CE 476

Construction Management
Lectures # 10 and 11

Dr. Abdulrahman K. Yussef

Chairman of the Architectural

Engineering Department
 Today…
CH3. Issues During Construction Phase
Project Rework Reduction
3.1 Acceptance Period/Withdrawal
3.2 Award of Contract/Notice to Proceed
3.3 Contract Agreement
3.4 Time Extensions
3.5 Change Orders
3.6 Changed Conditions
Project Rework Reduction
•Rework, and particularly field rework, continues to be one
of the major sources of unplanned cost growth on
industrial construction projects.
•Rework occurs when the installed work does not comply
with or meet required specifications.
•According to Construction Industry Institute (CII) research, if
field rework alone can significantly reduced, or even
eliminated, as much as 10% of overall project costs can be
saved.
•The savings are expected to be substantially greater across
an entire project cycle, which includes engineering and
procurement.
Project Rework Reduction
•In formal competitive bid situations, the timing of various activities has
legal implications.
•The issuance of the notice to bidders opens the bidding period.
•The date and time at which the bid opening is to take place marks the
formal end of the bidding period.
•Usually either a physical or virtual bid box is established at some central
location.
•Bids that have not been received at the bid box by the appointed date
and hour are late and are normally disqualified.
•Prior to the close of the bidding (i.e., bid opening), contractors are free to
withdraw their bids without penalty. If they have noted a mistake, they
can also submit a correction to their original bid.
Project Rework Reduction
•Once bid opening has commenced, these prerogatives are no longer available. If bids have been opened and the
low bidder declares a mistake in bid, procedures are available to reconcile this problem.
•If it can be clearly established that a mathematical error has occurred, the owner usually will reject the bid.
•However, if the mistake appears contrived to establish a basis for withdrawal of the bid, the owner will not reject.
•Then the contractor must enter into contract or forfeit bid security.
•The chronology of the bid procedure is shown in Figure 3.1.
Award of Contract/Notice to Proceed
•Notification of award of contract is normally accomplished by a
letter indicating selection and directing the contractor to proceed
with the work.
•The letter also implies that the site is free of encumbrances and
that the contractor can occupy the site for work purposes.
• Provisions of the contract usually direct that selected bidders
commence work on the site within a specified period of time, such
as 10 days.
Contract Agreement
•Although the issuance of the notice to proceed establishes
the elements of a contract, this is formalized by the signing
of a contract agreement.
•In a legal sense, the formal contract agreement is the single
document that binds the parties and by reference describes
the work to be performed for a consideration.
•It pulls together under one cover all documents to include
(a) the drawings, (b) the general conditions, (c) the
supplementary conditions, (d) the technical
specifications, and (e) any addenda describing changes
published to these original contract documents.
Contract Agreement
•As with other bid package components,
standard forms for the contract agreement
for a variety of contractual formats are
available from various professional
organizations.
•Forms for the stipulated (lump) sum and
negotiated (cost of work plus a fee) type
contract are given in Appendixes C and D.
Time Extensions
•Once the formal contract has been signed, certain aspects of the
contractor’s activity during construction must be considered.
•Often circumstances beyond the contractor’s control, which could not
have been reasonably anticipated at the time of bidding, lead to delays.
•These delays make it difficult or impossible to meet the project
completion date.
•In such cases the contractor will request an extension of time to offset
the delay.
•These time extensions, if granted, act to increase the duration of the
project.
•Procedures for dealing with time extensions are established in the
general conditions of the contract.
•Claims for extension of time must be based on delays that are caused
by the owner or the owner’s agents or on delays due to Acts of God.
Time Extensions
•Delays that result from design errors or changes are
typical of owner-assignable delays and are not
uncommon.
•A study of delay sources on government contracts
indicated that a large percentage of all delays can
be traced to the reconciliation of design-related
problems (see Table 3.1).
•Weather delays are typical of the so-called act of
God type delay.
•Normal weather, however, is not justification for the
granting of a time extension.
Time Extensions
Change Orders
•Since the contract documents are included by
reference in the formal agreement, the lines on the
drawings, the words in the technical specifications, and
all other aspects of the contract documentation are
legally binding.
