Construction Project and Contract Management: For Tis Esat PLC Technical Stffs Tadesse Ayalew September 2017 Bahir Dar

CONSTRUCTION PROJECT AND
CONTRACT MANAGEMENT
FOR TIS ESAT PLC TECHNICAL STFFS

TADESSE AYALEW
SEPTEMBER 2017
BAHIR DAR
Training on Construction Project Management, Sep

1 2017, Tadesse A.
1. Description of the subject (Major Undertakings For The Last 25
YEARS)
01 Building 02 Road 13 Years

13 + 10 Universities
RSDP
More Than 1000
(1997-
Health Center
2010)
450,000 Condominium
Houses within 5 Years in AA
Good Road Condition imroved
from 22% to 54%
1. Description of the subject (Major Undertakings For The Last 25
YEARS)
04 Railway Planned
on GTP I
03 Energy 60,000 AA LRT

Phase I
8,124 MW Completed
Hydro Potential
Planned to
Achive
17MW by
52020
Projects Djibouti-656Km
273 MW Under Bedele-366KM

Woldia-256 km
Construction
Mekele-556 Km
8,397MW
PartI: Construction Project
Management
Part 1. Introduction
I Pre-Project Phase
2.
Planning and Design Phase
Contractor Selection
Project Mobilization
Project Operation Phase
Project Closeout Phase
4 Tadesse A. Constructi
Training on Construction Project Management, Sep 2017,
1. Introduction
What is a project ?
1
What is project management?
Project manager
Areas of expertise
The project life cycle
5 Training on Construction Project Management, Sep 2017, Tadesse A.

1. Introduction
1.1 What is a Project?
 A project is a temporary endeavor undertaken to create a unique
product, service, or result.

 Temporary means that every project has a definite beginning
and a definite end.

 The end is reached
 when the project’s objectives have been achieved,

 or it becomes clear that the project objectives will not or cannot be met,
 or the need for the project no longer exists and the project is
terminated.
6 2017, Tadesse A.
1. Introduction (Cont…)
 Projects are undertaken at all levels of the organization and they
can involve a single person or many thousands. Their duration
ranges from a few weeks to several years.
 Examples of projects include, but are not limited to:
 Developing a new product or service
 Developing a new or modified information system/Implementing a new
business procedure or process
 Constructing a building or facility/ Building a water system for a
community etc
1.2 What is project management
 Project management is the application of
knowledge, skills, tools and techniques to

project activities in order to meet project
requirements.
 It is accomplished through the application and integration of the project
management processes of initiating, planning, executing, monitoring and

controlling, and closing.

8 2017, Tadesse A.

9 2017, Tadesse A.
1.3 Project Manager
 The project manager is the person responsible for accomplishing the project
objectives. Which include

 Identifying requirements
 Establishing clear and achievable objectives
 Balancing the competing demands for quality, scope, time and cost

10 2017, Tadesse A.
11
1.4 Areas of Expertise
 Effective project management requires that the project management team
understand and use knowledge and skills from at least five areas of
expertise:
 The Project Management Body of Knowledge
 Application area knowledge, standards, and regulations
 Understanding the project environment
 General management knowledge and skills
 Interpersonal skills.
Training on Construction Project Management, Sep 2017, Tadesse A.

Areas of Expertise Needed by the Project Team

12 2017, Tadesse A.
The Project Management Knowledge
Areas
The Project Management Knowledge Areas, Consists of Nine
Knowledge Areas and 44 project management processes
 Knowledge areas (Nine for all types

projects + four Specific to construction)
 Integration
 Scope
 Time  Safety
 Cost  Environme
 Quality + nt
 Human resource  Finance
 Communications  Claims
Training on Construction Project Management, Sep  Procurement
13 2017, Tadesse A.
 Risk
1.5 The Project Life Cycle
 Project managers or organization divide projects into phases to
provide better management control with appropriate links to the

ongoing operations of the performing organization. Collectively, these
phases are known as the project life cycle.
 Pre-project phase
 Planning and design phase
 Contractor selection phase
 Project mobilization phase
 Project operations phase
 Project closeout and termination phase

Project Life Cycle

15 2017, Tadesse A.
Construction Project Management
Part 2.
I Constructio
n Project
16 2017, Tadesse A. Manageme
Pre Project Phase
Project Delivery System
2.1 Contract Type

17 2017, Tadesse A.
2.1 Pre Project Phase
 Prior to the commencement of the construction project, the project owner
faces two important decisions regarding the relationships among the

various parties and the basis upon which the contractor will be paid which
can be addressed through;
 The first issue can be addressed through project delivery systems
which defines relationships, span and duration of responsibility of
each party.
 The second can be answered by various types of contracts that are
used to measure how the construction contractor will be paid for
completed construction work.

2.1.1 Project Delivery System
Project Delivery method is an organizational concept which assigns specific
responsibilities and authorities to people and organizations and which
defines relationship of the various elements in construction of a project.
Training on Construction Project Management, Sep 2017,

Tadesse A.
Types of PDS

20 2017, Tadesse A.
2.1.2 Types of Construction Contract
21 Training on Construction Project Management, Sep 2017, Tadesse

A.
2.2 Planning and Design Phase
Planning
2.2 Design
Contract Document

22 2017, Tadesse A.
2.2.1 Planning
• Planning and feasibility study stage
• Consultant selection
• Site investigation
• Constructability analysis
• Public input
• Preliminary cost estimate
• Financial feasibility analysis
• Funding
Site selection and land acquisition
• Project Recommendation
2.2.2 Design Development
• Preliminary design development
• Schematic design development
• Final design development

24 2017, Tadesse A.
2.2.3 Contract Document Development
1. Construction Documents
2.2.3
2. Bidding Requirements
3. Contract Documents
4. Bonds/Guarantee Forms

25 2017, Tadesse A.
 Construction Documents are defined as the written and

graphic documents prepared or assembled by the A/E for
communicating the design of the project and
administering the contract for its construction.
 The two major components that make up construction

documents include:
 Bidding requirements, and
 Contract documents.
26
27
Standard Bidding Document
Standard Bid Documents
MLDOs Business Asson’s Professional Asson’s

WB, ADB, EC/U, etc Contractors, Civil Engineers, Architects,
Consultants Construction Management,
Donors’ Interest
Business Interest Professional Interest
Public Authorities Public and / or

