LECTURE NOTES IN CVE173

CIVIL ENGINEERING LAW, ETHICS AND CONTRACTS

by

PROF. NATHANIEL C. TARRANZA

Department of Civil Engineering
College of Engineering
MSU-Iligan Institute of Technology

Property of MSU-Iligan Institute of Technology

ALL RIGHTS RESERVED
Unauthorized use and/or reproduction may result
to civil and/or criminal liabilities.

CE Laws, Contracts Tarranza, NC

Introduction to CVE173

Prof. Nathaniel C. Tarranza Date

Department of Civil Engineering and Technology
MSU-Iligan Institute of Technology
 CE A173 - CE Laws, Bids, Contracts, Specifications and Ethics

Course Description:

The course deals with the fundamentals on obligations and contracts, bidding
processes, preparation of specification, principles of professional ethics as applied to
the civil engineering profession, and the policies and objectives of some important civil
engineering related laws and governmental regulations. Designed to prepare civil
engineering students for professional practice, the course includes the study of Civil
Engineering Code of Ethics, legal processes in the practice of civil engineering in the
Philippines, ethical relations and duty of a civil engineer to his fellow professionals,
clients and the general public, basic elements of contracts, Civil Engineering Law, (RA
544) National Building Code, Structural Code, basic Labor laws, Government
Procurement Law, and the Manual of Professional Practice for Civil Engineers.

Introduction to Tarranza, NC
 Textbook:
1. Mead, Mead, and Akerman. 1992. Contracts, Specifications and Engineering
Relation. USA: McGraw-Hill Book Company.

References:

1. RA 544: An Act to Regulate the Practice of Civil Engineering in the Philippines.

2. Act No. 3815 : The Revised Penal Code of the Philippines
3. R.A. 386 : Civil Code of the Philippines
4. P.D. 442: Labor Code of the Philippines
5. P.D. 1096: National Building Code of the Philippines
6. National Structural Code of the Philippines
7. CIAP Document 102: Uniform General Conditions
of Contract for Private Construction
8. DPWH “Blue Book”.
9. Philippine Institute of Civil Engineers, Inc. 2003. Manual of Professional Practice for
Civil Engineers, 2nd Edition. Manila: Philippine Institute of Civil Engineers, Inc.
10. R.A. 8293, Intellectual Property Code of the Philippines
11. R.A. 9184, Government Procurement Reform Act

Introduction to Tarranza, NC
 Topics for Report:

1. Code of Ethics for Civil Engineers

2. Purpose , Preparation, and Qualities of Effective Specifications
3. RA 544: An Act to Regulate the Practice of Civil Engineering in the Philippines:
policies and objectives: policies and objectives
4. Manual of Professional Practice for Civil Engineers, (2nd Edition. Manila:
Philippine Institute of Civil Engineers, Inc.) : general features and objectives
5. National Building Code of the Philippines: policies and objectives
6. National Structural Code of the Philippines: policies and objectives
7. CIAP Document 102: Uniform General Conditions of Contract for Private
Construction
8. DPWH “Blue Book” : general features and objectives.
9. Government Procurement Reform Act of the Philippines
10. Intellectual Property Code of the Philippines

Introduction to Tarranza, NC
 Construction Contracts
How obtained? a) thru competitive bidding
b) negotiation

Types of Construction Contracts:

1. Lump sum – the owner of the project pays to the contractor an

agreed sum of money for the completion of the project
according to plans and specifications.
Advantage:
a. simply practicable
b. a limit to the cost of the project is fixed
c. good for work that is very certain and pre-estimated

Disadvantages:
a. contractors tend to use cheap materials to gain more
b. creates problem when “extra work’ is required

Introduction to CVE173; Tarranza, NC

 2. Unit-price - The owner pays the contractor an agreed amount of money
for eachunit of work done.

Advantage:
a. good when actual quantities of work-in-place are uncertain

Disadvantage:
a. quality of work maybe sacrificed if no clear specifications as to
how the work must be performed

3. Cost-plus –a-percentage – The owner pays the contractor the actual cost
of construction work, with a specified percentage thereof as
compensation for the contractor’s overhead expenses, personal
services and profit

Advantages:
a. risk of construction is entirely removed from the contractor
b. owner pays only the cost of construction as actually incurred

Introduction to CVE173; Tarranza, NC

 Disadvantages:
a. every increase in cost increases the amount payable to the contractor,
contractors exploit this opportunity to gain more
b. labor inefficiency, unsatisfactory performance on the part of the
contractor since his profit does not depend upon his ability to work

4. Cost-plus-a-fee – The owner pays the contractor the actual cost of

construction work plus a fixed sum to pay for the contractor’s overhead
expenses, personal services and profit.

