Main Parties to a contract

The Client
The Engineer

The Contractor
The Project

Work
Scene 1

Choice of Contract

1.1 Factors Affecting the Choice of Contract

1. Responsibility for Financing

2. Responsibility for design
3. Valuation of Work

4. Responsibility for Risk

Time

Money

Drawings

1.3 Allocation of design and Construction

The main roles to be performed during the project by parties are:

1. Design
2. Construction
3. Quality control
4. Supervision
5. Dispute Resolution
6. Certification
 Roles may be allocated to an individual or to several parties.

Arbitration

Supervision
Certification

1.4 Method of Pricing and Payment

Three types of Contracts exist:

Re-measurement, Cost reimbursement and lump sum contracts

As mentioned before the choice of contract will depend on mainly the allocation of risk,
responsibility for design, the responsibility for financing and the valuation of work done.

1. Re-measurement Contract

1. Risk is taken on by the employer this is significant due to the unpredictability of construction
projects
2. Estimated quantities are often different from the actual quantities
3. The bill of quantities is used to estimate the value of the works as well as calculating the final

contract price
4. The employer must require a detailed makeup of the rates of quantities during tendering
and any changes to rates during the execution of the works must be approved by the
engineer
5. There is no warranty the measurements of the quantities are accurate
6. The preliminary items has a major impact on the final contract price. If the prelim items only
form part of fixed expenditure the a recalculation of the contract price should be acceptable
but if the prelim items form a major part of the contract then only adjusting the contract
items may lead to an incorrect evaluation of calculation of the contract price.
Bill of Quantities

About the BOQ

1. It is a document used to calculate the cost of items and activities required for the
completion of the project.

2. Cost of the items are measured from drawings or calculated accurately

3. The document is divided into the projects discrete trades, each trade is subdivided into its
discrete items.
4. At the tender stage, each bidder provides a rate for each item in the BOQ
Advantages of BOQ

1. Reduces the cost and time of tendering

2. The employer can compare the resources of the bidders

3. Used for valuation of work for certification for interim payment

4. Used for calculating Variations

 5. Used for Remeasurement

Apportionment of Responsibilities

1. Omission of information and Incorrect information.

At times items not priced by the contractor are implied as included in other parts of the bill

2.

3. Estimates will be different from the final calculation

4. Change in quantities may make the unit price inaccurate.
 Effect of change in quantity

Changes to quantities are a common feature in contracts and it is important to device methods for
dealing with such situations when they arise.

It is important to ascertain methods to price the difference between estimated quantities and actual
quantities.

1. Apply the actual rate to the changed quantity

2. Adjust the rate for the item of work

3. Adjust the rate of other items

 4. Adjust the rate for the prelim items

Cost re-imbursement contract

- The contractor accepts all responsibility for the risks

- The contractor is paid for the cost of materials and workmanship and profits
The main types of Cost -re-imbursement contracts are

1. Cost plus percentage fee

2. Cost plus fixed rate

3. Cost plus fluctuating fee

4. Target price

Lump Sum

1. Contract price is based on a predetermined tender value

2. The employer accepts the least risk
 3. Can make use of the bill of quantities

Allocation of Risks

Risks are a common feature of project. A principle function of the contract is to allocate risks

- Risks allocation philosophy is concerned with who is to bear a risk if it is out of the control of
one or the other party

Principles for addressing risks

1. Ability to control risk

2. Ability to finance the risk

3. Responsibility of the parties

4. Ability to foresee
 5. Likely to benefit

Specifications

Design Specification
1. Gives a description of the materials and the manner of in which work should be carried out

2. Relieves the contractor of any responsibility because it implies building according to its
instructions should result in expected performance
Performance Specifications

- Describes a standard or objective to be achieved.

- States the operational requirements for the project.

Advantages of the Performance Specification

1. Provides flexibility for the contractor when It comes to producing solutions

2. Encourages innovation solutions

3. Allows for competitive bidding