Construction Methods & Management

CIEG 486-010

Construction Methods & Management

CIEG 486-010

Construction Management
Contractual arrangement: at-risk or
management services for fee only
or
Act of managing the construction process

Construction Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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
Savings

Design Phase

Construction phase

Phased or Fast-Track Construction

Lighting

West Approach

East Approach

Bridge Deck

Trusses/Framing

Suspended Steel

Main Cables

Towers

West Piers

East Piers

Test Piles

Anchorages

Construction Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

Contract Types
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 Methods & Management

CIEG 486-010

Contract Types

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

Construction Contracts
contract documents should:
Include a hierarchy to determine which
documents govern in case of conflict, i.e.:
DelDOTs hierarchy
Not contain ambiguous language
Not contain exculpatory clauses

Construction Contracts -- General Conditions

Contractors warranties
Defective drawings
Approval of contractors
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 Engr.
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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

Claims and Disputes

a claim is a request by a contractor for additional
compensation or time extension for occurrences
beyond the contractors 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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

Types of Claims
delay or disruption claim
extra work claim
acceleration
impossibility-of-performance claim
defective design claim (error or omission)
interference claim
superior knowledge claim

Construction Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010

Claims Avoidance
Claims avoidance begins in the preconstruction phase
Contract documents need to be clear,
accurate, comprehensive, and fairly
distribute risk

Construction Methods & Management

CIEG 486-010

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

100%

Level of Influence on Cost

AyI

0%

Concept &
Feasibility

Design and
Engineering

Procurement and Construction

Startup Oper.

Ability to Influence Construction Costs over Time

Construction Methods & Management

CIEG 486-010

Design Professionals should:

Specify locally available material
Allow substitution of equal quality material
Avoid one-ofa-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 Methods & Management

CIEG 486-010

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 Methods & Management

CIEG 486-010