Public Works Bodies, Government
Public Financiers Interest
28
 Bidding Requirements: are used to attract bidders and
explain the procedures to be followed in preparing and
submitting bids.
 Bidding requirements help bidders follow established
procedures and submit bids that will not be disqualified
because of technicalities. They do not become part of the
contract documents.
 Bidding Documents: all of the construction documents
issued to bidders before the signing of an owner-
contractor agreement. It comprises:
 Invitation to bid (notice to bidders);
 Instruction to bidders; and
 Bid forms and attachments.
29
2.1 Bid Package
 Bid Package: documents available to the contractor and
on which he must make a decision to bid or not.
 A set of plans and technical specifications, proposal form,
general conditions, special conditions etc. that shows the
description of the project to be constructed
30
2.2 Instruction to Bidders, ITB
 It describe the scope of the bid and also include the
following points:
 Source of fund (if it is financed from other agency);
 Fraudulent and fraud practices;
 Eligible bidders;
 Eligible Materials, Equipment and Services;
 Clarification of Bidding Document;
 Site Visit;
 Pre-Bid Meeting; and
 Amendment of Bidding Document.
31
2.3 Bid Data Sheet, BDS
 The BDS include the following fundamental essence of
the contract:
 Definitions, Engineer’s Authority to Issue Variations,
Performance Security, Inspection of Site, Program to
be Submitted, Cash Flow Estimate;
 Bid Security, Minimum Amount of Third Party
Insurance;
 Time for Issue of the Notice to Commence, Time for
Completion;
 Amount of Liquidated Damages, Limit of Liquidated
Damages; and
 Amount of Bonus for Early Completion, Limit of
Bonus.
32
2.3 Bid Data Sheet, BDS
 The BDS include the following fundamental essence of
the contract:
 Defects Liability Period, Amount of Interim Payment
Certificates;
 Percentage of Retention, Limit of Retention Money,
Amount of Advance Payment;
 Start Repayment of Advance Payment, Monthly
Recovery of Advance Payment;
 Number of Copies of Statement of Completion and
Final Statement;
 Procedure for Settlement of Disputes;
 Notice to Employer and Engineer; and
 Origin of Materials and Plant.
33
2.4 Evaluation and Qualification
 Evaluation: describe the Adequacy of Technical Proposal, in
case of Multiple Contracts, the Conditions Governs, Completion
Time.
 Qualification: describe the Eligibility, financial situation, staff,
experience , equipments.
2.5 Bidding Forms
 It includes these forms:
 Letter of bid (bid form);
 Form of bid security;
 Technical proposal forms (personnel, equipment);
 Bidders qualification forms as bidders data, JV information,
Historical Contract Non-Performance, Current Contract
Commitments, Historical Financial Performance, Average
Annual Turnover, General and specific Experience.
34
 Contract Documents (graphic and written) describe the
proposed construction (the ‘Work’) that results from
performing services, furnishing labor, and supplying and
incorporating materials and equipment into the construction.
 It is legally enforceable requirements that become part of the
contract.
 Include the following construction documents except
bidding forms:
 Contract Agreement;
 Conditions of Contract (General and Specific);
 Specifications and Bill of Quantities (BOQ);
 Drawings;
 Addenda; and
 Supplementary Contracts (Change Orders).
35
3.1 Contract Agreement
 The agreement is the document that represents and
reflects the legal contract between the owner and the
contractor.
 The purpose of the agreement is to record in written
form those items agreed between the owner and the
contractor.
 It is simply a letter that constitutes legal evidence that a
contract exists, and forms the basis for its enforcement.
 The Contract Agreement shall also declare the priority of
the Contract Documents i.e. which Contract Document
shall have precedence or priority over the other in case of
ambiguity or discrepancy between or among the relevant
parts of the Contract Documents.
36
3.1 Contract Agreement
 The agreement should contain:
 The date of agreement;
 The names and address of contracting parties;
 A brief description of the scope of work;
 A list of contract documents with their precedence
(reference to other documents);
 The procedures for payment;
 The contract time, or dates for start and completion;
 The signatures of contracting parties and witnesses;
 International construction documents are also often based
on industry-prepared standard forms.
37
3.2 Standard Conditions of Contract
3.2.1 General
 Conditions of Contract is the main component of a contract
which outlines the guidelines and relationships of parties to
successfully manage the project.
 Standard forms of contract developed for construction activities
have mostly been drawn up by independent professional
organizations, rather than by one of the parties to the contract,
in order to establish or to consolidate a fair and just contract.
 Purpose of Conditions of contract include:
 Balanced representation of all relevant industry
participants;
 Fair allocation of risk;
 Manage and mitigate project risks; and
 Facilitate a greater sense of partnership.
38
3.2.1 General
 The condition of contract is a document that states the
obligations and rights of the parties and detail conditions
under which the contract is to be carried out.
 Some of the subjects to be defined in the conditions of
contract are:
 Definitions & interpretations;
 Duty & responsibilities of the engineers;
 Contract period;
 Method of payment and periods;
 Retention money;
 Payment for materials on site; and
 Payment for variation orders.
39
3.2.1 General
 Some of the subjects to be defined in the conditions of
contract are:
 Escalation (wages, cost of materials);
 Procedures on sub contracting;
 Insurance & indemnities;
 Liquidated damages;
 Granting of extension time; and
 Conditions for contract termination.
40
3.2.1 General
A. General Conditions of Contract, GCC
 A document called the General Conditions is an essential
part of the contract. It defines the responsibilities of the
parties involved in the contract, the owner and the
general contractor. It describes the guidelines that will be
used in the administration of the contract.
 The conditions are intended to govern and regulate the
obligation of formal contract.
 Various standard forms of General Conditions have been
developed by different organizations such as FIDIC, ICE,
JCT, BaTCoDA, MoWUD and PPA etc.
41
3.2.1 General
B. Special Conditions of Contract, SCC
 The purpose of the Special Conditions is to provide an
extension of the General Provisions of the contract to fit
the specific project at hand.
 It is also known as Conditions of Particular Application,
CPA.
 They serve as amendments or augmentation to the
General Conditions.
 Items included in the Supplementary Conditions are
entirely subject to the discretion of the owner.
42
3.2.1 General
B. Special Conditions of Contract, SCC
 Special conditions of contract may include topics such as:
 The number of copies of contract documents to be
received by the contractor;
 Survey information to be provided by the owner;
 Materials provided by the owner;
 Changes in insurance requirements;
 Requirements for security and temporary facilities;
 Procedures for submittal and processing of shop
drawings;
 Cost and schedule reporting requirements; and
 Traffic control and street cleaning requirements.
43
3.2.1 General
C. Categories of Contract Forms
 Conditions of contract can be international or domestic.
 International Contract forms:
o ICE contract forms;
o NEC contract forms;
o JCT contract forms; and
o FIDIC contract forms.
 Domestic contract forms:
o BaTCoDA 1987 contract forms;
o MoWUD 1994 contract forms;
o PPA 2006 contract forms; and
o PPPAA 2011 contract forms.
44
3.2.2 FIDIC Contract Forms
 The Fédération Internationale des Ingénieurs-Conseils,
FIDIC (International Federation of National Associations
of Independent Consulting Engineers) organization was
founded in 1913 by France, Belgium and Switzerland.
 Now with membership from over 74 countries, members
are generally national associations with the Ethiopian
Consulting Engineering and Architects Association being
one.
 FIDIC has evolved into a leading body for development
of model standard forms of contract for use in the
international construction industry.
45
 The following editions are relevant with respect to
international construction contract ( Red Book)
 First Edition August, 1957;
 Second Edition July, 1969;
 Third Edition March, 1977;
 Fourth Edition September, 1987;
 Fourth Edition (a supplement) Summer 1992 ; (NB:
Amendments with regard to some of the Provisions of
the Conditions of Contract); and
 Fourth Edition (further amendment) November, 1996
(NB: in relation to Dispute Adjudication Board,
Payment on Lump Sum Basis and Late Certification.)
46
 Recently (1999 & 2006) FIDIC has published the following
conditions of contract. These are:
 Conditions of Contract for Construction for Building and Engineering
Works Designed by the Employer: The Construction Contract (New
Red Book);
 Conditions of Contract for Plant and Design-Build for Electrical and
Mechanical Plant, and for Building and Engineering Works, Designed
by the Contractor: The Plant and Design/Build Contract (New Yellow
Book);
 Conditions of Contract for EPC/Turnkey Projects: The EPC/Turnkey
Contract: (Silver Book); and
 Short form of Contract: The Short Form (Green Book).
 Conditions of Contract for Construction: For Building and
Engineering Works Designed by the Employer: Multilateral
Development Bank (MDB) Harmonized Edition, March, 2006,
FIDIC;
47
3.2.3 MoWUD Contract Forms
 Officially, known as “Standard Conditions of Contract for
Construction of Civil Work Projects”.
 It has been in practice since December, 1994.
 It contains 75 clauses including Form of Agreement & Form
of Performance Bond.
 Its structure & content resembles that of FIDIC fourth
edition Standard Conditions of Contract for Civil
Engineering Works.
 The Project Delivery System adopted is that of Design-Bid-
Build.
 The type of contract is based on BOQ i.e. it is an ad
measurement contract type (see Clauses 55-57).
 The role of the Engineer is maintained.
49
3.2.4 PPA/PPPAA Contract Forms
 The PPA, under its legal mandate provided under The
Public Procurement Proclamation, it has prepared &
issued certain standard tender & contract documents for
the purpose of public procurement.
 The conditions of contract are applicable to the
procurements of the federal government.
 It has been in practice since January 2006.
 It recently revised by PPPAA since August 2011.
50
 The Standard Conditions of Contract cover the following
types of procurement.
 These are Standard Conditions of Contract for the
procurement of:-
 Consultancy Services;
 Non-consultancy Services;
 Works; and
 Goods; Including Simple Request for Quotations &
