ‘s design (e.g.
temporary works)
Variations or changes to work scope
Poor site co-ordination
Increase in Quantities
Price Fluctuation
Inaccurate quantities in contract BOQ
Delayed Geo-technical investigation by
the Contractor
101
Claims and Dispute Resolution….cont’d
Excusable/Neutral Delay
Non-Excusable Delay
Late/Poor design information by the
Engineer
Re-work and maintenance works
Suspension of Works by the
Engineer/Employer
Provision of Engineer’s Facilities
Delay caused by statutory bodies &
stakeholders
Improper Mgt. of Statutory obligations
– Traffic & Safety Mgt
Exceptionally adverse weather
conditions
Lack of Early Warning for delaying
events
Delay caused by Employer or his
representatives
Re-work and maintenance works
Civil commotion & Industrial action(e.g.
lock outs)
102
Claims and Dispute Resolution….cont’d
Claims Analysis

−
−
−
−
−
Brief of the case
Owner’s position
Contractor’s position
Analysis and evaluation
Recommendations
103
Claims and Dispute Resolution….cont’d
Claims Prevention Suggestions

−
−
−
Carefully analyze and consider exactly what you are
building and precisely how it will be built so the
contractor does not have to assume or guess about any
aspect of the job.
Complete the project design before the contract is
bid, and if some parts of the project cannot be
completely designed at bid stage, clearly identify them
and its possible impact.
Conduct a thorough review of the design prior to the
bid stage to identify and correct any design errors or
inadequacies.
104
Claims and Dispute Resolution….cont’d
−
−
−
−
Give bidders sufficient time to carry out a complete
review of the bid package and an investigation of the
construction site.
Allow enough construction time, remember in this
context, time is not money. Do not assume that
bidders will simply increase their bids to cover a short
schedule.
Identify with enough anticipation what type of contract
will best suite the project.
Think about every sentence included in the contract,
why it is there and whether it is necessary.
105
Claims and Dispute Resolution….cont’d
−
−
−
−
Draft for clarity, not confusion. Use standard list of
definitions, and always use the same defined word
consistently.
Clearly identify who will be responsible for material
delays.
Analyze all potential bidders before preparing a bid
slate.
Examine contractors’ prior contracting
experience, claims history, management capabilities
and financial ability.
Carefully analyze contractors’ technical proposal paying
particular attention to the proposed method of
construction and the planned number of manhours claimed necessary to execute the job.
106
Claims and Dispute Resolution….cont’d
−
−
−
Appreciate the contractors’ right to perform the
contract in any fashion he deems appropriate, as
long as the methods and results conform to
contractually specified standards.
Keep in mind that the owner has the obligation to
provide: a suitable construction site, accurate
plans and specifications, well-defined scope of
work, and inspection without interference.
Understand how many factors can affect a contract and
delay and disrupt the work. Cooperate to establish an
atmosphere of understanding and mutual respect.
107
Claims and Dispute Resolution….cont’d
−
−
−
−
Seriously question the contractors’ excessively low
bid.
If you are forced to accept a low-ball contractor,
anticipate a claim and work on it from the
beginning.
Be reasonable when analyzing the contractors’
complaints about changes and omissions. Negotiate
settlement as soon as possible and keep in mind that
the older the issue, the more difficult it will be to
settle.
Keep strict control of: progress reports, daily meetings,
schedule revisions, cost estimates, change orders and
their justifications, correspondence.
108
Claims and Dispute Resolution….cont’d
Dispute Resolution Mechanisms

−
−
−
−
−
Negotiation
Mediation
Dispute Review Boards
Arbitration
Litigation
109
Claims and Dispute Resolution….cont’d
Negotiation
−
−
−
−
Dispute resolution between the parties involving only
the parties
Casual(Conversations, emails, texts, phone calls)
Formal (Meetings, documentation, presentations)
Resolution (Regardless of how you got there:
Put it in writing)
110
Claims and Dispute Resolution….cont’d
Mediation:
−
−
−
−
Bringing in a respected, neutral, uninvolved person to
help everyone reach a mutually acceptable resolution
The mediator DOES NOT decide
Mediation may not resolve a dispute-The Parties decide
NOT binding until all parties accept
111
Claims and Dispute Resolution….cont’d
Dispute Review Boards
−
−
−
−
−
−
−
−
A contractually defined process
1 or 3 members – all are neutral:
Contractor nominated, Owner nominated
Those two appoint the 3rd neutral
But can be established any time the parties agree to do
so
Regular site visits
Conducts hearings
Dispute Review Board Decisions are binding until
reverted by arbitration
112
Claims and Dispute Resolution….cont’d
Arbitration
−
−
−
Arbitration is the submission of a dispute to one or more
impartial persons for a final and binding decision,
known as an "award."
Awards are made in writing and are generally final and
binding on the parties in the case.
The Final Decision is Final
Litigation
−
−
−
Public proceedings
Adjudicated by a judge
Difficulty in enforcing foreign judgments
113
Claims and Dispute Resolution….cont’d
1.
So now would you read the contract before signing?? and
what do you think is the benefit to do so??.
2.
As URRAP projects are supposed to be undertaken by
labour as stipulated under item 5 of the particular
instruction of the project except for certain activities.
However, most contractor are using equipment for all
activities which is a change of methodology.
3.
What kind of project delivery system do you think is
URRAP revealed?? What is the pros and cons of design
procedures in URRAP??
114
Claims and Dispute Resolution….cont’d
4.
What kind of project delivery system do you think is
URRAP revealed?? What is the pros and cons of design
procedure in URRAP??
5.
The BOQ in URRAP is rate only?? What difficulty did u
encounter so far?? Was the route selection by the
consultant have contribution?? Quantities for the work
items shall be determined on the working site
(project) of the mentioned Ana by the Engineer.
6.
If there is no quantity in the BOQ, was the rate revision
provision applicable?? If yes, what is the cut-off quantity?
115
End of Contract Management and Administration
End of the presentation
Thank you,
for your attention!