Advantages:
a. contractor can no longer profit from any increase in construction cost,
and will make efforts to finish the job soon.
b. the risk of construction is entirely removed from the contractor
c. the owner pays only the cost of construction as actually incurred

Disadvantage:
a. labor inefficiency on the part of the contractor since his profit is already
fixed

Introduction to CVE173; Tarranza, NC

 5. Cost-plus-a-variable-premium - The contractor undertakes to complete the work for
a fixed sum and a definite completion time. In addition to the fixed sum, he is paid
a stated premium which may be decreased or increased accordingly as the actual
cost and completion time of the project are greater than or less than the said fixed
sum and definite completion time.

Advantages:
a. If the actual construction cost is less than the fixed sum, the owner and
the contractor share the gain. Half of the gain is added to the stated premium
of the contractor, and the other half goes to the owner.
b. If the actual construction cost is greater than the fixed sum, the owner provides
half of the loss and the other half is deducted from the contractor’s stated
premium.
c. If the project is actually completed before the fixed completion time, the
contractor receives a certain agreed sum per day of time saved; if completed after
the fixed completion time, a corresponding deduction, per day of delay, is made
from the contractor’s stated premium.

a. The contractor gets

Introduction to an unfairly
CVE173; high premium when theTarranza,
fixed sum is deliberately
NC
 Disadvantage:
a. The contractor gets an unfairly high premium when the fixed sum is deliberately
made high and/or the fixed completion time is deliberately made long.

Introduction to Tarranza, NC
 Contract Documents for Large Construction Project

1. Advertisement
- a written invitation to bidders to furnish materials or services of value
- includes information on what to furnish, the site of work, deadline for submission
of bids, required bidder’s bond, date of opening of bids, manner of addressing
the bids, where to secure plans and specifications of the work, and statement of
owner’s right to reject any bid.

2. Instruction to bidders
- to amplify anything which has been omitted in the advertisement because of
the cost and space limitation
- includes description of work, how to prepare bid proposals, bid delivery and
withdrawal, bidder’s bond, bidder’s responsibility, interpretation of contract
documents, requirement for signing bids, conditions for the award of contract,
effectivity of contract, instruction for the execution of performance bond, time
of project completion, interpretation of standard specification, and contract
documents needed.

Introduction to CE A173 ; Tarranza, NC

 3. Bid Proposal
- the contract amount and services which the contractor offers to the owner for
the construction of the project; bid proposal form is usually furnished by the owner
to ensure uniformity and easy comparison of bids.

4. General Conditions
- includes the intent of the contract, definition of terms, bond requirements,
financial protection, reports and payments, contractual relations, conduct of
work for protection of properties and the general public, retainage matters,
termination of contract and arbitration matters, terms of completion and
acceptance

5. Agreement
- the contract in its written form, contains the scope of work, contract price, and
components of the whole contract.

Introduction to CE A173 ; Tarranza, NC

 6. Performance bond
- A form of bond intended to protect the owner in the event that the contractor
is unable to finish the work in accordance with the plans and specifications.
- A bonding company (surety) guarantees the owner that the project will be completed
by the contractor. In the event the contractor is unable to finish the project, the surety
uses the amount of the bond to engage the services of another contractor who will
finish the project. If and when the original contractor finishes the project, the
performance bond he posted is cancelled.

7. General Specifications
- specifications of general character relating to the project.

8. Detailed Specifications
- specifications relating to a particular item of work.

9. Plans and Drawings

Introduction to CE A173 ; Tarranza, NC

 Payment for Extra Work
- When changes in the contract are made necessary because conditions arise which
had not been readily determined before the beginning of the work, the contractor
may, by written notice to the owner, negotiate for supplemental contract or
variation order.

Payment Due to Inflation

- In the event of an inflation in currency, the contract stipulation on the limit of
inflation rate beyond which the contractor can claim for extra cost shall be the basis.
- If there is no contract stipulation on this matter, the contractor may ask the
court to intervene but he must prove that the inflation is extra-ordinary.

Introduction to CE A173 ; Tarranza, NC