Local Purchase Order;
51
 The Standard Conditions of Contract for the purpose of
the procurement of Works have been prepared for
International Competitive Bidding (ICB) & National
Competitive Bidding (NCB), separately.
 User’s Guide has been also prepared, separately, both for
the ICB & the NCB.
 The Conditions of Contract have been also prepared
both in Amharic & English languages.
 The conditions of contract are based on Design-Bid-
Build project delivery system.
52
 The type of contract could be based on BOQ, in which
case it becomes measurement based. Or based on
Activities Schedule, in which case it becomes lump sum.
 The documentation is divided in to the following three
parts, namely,
 Bidding Procedure;
 Schedule of Requirements; and
 Contract.
53
3.3 Specifications
 Specification is a written standard to be used in
conjunction with the drawings, so together with
drawings and the specifications fully describe and define
the requirements of the contract, to include the quality
that is to be achieved.
 Specification may also be know as Technical Provisions.
 They supplement the drawings and provide information
that cannot be shown in graphic form, or information
that is too lengthy to be placed within the drawings.
 They guide bidders in the preparation of cost proposals
as well as field execution of the work.
 They also guide the contractor through the processes of
ordering materials and construction and installation of
the facility.
54
3.3 Specifications
 It helps as a standard assuring the critical performance
and other requirements for the works.
 It is advisable to use Ethiopian standards (ES) and
technical specifications (BaTCoDA 1991) for the works;
however, if they are inappropriate for the specific work,
internationally accepted standards and specifications such
as those issued by ISO can be specified.
 Specifications provide information regarding:
 The quality of materials;
 The quality of workmanship;
 Erection and installation methods; and
 Measurement, test and inspection requirements and
methods.
55
3.3 Specifications
 Specifications have restricted application, usually to a
specific item or work operation. The designer or
specification writer is therefore able to assign
responsibility for each provision of the specifications to
the desired specific party.
 Specifications must satisfy these basic criteria:
 Technical accuracy and adequacy;
 Definite and clear stipulations;
 Fair and equitable requirements;
 A format that is easy to use during bidding and
construction; and
 Legal enforceability.
56
3.4 Drawings
 Drawings are the means by which the designer conveys
the physical, quantitative, and visual description of the
project (physical structure) to the contractor.
 They are also known as plans or blueprints.
 The contract drawings are organized into sections
numbered sequentially. Drawings for a building project
may include the following type:
 Architectural drawings;
 Structural drawings;
 Sanitary drawings;
 Electrical drawings; and
 Mechanical drawings.
57
3.5 Addenda
 Any change to the bid documents after they are released
for bidding but before bids are actually received requires
the issuance of an addendum.
 This formal document changes the original bid
documents and becomes a part of the bid package.
 At the time of bid opening, bidders must in their bid
documents, acknowledge all addenda.
 Technically addenda may be issued to change the bid
opening date, to modify the original design, to delete or
add items, or to correct errors.
 Addenda may not be issued within about five days of bid
opening unless the bid date is also extended accordingly.
58
4. Bond/Guarantee Forms
4.1 General
 A bond or guarantee is an arrangement under which the
performance of a contractual duty owed by one person
(A) to another (B) is backed up by a third party (C).
 What happens is that C promises to pay B a sum of
money if A fails to fulfill the relevant duty.
 In this context A is commonly known as the principal
debtor or simply principal; B is called the beneficiary;
and C is called the bondsman, surety or guarantor.
59
4.2 Bid Bonds
 Bid Bonds guarantee that the bidder will carry out the
terms of a contract at the bid price upon award of the bid.
 Thus it is a guarantee that a contractor will enter into a
contract at the amount of bid and post the appropriate
performance bonds, providing financial assurance that the
bid has been submitted in good faith.
 These bonds are used by owners to pre-qualify
contractors submitting proposals on contracts.
60
4.2 Bid Bonds
 Bid Bonds guarantee that the bidder will carry out the
terms of a contract at the bid price upon award of the bid.
 Thus it is a guarantee that a contractor will enter into a
contract at the amount of bid and post the appropriate
performance bonds, providing financial assurance that the
bid has been submitted in good faith.
 These bonds are used by owners to pre-qualify
contractors submitting proposals on contracts.
61
4.2 Bid Bonds
 Bid bonds have two purpose:
 To guarantee that the contractor will enter into a
contract if determined to be the lowest responsive
bidder and
 To guarantee the contractor will provide the required
payment and performance bonds, and insurance
policies.
 When the performance and payment bonds have been
submitted, the contractor is released from the bid bond
obligations.
62
4.2 Bid Bonds
Bid Withdrawal
 If a bid is withdrawn before the bid is opened, the bid
security shall be returned to the bidder. No action is taken
against the bidder or bid security if a bidder is permitted
to withdraw the bid before award.
 Conversely, a successful bidder may not withdraw the bid
after bid opening without forfeiture of bid security, unless
the bidder can establish by clear and convincing evidence
that a non judgmental mistake was made in the bid.
 If withdrawal of a bid after bid opening is permitting, no
action may be taken against the bidder or bid security.
63
4.3 Performance Bond
 The Contractor, upon receiving the Letter of Acceptance,
shall obtain and provide to the Employer before signing the
Contract, the Performance Guarantee in the value of ten
percent of the Contract Sum, as a guarantee of the proper
execution of the Works in accordance with the Contract.
 This guarantee shall be issued by a licensed bank or
financial institution acceptable to the Employer.
 The obtaining of such guarantee shall in all respects be at
the expense of the Contractor.
 The Performance Security shall be valid until a date 28
days from the date of issue of the Certificate of Completion
in the case of a Bank Guarantee, and until one year from
the date of issue of the Completion Certificate in the case of
a Performance Bond.
64
4.3 Performance Bonds
 Performance bonds guarantee the performance of the
contract requirements at that stated bid price. In effect,
the surety is saying it guarantees the performance of the
contractor, or it will complete the project as described in
the plans and specifications.
 Performance Bonds guarantee the contractor will
faithfully perform the contract or the terms of the
contract.
 This protects the owner from financial loss should the
contractor fail to perform the contract in accordance with
its terms and conditions.
 Performance bonds frequently incorporate payment bond
(labor and materials) and maintenance bond liability.
65
 While a bid bond is submitted with the bid, a
performance bond is submitted by the winning bidder
upon award of the contract.
 The surety is in the position of being asked to guarantee
the contractor’s performance.
 Therefore, the contactor must demonstrate an ability to
perform before the surety is willing to issue payment and
performance bonds.
 The sureties will visit the contractor’s home office and
job sites, and will contact the owners of recently
completed contracts.
66
 If a contractor defaults on performance of the contract,
the surety has three basic choices:
 Buy back the bond. This amounts to giving the
owner a check for the amount of the penal value of
the bonds.
 Replace the contractor. Negotiate or advertise for
bids for the purpose of obtaining another contractor
to finish the work.
 Finance the contractor. The bonding company runs
the risk of spending more than the value of the bond,
but this is still a common option because the
contactor is familiar with the project.
 Today most sureties try to replace the contractor.
67
4.4 Payment Bonds
 Payment Bonds ensure subcontractors, laborers and
material suppliers used in fulfilling a contract will be
paid.
 A payment bond is a contract bond that guarantees
payment of the contractor's obligation under the contract
for subcontractors, laborers and material suppliers
associated with the project, providing assurance that they
will be paid if the contractor defaults.
 The payment bond is a protection for those supplying
labor or materials to a public job.
 In most cases, payment bonds and performance bonds
are issued together as one bond; the same application
covers both.
68
4.4 Advance Payment Bond
 These are bonds or guarantees given to the owner by the
contractor assuring the owner that the contractor will pay
back any advance payment that he has received.
 The Employer shall make advance payment to the
Contractor of the amounts stated in the PCC by the date
stated in the PCC, against provision by the Contractor of
an Unconditional Bank Guarantee in a form and by a
bank acceptable to the Employer in amounts and
currencies equal to the advance payment.
 The Guarantee shall remain effective until the advance
payment has been repaid, but the amount of the
Guarantee shall be progressively reduced by the amounts
repaid by the Contractor.
 Interest shall not be charged on the advance payment.
69
4.4 Advance Payment Bond
 The Contractor is to use the advance payment only to pay
for Equipment, Plant, Materials, and mobilization
expenses required specifically for execution of the
Contract. The Contractor shall demonstrate that advance
payment has been used in this way by supplying copies of
invoices or other documents to the Project Manager.
 The advance payment shall be repaid by deducting
proportionate amounts from payments otherwise due to
the Contractor, following the schedule of completed
percentages of the Works on a payment basis. No
account shall be taken of the advance payment or its
repayment in assessing valuations of work done,
Variations, price adjustments, Compensation Events,
Bonuses, or Liquidated Damages.
70
4.5 Defects Liability Security
 After primary taking over, 5% guarantee is submitted to
employer for defect liability, valid for 365 days or as
stipulated in PCC.
4.6 Insurance Certificates
 Insurance for Works and Contractor’s Equipment,
 Insurance against Injury to Persons and Damage to
Property ,
 Insurance for Contractor’s Personnel.
71
2.3 Contractor Selection
Pre/Post Qualification
2.3 Methods and Criteria's