•Any alteration of these documents constitutes an
alteration of the contract.
•As will be discussed in Chapter 4, certain contractual
formats such as the unit-price contract have a degree of
flexibility.
•However, the stipulated or lumpsum contract has
virtually no leeway for change or interpretation.
Change Orders
•Changes that are dictated, for any reason,
during construction represent an alteration of
a legal arrangement and, therefore, must be
formally handled as a modification to the
contract.
•These modifications to the original contract,
which themselves are small augmenting
contracts, are called change orders.
Change Orders
•Changes that are dictated, for any reason,
during construction represent an alteration of
a legal arrangement and, therefore, must be
formally handled as a modification to the
contract.
•These modifications to the original contract,
which themselves are small augmenting
contracts, are called change orders.
Change Orders
•Procedures for implementing change orders are
specified in the general conditions of the contract.
•Since change orders are minicontracts, their
implementation has many of the elements of the
original contract bid cycle.
•The major difference is that there is no
competition, since the contractor has already
been selected.
Change Orders
•Normally, a formal communication of the change to include scope and
supporting technical documents is sent to the contractor.
•The contractor responds with a price quotation for performing the work,
which constitutes his or her offer.
•The owner can accept the offer or attempt to negotiate (i.e., make a
counteroffer).
•This is, of course, the classical contractual cycle.
•Usually, the contractor is justified in increasing the price to recover
costs due to disruption of the work and possible loss of job rhythm.
•If the original contract documents were poorly scoped and prepared,
the project can turn into a patchwork of change orders.
•This can lead to a sharpening of the adversary roles of the contractor
and the owner and can substantially disrupt job activities.
Changed Conditions
•Engineering designs are based on the project site
conditions as they are perceived by the
architect/engineer (A/E) or design professional.
•For structural and finish items as well as mechanical
and electrical systems above ground, the conditions
are constant and easily determined.
•Variation in wind patterns leading to deviation from
original design criteria may pose a problem.
•But normally, elements of the superstructure of a
facility are constructed in a highly predictable
environment.
Changed Conditions
•This is not the case when designing the subsurface and site
topographical portions of the project.
•Since the ability to look below the surface of the site is limited, the
designer relies on approximations that indicate the general
nature of the soil and rock conditions below grade.
•The designer’s ‘‘eyes’’ in establishing the design environment are
the reports from subsurface investigations.
•These reports indicate the strata of soil and rock below the site
based on a series of bore holes.
•These holes are generally located on a grid and attempt to
establish the profile of soil and rock.
Changed Conditions
•The ability of the below-grade area to support weight
may be established by a grid of test piles.
•The money available for this design activity (i.e.,
subsurface investigation) varies, and an inadequate set
of bore logs or test piles may lead to an erroneous
picture of subsurface characteristics.
•The engineer uses the information provided by the
subsurface investigation to design the foundation of the
facility.
•If the investigation is not extensive enough, the design
can be inadequate.
Changed Conditions
•The information provided from the subsurface investigation is
also the contractor’s basis for making the estimate of the
excavation and foundation work to be accomplished.
•Again, if the investigation does not adequately represent the
site conditions, the contractor’s estimate will be affected.
•The topographic survey of the site is also a basis for
estimate and, if in error, will impact the estimate and price
quoted by the contractor.
•If the contractor feels the work conditions as reflected in the
original investigation made available for bidding purposes
are not representative of the conditions ‘‘as found,’’ he or she
can claim a changed condition.
Changed Conditions
•For instance, based on the boring logs, a reasonable estimate
may indicate 2,000 cubic yards of soil excavation and 500 cubic
yards of rock.
•After work commences, the site may be found to contain 1,500
cubic yards of rock and only 1,000 cubic yards of soil.
•This, obviously, substantially affects the price of excavation and
would be the basis for claiming a changed condition.
•If the owner accepts the changed condition, the extended scope
of work represented will be included in the contract as a change
order.
•If the owner does not accept the changed condition claim, the
validity of the claim must be established by litigation or arbitration.