Construction Management & Engineering CIEG 467-013
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Construction Management & Engineering CIEG 467-013 Construction Management & Engineering CIEG 467-013 Method or System of Project Delivery • Traditional design-bid-build • Phased or Fast-track • Design-build Design Phase Bid Construction phase Traditional Design-Bid-Build Time Savin gs Design Phase Construction phase Phased or Fast-Track Construction ns i ngng i ne e ns i na na g e i e Lighting West Approach East Approach Bridge Deck Trusses/Framing Suspended Steel Main Cables Towers West Piers East Piers Test Piles Se a a ei a a g e s Anchorages e si g n a se ns i n a se a i a ese a a ens i nn a s S se nsi n i g e a se ns i n Construction Management & Engineering CIEG 467-013 Contract Types • Traditional vs. alternative • Classification by method of award and method of pricing • Model contracts have been developed by AIA, AGC, CEC, DBIA, CMAA, and Engineers Joint Contract Documents Committee (EJCDC) Construction Management & Engineering CIEG 467-013 Contract Types v Method of Award 1. Competitive bidding – formally advertised public work – selective invitation for private work – awarding of contracts by: • Lowest responsible bid or • Best value i.e.: technical score price or price + time(ft), and other variations Construction Management & Engineering CIEG 467-013 Contract Types v Method of Award 2. Negotiated contracts – Generally private work – Benefits include flexibility of pricing arrangement – Often used on projects of large size and great complexity – Owner may value expertise and integrity of a particular contractor and can award contract without competition that may otherwise exclude that contractor from the work Construction Management & Engineering CIEG 467-013 v Method of Pricing Fixed-price 1. Lump sum – Traditional, single fixed price – Predetermined price that includes profit, overhead, and all other costs – Greatest risk to contractor resulting in a higher markup (the greater the risk, the higher required rate of return ) – Most common contract form Construction Management & Engineering CIEG 467-013 v Method of Pricing Fixed-price 2. Unit-price contract – Prices of specified units of work are fixed or predetermined – Actual cost to the owner will vary with actual quantities placed – Best used when details and general character of the work are known, but quantities are subject to variation – Risk of unbalanced bids Construction Management & Engineering CIEG 467-013 v Method of Pricing Cost-plus • • • Contractor agrees to perform the work for a fixed or variable fee covering profit and home office costs (general overhead) Field costs are reimbursable at actual cost Used when: – nature of the work or physical conditions are unpredictable – scope is unknown or difficult to define Construction Management & Engineering CIEG 467-013 v Method of Pricing Cost-plus • • • • All cost-plus contracts depend on cooperation among A/E, owner, and contractor Record keeping and timely evaluation are extremely critical Detail record of labor hours and salaries, material and equipment must be maintained Good application for professional CM services Construction Management & Engineering CIEG 467-013 Types of Cost-plus Contracts 3. Cost plus fixed % – Fixed % based on portion or all of reimbursable costs – Used in construction involving new technology or extremely pressing needs – Owner assumes risk – Contractor cooperation very high – Little or no incentive for cost savings Construction Management & Engineering CIEG 467-013 Types of Cost-plus Contracts 4. Cost plus fixed fee – – – More incentive for cost savings Incentive for timely completion Risk shared by owner and contractor 5. Cost plus variable % – – – Also called “sliding scale %” Keeps fee in line with type & volume of work Fee becomes progressively smaller on work that is repetitive, requires little or no re-engineering, replanning, or additional layout Construction Management & Engineering CIEG 467-013 Types of Cost-plus Contracts 6. Target estimate – – – May be based on dollar amounts, man-hours, schedule, or combination Cost savings or overrun shared by owner and contractor at predetermined split Cost underrun increases contractor profit, overrun decreases profit 7. Guaranteed maximum price – – – – Used with well defined scope of work Particularly suitable for turnkey operation Contractor or design-builder assumes all risk Provisions to share savings can be applied Construction Management & Engineering CIEG 467-013 Excel Spreadsheet Contract Types Construction Management & Engineering CIEG 467-013 Construction Contracts • Prequalification of bidders – Evidence of satisfactory previous experience – Financial stability – Advanced or specialized prequalification may be required as dictated by the magnitude and nature of the work – Bid bonds are often required Construction Management & Engineering CIEG 467-013 Elements of a legal contract • offer • acceptance • consideration • legal in every respect • requires a meeting of the minds • offer + acceptance = binding obligation Construction Contract Documents • • • • • • • • Advertisement for bids Information for bidders Bid form General notices Notice of award Notice to proceed Bid bond Performance bond • Payment bond • Contract form or agreement • General conditions or provisions • Supplemental and/or special conditions • Plans • Specifications Construction Contract Documents Characteristics of a “good” contract document: 1. 2. 3. 4. 5. 6. 