2.4.2 .1 Pre-qualification/Post-qualification
 To limit the number of firms allowed to submit tenders on a
project, some owners require that contractors be pre-qualified.
 They must submit information about their experience,
competence and financial condition, after which the owner
decides whether they are qualified or not
 Post-qualification is another option. If a contractor is the
apparent low tenderer for a project, it will then be asked to
submit information demonstrating its qualifications.

2.3.1. Method of selection
 The World Bank provides seven method of selection, among
them the following are the common ones;

 Quality & Cost Based Selection (QCBS);
 Quality Based Selection (QBS);
 Selection under a Fixed Budget (SFB);
 Least Cost Selection (LCS);
 Single Source Selection (SSS);
74
2.3.2 Evaluation Criteria
 To qualify for award of the Contract, in accordance with ITB Sub-
Clause 4.5 of PPA 2006, bidders shall be assed base on the

following criteria:
1. Average annual volume of construction work
2. Experience as a prime/ sub contractor in similar nature of works
3. Proposals for the timely acquisition of essential equipment
4. Schedule of Key Personnel
5. General work program, brief description of construction method,
site organization and work items to be sub-contracted etc..
75
2.4 Project Mobilization Phase
Legal and
2.4 contractual
Project
organization
issues
and start up

2.4.1 Legal and Contractual Issues
Bonding and Insurances
 A bond is a legal instrument issued by a third party to guarantee the obligations
of a first party to a second party.
 The Three main types of bonds include;
 Bid Bond/Bid security

 Performance Bond
 Payment Bond
 Types of Construction insurance into;
 Property insurance,
 Liability insurance,
 Employee insurance and other types.

77 2017, Tadesse A.
2.4.2 Project organization and start up ( Cont…)
1. Project organizational structure

 Establish project organization structure based on the size, type and complexity of project
2. Assignment of core personals and preliminary requirement

 Site Engineer
 Planning programming head
 Administration and finance etc..
3. Initial coordination meeting

This meeting is conducted with head office staffs to decide on strategic
matters such as;
Setting the project key performance indicator
 Tender assumption
 Mobilization program etc…
4. Initial consultant/client meeting
To discuss on issues like

 Communication and documentation
 Authority and contact person
 Parties responsibility
 Initial mobilization
 Meeting programs et
5. Constructability review meeting

Major issue to be discussed will be is the design complete and can be
constructed
5. Project Cost and petty cash management

 All projects shall have separate account codes/chart of account issued to them
 The amount of patty cash should be determined
6. Site hand over

 Ensure that all representatives are presented
 Check all the necessary requirements
7. Initial mobilization program

 Resource mobilization shall only commence after site handover has taken place
 The PM at this stage shall study, identify and decide on availability of various
resources in the vicinity of the project site & determine which resources and
amount will be mobilized
8. Site Establishment
 Site security and access
 Resources mobilization
 Lay out of site office and other facilities
 Utility, water supply, drawing, electric power and
communication
 Accommodation of labor and staffs
 Office furniture's and workshop equipment

