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 • material
• subcontractors • information
• equipment • time
• construction • money
plant
 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

Design Phase Time

Savings

Construction phase

Phased or Fast-Track Construction

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West Approach
East Approach
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Main Cables

Bridge Deck
Anchorages

West Piers
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Test Piles

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Towers

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 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, re-
planning, 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. Carefully considered
2. Expressed clearly
3. Time-tested
4. Comprehensive
5. Fair
6. Balanced
7. 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.:
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 • Retainage
government regulations • Bonding and insurance
• Employment (EOE rules) • Guarantee of equipment
• Emergencies • Borings
• Minimum wage rate • Spare parts
• Domestic vs.foreign
materials and labor
• Construction reports
• Payrolls and bills of material
• Cooperation among
contractors
• Patents
 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 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 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 pre-
construction 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% 

AyIf
Level of Influence on Cost

0%

Concept & Design and

Procurement and Construction Startup Oper.
Feasibility Engineering

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-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 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