7. Carefully considered Expressed clearly Time-tested Comprehensive Fair Balanced Applicable to the elements of a construction projects Construction Management & Engineering CIEG 467-013 Construction Contracts ……bidders are required to: – – – – examine all portions of the contract documents examine the physical conditions of the site determine legal requirements affecting the work complete these investigations prior to bidding Construction Management & Engineering CIEG 467-013 Construction Contracts ……contract documents should: – Include a hierarchy to determine which documents govern in case of conflict, i.e.: DelDOT’s hierarchy – Not contain ambiguous language – Not contain exculpatory clauses Construction Contracts -- General Conditions • Contractor’s warranties • Defective drawings • Approval of contractor’s plans and equipment • Approval of shop drawings other submittals • Guarantee by the Contractor • Conduct of the work • Defective work • Relations with other contractors and subcontractors • • • • • • • • • • • Inspection of materials Inspection of field work Authority of the Eng’r. Duties of the inspector Permits and licenses Labor considerations Work done by the owner Lines and grades Order and discipline Performance Final inspection & acceptance Construction Contracts -- General Conditions • Federal, state, and local government regulations • Employment (EOE rules) • Emergencies • Minimum wage rate • Domestic vs.foreign materials and labor • Construction reports • Payrolls and bills of material • Cooperation among contractors • Patents • • • • • Retainage Bonding and insurance Guarantee of equipment Borings Spare parts Risk Allocations -- General Conditions • • • • • • • Force majeure Indemnification Liens Labor laws Differing site conditions Delays and extension of time Liquidated damages • Consequential damage • Occupational safety, and health of workers • Permits, licenses, and regulations • Termination for default by contractor • Suspension of work • Warranties and guarantees Construction Management & Engineering CIEG 467-013 Specifications • Standard, supplemental, and special provisions • two types of specifications: – method specification dictates equipment and procedures – performance spec specifies only the desired end result or product – should include hierarchy Construction Management & Engineering CIEG 467-013 Hierarchy Governing ranking of contract components in case of a discrepancy (DelDOT) • General Notices • Special Provisions • Plans • Supplemental Specifications • Standard Construction Details • Standard Specifications Construction Management & Engineering CIEG 467-013 Classification Coding System • Architectural building and site development industry employees the CSI Format that includes 16 divisions of work. • Public owners generally use a system of sections or divisions developed and employed for several decades Construction Management & Engineering CIEG 467-013 Codes, Standards, and Regulations Model Codes • • • • Basic/National Building Code (BOCA Code) Uniform Building Code Standard Building Code National Electric Code (NEC) and Life Safety Code by the NFPA under ANSI • The International Building Code 2000 (IBC) replaces the first three codes. Several subcodes of the IBC include Fire, Residential, Plumbing, Energy Conservation, Mechanical, & Private Sewage Construction Management & Engineering CIEG 467-013 Codes, Standards, and Regulations Model Codes • Model codes are adopted in whole or in part by the local municipality, and become enforceable under the law Zoning Regulations • imposed by local zoning commissions Environmental Regulations • imposed by the EPA, State DEP (DNREC), or local agency Construction Management & Engineering CIEG 467-013 Codes, Standards, and Regulations Standards • ASTM • Underwriters Laboratories, Inc. (UL) • AASHTO • ACI • AISC • many, many others • no enforcement by these agencies • specifications generally refer back to these standards Construction Management & Engineering CIEG 467-013 Submittals required in the contract – copies of subcontracts – shop drawings and support calculations – catalog cuts – material or equipment samples – schedule(s) – certified payrolls – certificates of insurance – environmental test reports – material test reports & certifications Construction Management & Engineering CIEG 467-013 Shop Drawings – structural steel details & erection plan – erection procedures (safety) – PS/PC concrete items – shoring & underpinning details – jacking plans and calculations – scaffolding and falsework – concrete formwork design and details – construction sequencing diagrams Construction Management & Engineering CIEG 467-013 Shop Drawings – cofferdam design & details – dewatering procedure – stream diversions – pipe and ductwork fabrication details – reinforcing steel bending diagrams and bar lists – structural timber elements – ornamental iron or steel – maintenance of traffic plans (alternates) Construction Management & Engineering CIEG 467-013 Payments and related issues – mobilization and initial costs – retainage – progress payments and partial payments – material payments – change orders – substantial completion – punchlist – final acceptance and payment Construction Management & Engineering CIEG 467-013 Changes in plans and specs – clarification, correction, modifications prior to bid are referred to as “addenda” • owner must maintain a system of distributing and acknowledging receipt of addendum – plan and spec changes after award are referred to as “revisions”, and generally require issuance of a change order(s) Construction Management & Engineering CIEG 467-013 Change Orders – a written order issued by the owner to the contractor for a change to the contract within the scope of work – change orders are written for: • extra work • increasing or decreasing the contract quantities • alterations – change orders state the basis and amount of payment and time extensions Construction Management & Engineering CIEG 467-013 Contracts • Liquidated damages • Incentive/Disincentive (bonus/penalty) • Acceleration – Increase crew levels, crew size – Add shifts and/or extend work hours • CPM schedule is an extremely valuable tool in analyzing delay claims Construction Management & Engineering CIEG 467-013 Claims and Disputes • a claim is a request by a contractor for additional compensation or time extension for occurrences beyond the contractor’s control including: – differing or unexpected site conditions – change in scope – delays caused by the owner • owner has duty to provide adequate, accurate data to the bidders Construction Management & Engineering CIEG 467-013 Claims and Disputes • Owner is liable to contractor when: – inaccurate data are given – extras develop because of improper design – design is significantly changed after the contract is signed (constructive change) • Contractor must prove entitlement and the associated damages • Contractor must provide timely notice of claim upon discovering impact Construction Management & Engineering CIEG 467-013 Types of Claims – delay claim – extra work claim – acceleration – impossibility-of-performance claim – defective design claim (error or omission) – interference claim – superior knowledge claim Construction Management & Engineering CIEG 467-013 Dispute Resolution • Early settlement between parties • Alternative depute resolution (ADR) – negotiation – arbitration (1 or 3 members) – mediation – neutral advisors – Dispute Review Board (DRB) • 3 or more odd number of board members selected evenly by both sides • Litigation – sometimes unavoidable; usually undesirable; but sometimes best method Construction Management & Engineering CIEG 467-013 Credits • Credits – reimbursement from contractor to owner for work eliminated (lump sum contract or item) • Credit may also be given when specified performance criteria is not met Construction Management & Engineering CIEG 467-013 Claims Avoidance • producing comprehensive, accurate, contract documents • constructibility review • clear understanding of contract requirements prior to bidding • having good administrative procedures in place • open and honest communication • timely troubleshooting Construction Management & Engineering CIEG 467-013 Claims Avoidance • Claims avoidance begins in the preconstruction phase • Contract documents need to be clear, accurate, comprehensive, and fairly distribute risk Construction Management & Engineering CIEG 467-013 Ability to influence cost over time • Greatest potential to influence cost is during the pre-construction design phase • Claims avoidance begins during pre-construction • Design phase – Intensive preparation and review of contract documents – Careful consideration of methods and equipment = consider overall constructibility nsin 100% Level of Influence on Cost Aiiy s Infene ss 0% Concept & Feasibility Design and Engineering Procurement and Construction Startup Oper. Ability to Influence Construction Costs over Time Construction Management & Engineering CIEG 467-013 Design Professionals should: • Specify locally available material • Allow substitution of equal quality material • Avoid one-of–a-kind or non-standard items where possibly • Design structures with as many redundant elements as possible • Design should allow construction using the prevailing methods and equipment Construction Management & Engineering CIEG 467-013 Design Professionals should: • Design to minimize required labor • Specify a quality of workmanship consistent with the quality of the project • Do not require the contractor to assume responsibility for information that should be furnished by the design engineer/architect • Produce simple, straight-forward specs = clearly state what is expected Construction Management & Engineering CIEG 467-013 Construction Management Contractual arrangement: at-risk or management services for fee only or Act of managing the construction process Construction Management & Engineering CIEG 467-013 Construction Management • • • Contractual arrangement Construction management personnel can represent owner or contractor CM manages the basic resources of construction Basic Resources • • • • workforce subcontractors equipment construction plant • • • • material information time money Construction Management & Engineering CIEG 467-013 Project Management • Optimize the three attributes of: quality, cost, and time • Principle objective of a construction manager is to complete each project on time and within budget, while maintaining acceptable levels of safety and risk Construction Management & Engineering CIEG 467-013 Value Engineering • Effect overall economy in the total life cycle • Performed prior to the bid as part of the review process, or • Performed by the contractor under terms of the contract = cost savings shared by the owner and contractor • Goal is to lower construction or life cycle cost without reducing quality or usefulness Value Engineering Structured VE job plan consists of five phases 1. Information phase • Function analysis 1. 2. 3. 4. 5. What is its purpose? What does it do? What does it cost? What is it worth? What alternative would accomplish the same function? 6. What would the alternative cost? Value Engineering 2. Speculation/Creative Phase “brainstorming” 3. Evaluation/Analytical Phase 4. Development Phase 5. Report Phase Value Engineering Economic evaluations considering the time value of money Present Worth vs. Future Worth Minimum Attractive Rate of Return (MARR) Return on Investment (ROI) Construction Management & Engineering CIEG 467-013