9. Environmental health and safety

 Appoint safety supervisor and make sure that he has prepare and continually
update his EH & Safety plan
10. Local construction material sourcing

 Decide whether you are going to use
 Own quarry
 quarry owner to get materials
11. Local labor sourcing and recruitment

 Identify local labor sources
12. Local laws and regulation

 Be aware of local rules and regulation and respect it
2.5 Project Operation Phase
Contract Administration
2.5 Monitoring and Controling
Resources Management

2.5.1 CONTRACT
ADMINISTRATION
84 Training on Construction Contract Management, Sep 2017, Tadesse A.

Contents
0. Basic Principles of a contract
1. General
2. Variation
3. Powers and Responsibilities of the Engineer
4. Delay and Time Extension
5. Payment
6. Price Adjustment
7. Default of Parties
8. Obligation and Rights of Parties
85
Training on Construction Contract Management, Sep 2017, Tadesse A.
Basic Principles of a Contract
Training on Construction Contract Management,

86 Sep 2017, Tadesse A.
0. Principles of Contract
0.1 Contract: Definition
 Generally, a contract is an agreement or willful promise
enforceable at law.
 However, not all agreements or promises are contracts as
some agreements may lack enforceability at law.
 Enforceable at law means that if the agreement reached
between the parties breached (deviations occur from the
promises) by one of the parties, the aggrieved party, may
bring a legal action against the other to demand the
enforcement of its rights with the support of law.
 A valid contract is an agreement made between two or
more parties whereby legal rights and obligations are
created which the law will enforce.
87
Training on Construction Contract Management, Sep 2017, Tadesse A
 The earliest recorded reference to a building contract
comes from one of the laws of Hammurabi, the
Babylonian conqueror:
“If a contractor builds a house for a man this man shall
give the contractor two shekels of silver as recompense.
If a contractor builds a house and does not build it
strong enough and it collapses and kills the owner the
contractor shall be put to death.”
 This ancient law explicitly express the rights, obligations

and penalties for non compliance of contracting parties.
88
 According to Art. 1675 of the 1960 Civil Code of Ethiopia:
“A contract is an agreement whereby two or more persons
as between themselves create, vary or extinguish
obligations of a proprietary nature.”
 The definition encompass the following main points:
 The contract is an agreement;
 The agreement is to be made between two or more
persons;
 The agreement is binding between such two or more
persons;
 The agreement is to create, vary and extinguish
obligations;
 The nature of obligations is proprietary.
89
0.2 Elements of Contract
 According to Art. 1678 of the Civil Code, no valid
contract shall exist unless:
 The parties are capable of contracting and give their
consent sustainable at law.
 The object of the contract is sufficiently defined and
is possible and lawful.
 The contract is made in the form prescribed by law.
 The following are the fundamental elements of contract.
 Capacity of the contracting parties;
 Consent of the contracting parties;
 Object of the contract; and
 Form of contract, if any.
90
0.3 Effects of Contract
 Effects of contract may have two dimensions:

 The time when the contract is considered bound by
the contracting parties; and
 The fulfillment or performance of the set of
promises prescribed in the contract;
 The first one relates to the effectiveness of the contract,
whereas the second is related to the performance of
obligations of the contracting parties under the contract.
91
0.4 Purpose of Construction Contracts
 The fundamental purpose of construction contract is to:
 Describe scope of work;
 Establish time frame;
 Establish cost and payment provisions;
 Establish commercial terms and conditions;
 Set obligations, remedial rights and relationships;
 Manage multiple risks;
 Balance risk;
 Set project execution plan;
 Establish control mechanisms;
 Minimize disputes; and
 Improves economic return of investment.
92
Contract Administration

1. Introduction
 The purpose of contract administration is to see that the
contract is properly administered in parallel with the
execution of works.
 It is also to ensure that the contractor receives fair and
proper payment for the works executed;
 Main issues to be considered in contract administration:
 Variations;
 Powers and responsibility of the engineer;
 Delays, Time extension, and Liquidated damage;
 Payment;
 Price adjustment;
 Default of employer and contractor;
 Suspension;
 Termination; and
 Claims and disputes.
94
2. Variation
2.1 Introduction
 Construction project usually undergoes through a
complex process, which requires close cooperation and
coordination among the stakeholders.
 The construction process is influenced by highly
changing variables and unpredictable factors that could
result from different sources.
 The different stages of construction projects are,
inception/conceptual stage, design development,
procurement, construction, testing and commissioning
and operation.
 Design plays an important role in improving the
development of construction industry. A good design will
enhance value generation, reduce variation, dispute and
improve the work flow.
95
2. Variation
2.1 Introduction
 “In a perfect construction world there would be no
change orders” (anonymous). Unfortunately there is no
perfect construction world.
 Therefore change is a fact of life for construction project
and it is inevitable.
 Changes or variations result from the necessity to
modify aspects of the construction project in reaction to
circumstances that develop during the construction
process.
 Variations are common in all types of construction
projects. The nature and frequency of variation
occurrences vary from one project to another depending
on various factors.
96
2. Variation
2.2 Variation: Definition
“Variation work is the work that can be imposed with in
the contract documents. It is a change or alteration to
the plans or specifications for a number of reasons
implicit in the original agreement, these reasons could
include, but are not limited to, omissions in the design
documents, recognition of better methods or materials to
achieve the required effect, resolution of problems
recognized, resolution of unforeseen conditions not
anticipated, and similar adjustments with in the intent of
the original contract.”
97
2. Variation
2.3 Types of Changes
 There are several types of changes in the construction
work process. Changes can be classified into:
 Formal Changes;
 Constructive Changes;
 Cardinal changes;
 Design Related Changes; and
 Payment changes.
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2. Variation
2.3 Types of Changes
 Formal Changes: Formal changes are change order
which is directed by the owner or owner’s representative.
 Constructive Changes: is a type of change that lacks the
formal directive authorizing a change in work.
 Cardinal Changes: is as intensive as it changes the entire
character of the work required under the contract.
 Design Related Changes: Design error can be considered
as a change to the construction Contract.
 Payment Changes: Disputes arise when one party fails to
pay the other.
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2. Variation
2.4 Causes of Changes
 With respect to causes that lead to changes, changes can
be divided into two categories:
 Technical Changes; and
 Administrative Changes.
 With respect to their originators changes can be
categorized:
 Owner related changes;
 Design Consultant related changes;
 Contractor related changes; and
 Other changes.
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2. Variation
2.4.1 Technical Changes
 In the category of technical changes, there are four types
of causes namely
 Planning and design;
 Underground conditions;
 Safety considerations; and
 Natural incidents.
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2. Variation
2.4.2 Administrative Changes
 The category of administrative changes consists of:
 Changes of work rules/regulations: The work rules or
regulations enforced during the initial period of planning and
design may be revised by the governing agency latter in the
construction stage.
 Changes of decision making authority: Project risks incurred
by the change of decision making authority are external and
beyond the control of both the client and the contractor.
 Special needs for project commissioning and ownership
transfer: the user party, during the course of commissioning,
may raise request to modify its requirements for the built
facility.
 Neighborhood pleading: Usually neighborhood concerns are
considered in the stage of planning and design.
102
2. Variation
2.4.3 Causes of variation with respect to their originator
A. Owner related changes
1. Change of plans or scope by owner.
2. Change of schedule by owner.
3. Owner's financial problems.
4. Replacement of materials or procedures.
5. Change in specifications by owner.
B. Contractor related changes
1. Unavailability of equipment.
2. Differing site conditions.
3. Defective workmanship.
4. Unfamiliarity with local conditions.
5. Contractor's lack of required data.
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2. Variation
C. Design Consultant related changes
1. Change in design by consultant.
2. Errors and omissions in design.
3. Conflicts between contract documents.
4. Inadequate working drawing details.
5. Noncompliance design with government regulations.
6. Noncompliance design with owner's requirement.
7. Change in specifications by consultant.
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2. Variation
D. Other changes
1. Weather conditions.
2. Safety considerations.
3. Change in government regulations.
4. Change in economic conditions.
5. Socio-cultural factors.
6. Unforeseen problems.
105
2. Variation
2.4.4 Effects of Variation
 Variation order impact on the project cost and/or progress
varies with the following:
 The larger the scope (measured by the cost), the
greater the impact.
 The later in time the change order is implemented,
the greater the impact.
 The better the management of the change order
process, the less the impact.
 There are many effects of variation order to either parties
of the construction project. Some well known ones
include: Delay, Cost overrun, Claim and Dispute .
106
2. Variation
2.4.5 Variation Provisions
 Variation is the addition, omission or alteration of works in terms
of quality, form and function necessary to complete the works
contained in the main contract.
 Construction contracts provision for variation.
 Variations: Sub-Clause 51.1 (MoWUD 1994, FIDIC IV); Sub-
clause 13.1 and 13.3 (FIDIC 1999, 2006 MDB);
 Engineer’s power to order variation: Sub-clause 51.2 (MoWUD
1994, FIDIC IV);
 Valuation of variation: Sub-clause 52.1 (MoWUD 1994, FIDIC IV)
 Engineer’s power to fix rates: Sub-clause 52.2 (MoWUD 1994,
FIDIC IV); and
 Variation exceeding 10% (15%): Sub-clause 52.3 (MoWUD 1994,
FIDIC IV).

107
3. Powers & Responsibilities of the Engineer
 The Engineer, not a party to the contract between the
employer and the contractor, is in fact empowered under
various clauses of the MoWUD 1994, PPA 2006, FIDIC
4th edition and FIDIC1999, 2006 MDB conditions of
contract.
 These powers include to:
 Give instructions;
 Make decisions and/or determinations; and
 Order variations, etc.
 The above decisions are binding on the parties to the
contract unless and until they are subsequently or varied
by DRB, ADR or an arbitrator.
108
3. Powers & Responsibilities of the Engineer
 The engineer is considered as:
 Impartial third party in MoWUD 1994 and FIDIC

IV (Sub-clause 2.6); in dispute settlement under
FIDIC IV (clause 67.1); in giving determination on
matters in relation to the contract - PPA 2006 Clause
4.1; and FIDIC 1999, 2006 MDB clause 3.5.
 Agent to the employer in FIDIC 1999, 2006 MDB

(Sub-clause 3.1) and PPA 2006 (clause 4).
109
4. Delays & Time Extension
4.1 Delays
Delay caused by employer
 If the employer delayed in site handover/possession (MoWUD
1994 Sub-clause 42.1; FIDIC IV clause 42.2; and FIDIC 1999,
2006 MDB sub-clause 2.1) and to effect payment (MoWUD
1994 and FIDIC IV Clause 60).
 If the Engineer failed to give instruction and notice on time, do
not provide drawings on time, etc.
Remedial right of the contractor
 Financial claim; and
 Time extension.
Delay caused by contractor
 Delay of progress of works and failure to meet completion time.
Remedial right of the Employer
 Liquidated damage.
110
4.2 Grounds for Extension of Time according to FIDIC
 The following factors are the major grounds for Extension
of Time.
 Opening up and inspection of defective work;
 Delay in the supply of information;
 Delay on the part of nominated sub-contractors/
suppliers;
 The execution of work not forming part of the contract;
 The supply of materials by the employer;
 The exercise by the government of any power which
directly affects the works;
 Carrying out of work by statutory power; and
 Failure by the employer to give access over employer’s
land.
111
 The following factors are the major grounds for Extension
of Time (FIDIC 1999, 2006 MDB).
 Clause 8.4(a) due to Variation;
 Clause 8.4(b) see below in conjunction with other
relevant Sub-clauses;
 Clause 8.4 (c) due to exceptionally adverse climatic
conditions;
 Clause 8.4 (d) due to unforeseeable shortages in the
availability of personnel, or Goods caused by
epidemic or governmental action;
 Clause 8.4(e) due to any delay, impediment or
prevention caused by or attributable to the Employer,
the Employer’s personnel (including the Engineer see
Clause 1.1.2.6) or the Employer’s other contractors;
112
 The following factors are the major grounds for Extension of
Time (FIDIC 1999, 2006 MDB).
 Clause 8.4(b)cum Clause 1.9(a) due to delay in issuing
drawing & instructions by the Engineer to the Contractor;
 Clause 8.4(b) cum Clause 2.1(a) due to delay in providing
access to the Site by the Employer;
 Clause 8.4(b) Clause 4.7(a) due to delay caused due to
error in Setting out;
 Clause 8.4(b) cum Clause 4.12(a) delay due to
unforeseeable physical conditions;
 Clause 8.4(b)cum Clause 4.24(a) delay caused due to
discovery & reporting of Fossils;
 Clause 8.4(b)cum Clause 7.4(a) delay caused by the
Employer in relation to Testing;
113
 The following factors are the major grounds for
Extension of Time (FIDIC 1999, 2006 MDB).
 Clause 8.4(b)cum Clause 8.8 delay caused by
suspension as ordered by the Engineer;
 Clause 8.4(b)cum Clause 8.11 delay caused due to
prolonged suspension provided the Contractor opted
for resuming the performance of the Works after
such prolonged suspension;
 Clause 8.4(b)cum Clause 16.1(h) delay caused to the
Contractor due to suspension or reduction in the
progress of the Works by the Contractor due to delay
in payment;
114
5. Payment
 The provisions relating to payment concern the way the

contractor is paid by the employer.
 The primary obligation upon the employer is to give the

contractor the sum of money which forms the
consideration for the contract.
 Money must be paid promptly and fully unless there are

specific reasons for withholding it.
115
5. Payment
5.1 Contract Price
 The contract price is dealt with in different ways by
different contracts.
 If the contract is ad-measurement, the bid by the
contractor is based upon the work described and
quantified in the contract bills.
 If any quantities are altered because of variations in the
client’s requirements, then the contract sum will be
altered. Otherwise, the contractor is paid the amount of
the tender.
116
5. Payment
5.2 Time of Payment
 It is common practice in the construction industry, for
payment of the contract sum to be made by installments.
 This is because the total value of each contract forms a
large proportion of a contractor’s annual turnover.
 Payment by installments should eliminate the need for
the contractor to borrow money pending final payment.
 The time of payment should be as clearly depicted in the
contract document.
117
5. Payment
5.3 Payment Obligation according to FIDIC
5.3.1 Payment of the contract price
 Clause 14.2 cum Clause 14.7(a) in relation to Advance
Payment.
 Clause 14.7(b) in relation to Interim Payment.
 Clause 14.13 cum Clause 14.7(c) in relation to Final
Payment.
 Clause 14.9 in relation to the first half of the Retention
Money.
 Clause 14.9 in relation to the second half of the
Retention Money.
118
5. Payment
5.3.2 Other Payment Obligations (relative to claims or
other wise)
 Clause 1.9(b) payment of cost & profit due to delay in
issuing drawings & instructions by the Engineer;
 Clause 2.1(b) payment of cost & profit due to delay
caused in providing access to the Site;
 Clause 4.7 payment of cost & profit due to error in
Setting out;
 Clause 4.12(b) payment of cost due to delay caused by
unforeseeable physical conditions;
 Clause 4.24(b) payment of cost in case of discovery &
reporting of Fossils;
119
5. Payment
other wise)
 Clause 7.4(b) payment of cost in case of Testing for
which the Employer is responsible;
 Clause 8.9(b) payment of cost in case of suspension of
Works;
 Clause 10.3(b) payment of cost & profit in case of
interference with Tests on Completion;
 Clause 11.6 payment of cost in case of further tests for
which the Employer is responsible;
 Clause 13.7 cum 14.3(b) payment of cost in case of
Adjustment for Changes in Legislation;
120
5. Payment
other wise)
 Clause 13.8 payment of cost in case of Adjustment for
Changes in Cost.
 Clause 14.3(a) cum Clause 13.2 payment of additional
payment to the Contractor derived from savings due to
the effects of Value Engineering.
 Clause 14.8 payment of financing charges in case of
delay in payment.
 Clause 15.4( c ) entitlement to a balance of costs, if any,
in case of termination of the Contract by the Employer
due to the default of the Contractor, after completion of
the Works by the Employer or another contractor;
121
5. Payment
5.3.2 Other Payment Obligations (relative to claims or other
wise)
 Clause 16.1(b) payment of cost & profit in case of
suspension & reduction of the progress of the Works by the
Contractor;
 Clause 16.4 payment of any loss or damage sustained by
the Contractor due to termination of the Contract by the
Contractor due default of the Employer;
 Clause 17.4(b)cum Clause 17.3(f) & (g) payment of cost &
profit in case of Employer’s risks;
 Clause 19.7 payment of costs in relation to Plant, Materials,
other costs & liabilities, cost of removal of the Temporary
Works, cost of the repatriation of Contractor’s Personnel;
 Clause 20.1 cum Clause 14.3 payment of claims;
122
6. Price Adjustment
6.1 General
 It is common to come across price escalation in
construction projects due to the following factors:
 Cost of material;
 Design and specification;
 Project specific factors;
 Competition and market condition; and
 Macroeconomic conditions.
 There fore price escalation provisions are stated in many
contract forms.
 Two methods of price adjustment:
 Basic price (base date price) (Clause 70.1 MoWUD 1994; FIDIC
IV edition, clause 13.7 FIDIC 1999, 2006); and
 Indices/Adjustment formula (clause 47.1 PPA 2006, clause 13.8
FIDIC 1999, 2006 MDB).
123
6. Price Adjustment
6.2 Purpose
 The purpose of a Price Adjustment clause is to provide a
mechanism for reimbursing contractors for changes in
input prices over which they have no control at all.
 The adjustment to be applied to the amount otherwise
payable to the Contractor, as valued in accordance with
the appropriate schedule and certified in payment
Certificates, shall be determined from formulae for each
of the currencies in which the contract price is payable.
 No adjustment is to be applied to work valued on the
basis of cost or current prices.
Ln En Mn
Pn  a  b c d  ........
Lo Eo Mo
124
6. Price Adjustment
6.3 PPPAA 2011 Provision
125
7.1 Default of Employer
 Breach of contract by the employer (Sub-clause 69.1 of
MoWUD 1994 and FIDIC IV); Clause 16 of FIDIC 1999,
2006 (outlines employers default as a basis for
contractor’s entitlement to suspend and terminate the
contract).
 Non-payment, late or under payment;
 None or late possession of site;
 Obstruction of works;
 Non-coordination of work of the main contractor;
 Failure to allow the engineer to function in an
independent role; and
 Delay in providing drawings, information and
approvals.
126
7.2 Default of Contractor
 Breach by the contractor includes (Sub-clause 63.1 of
MoWUD 1994 and FIDIC IV); Clause 15.2 of FIDIC
1999, 2006 (outlines contractors default as a basis for
Employer’s entitlement to suspend and terminate the
contract)
 Abandonment or total failure to complete;
 Delay in completion; and
 Defective works or materials.
127
7.3 Suspension
 The Engineer may instruct the contractor to suspend
some or all of the works as appropriate (Sub-clause 8.11
of FIDIC 1999, 2006 MDB).
 If it continues for more than 84 days, the contractor asks
permission to proceed.
 If the engineer fails to respond within 28 days the
contractor can terminate the contract.
 The contractor has a right to suspend or reduce progress
of work giving 28 days prior notice, if he is not paid
within 28 days after the Engineer approved the payment
certificate and delivered to the employer as per sub-
clause 60.10 (FIDIC IV Sub-clause 69.4).
128
3.4 Termination
 Termination can be a result of completion, discharge of
obligation, default of one party, force majeur etc.
 One of the contracting party has a right to terminate the
contract on the ground of breach by the other party.
 Ground of termination by the Employer:
 Bankruptcy/Insolvency of the contractor;
 Failure to execute the work in accordance with the contract;
failure to proceed with due diligence; neglect in carrying out
obligations under the contract,
 Abandoning the contract;
 The contractor has, to the detriment of good workmanship,
defiance of the Engineer’s instruction to the contrary, and
Assigning (sub-let) any part of the contract; and
 Suspending the execution of work for 28 days after received
Engineer’s written notice to proceed.
129
3.4 Termination
 Ground of termination by the Contractor:
 Bankruptcy/Insolvency of the employer; being a
company goes into liquidation, other than for the
purpose of a scheme of reconstruction or amalgamation;
 Failure of the employer to make payment within the
time stated by the contract;
 Obstructing or interfering with the issue of any
certificate by the engineer;
 Replacing the engineer against the reasonable
objections of the contractor; (FIDIC IV) and
 Employer giving formal notice to the contractor for
unforeseen reasons, due to economic dislocation, it is
impossible for him to meet his contractual obligations.
130
3.4 Termination
 If termination due to default of the Employer, the
contractor has the right to be compensated for the damages
that arise from the termination which include:
 Idle equipment and workmen;
 Material on site;
 Forced demobilization; and
 Anticipated profit.
 If termination is due to the default of the contractor:
 The employer may use contractor’s equipment for
completion of the works as he thinks proper after
termination (FIDIC IV Sub-clause 63.1).
 Contractor’s equipment on site are deemed to be the
property of the employer (PPA 2006 Sub-clause 61.1).
131
8. Obligation & Right of Parties
8.1 Contractor’s Obligation
 The obligations of the contractor, under the FIDIC 1999
and 2006 MDB Conditions of Contract, may be
generalized as follows:
 Completion obligation;
 Quality performance obligation;
 Timely performance obligation;
 Obligation to provide securities, indemnity and
insurance;
 Obligation to supply information and notice;
 Administrative obligation; and
 Obligation upon or after completion.
132
8.2 Employer’s Obligation
 The obligations of the employer, under the FIDIC 1999

and 2006 MDB Conditions of Contract, may be
generalized as follows:
 Payment obligation;
 Risk sharing obligation;
 Acceptance obligation; and
 Other obligations.
133
8.3 Remedial right of the Contractor
 The remedial rights of the contractor, can be contractual and
legal remedies.
Contractual remedies
 Financial remedies:
o Cost;
o Profit;
o Financing charges; and
o Indemnity.
 Extension of time;
 Other remedies:
o Deceleration of progress of the Works;
o Suspension; and
o Termination.
134
8.3 Remedial right of the Contractor
Legal remedies
 Specific Performance;
 Cancellation of Contract;
 General damages; and
 Other remedies, if any.
135
8.4 Remedial right of the Employer
 The remedial rights of the Employer, can be contractual
and legal remedies.
Contractual remedies
 Financial remedies:
o Delay damages;
o Indemnity; and
o Deduction of contract price.
 Extension of time (in case of defects liability period);
 Other remedies:
o Suspension; and
o Termination.
136
8.4 Remedial right of the Employer
Legal remedies
 Specific Performance;
 Cancellation of Contract;
 General damages;
 Other remedies, if any;
137
Exercise
Compare the provisions in PPA 2006, PPA 2011, MoWUD
1994 and FIDIC 1987 GCC on the following issues
 Variations;
 Powers and responsibility of the engineer;
 Payment

Format
ISSUES/Condition PPA 2006 PPPA 2011 MoWUD 1994 FIDIC 1987
of Contracts
Variation
Powers and
responsibility of the
engineer;
Payment

CONSTRUCTION CONTRACT MANAGEMENT
Claim and Dispute Management
140 Training on Construction Contract Management, Sep 2017, Tadesse A.

Contents
Claims and Dispute Management
1. Claims Management
2. Procedure for claims
3. Types of Claims
4. Construction Disputes
5. Dispute Resolution
6. Dispute resolution Mechanisms
7. Discussion
141
1.1 Claim: Definition
 Claims in construction industry are defined as demands
for compensation in terms of money, time extension or a
combination of both a party rightly or wrongly believes
entitled to.
 Claim is mostly concerned with entitlements and
liabilities arising under, or as a result of, a legally valid
contract.
 A construction claim is therefore can be a demand for
payment of additional compensation, adjustment of the
parties' respective contractual obligations, extension of
time or compensating delay damages, or any other
change with regard to the contractual conditions or terms.
 A claim is an assertion to a contractual right.
142
1.2. Causes of Claims
 Causes for claims include among other things the occurrences
of deviations from the promises made under the construction
contract during the performance of the Construction Contract.
 Completion time;
 Construction cost;
 Quality performance; and
 Safety requirements.
 Claims may occur when the terms and conditions of the
contract change in such a way that the contractor is unable to
recover expenses and profits.
 When the provisions of the contract documents and
specifications lack clarity, a correct interpretation of the
documents may result in extra expenditure, which a
contractor is forced to cover through claims.
143
1.2. Causes of Claims
 Contractors attempt to obtain work by submitting an
artificially low price and hoping to make up the difference
through claims later on.
 The constraints of time, finances and other factors force a
contractor to cut corners as much as possible.
 Where the form of contract transfers the risks to the
employer (esp. in DBB delivery system), the contractor
may be tempted to claim.
 The following factor also contribute for claims:
 Poor or unclear tender and/or contract documents;
 Poor or inadequate administration of responsibilities
by stakeholders; and
 Unforeseen or uncertain situations during execution
of the Construction Project.
144
1.3. Understanding Claims
 As part of the unique nature of civil engineering projects and
due to the unpredictability of their nature, civil engineering
projects are prone to be claim sensitive.
 No matter how carefully drawn the contract documents may
be, situations can, and usually do arise, which were not
exactly as expected by the parties.
 This fact seems to have been overlooked by the parties
executing major projects in the Ethiopia.
 The fact that claims are in a way unavoidable should not
create an atmosphere of resignation/apprehension but should
encourage the development of a resolution mechanism.
 In such cases, the best approach is not to have an
antagonistic approach toward their resolution but create an
atmosphere of partnership between all parties.
145
1.3. Understanding Claims
 The antagonistic approach is partly a result of lack of
experience in handling claims, inadequate
understanding of contractual and legal requirements, in
addition to an attitude of avoiding responsibility.
 Such drawbacks can only be addressed through an

integrated awareness and claims handling capacity
building.
146
2. Procedures for Claims
2.1. General
 Recognizing the inevitability of claims, many
international civil engineering projects provide means of
handling claims in their contractual provisions.
 These procedures set out a systematic approach to the
submission of claims and to their handling.
 Claim procedures under the following contract forms is
dealt:
 FIDIC IV (1987),
 FIDIC 1999 and 2006 MDB,
 MoWUD 1994, and
 PPA 2006 (Reading Assignment).
147
2.2. FIDIC IV Claim Procedures
 In order to avoid ambiguity in the handling of claims, the
FIDIC IV edition sets out in Clause 53 detailed procedures
for claims as follows:
 The contractor gives his intention to claim within 28
days after the event give rise to the claim has first
arisen;
 The contractor keeps contemporary records on the
claim issue;
 The engineer examines such contemporary records;
 The contractor submits detailed particulars of the
amount claimed and the grounds upon which the claim
is based;
 The engineer to make determination based on the
available contemporary records.
148
2.3. FIDIC 1999, 2006 MDB Claim Procedures
 FIDIC 1999, 2006 MDB edition sets out in clause 20.1
detailed procedures for claims which include:
 The contractor gives notice to the engineer within 28
days after the event give rise to the claim has first
arisen;
 The contractor submits supporting particulars to the
claim as relevant to the circumstances;
 The contractor send to the Engineer within 42 days a
detailed claim with supporting particulars of the
amount claimed (extension of time and/or additional
payment); and
 The engineer shall respond within 42 days after
receiving the detailed claim with approval,
disapproval or detailed comments.
149
2.4. MoWUD 1994 Claim Procedures
 MoWUD 1994 has a brief description claims in clause
52.5 stating “the contractor sends an account giving
particulars as detailed as possible every month to the
Engineer.”
 It do not state the time frame the Engineer will respond to
the claims.
 Besides, the contractor is required to submit every month
the amount of additional works executed together with
claims.
 Any claim not included in the particulars will not be
considered by the Engineer.
150
3. Types of Claims
 Civil Engineering projects are uploaded with a variety of
claims which attributes to their unique nature and
unpredictability.
 Such claims can be categorized as follows:
 Claims within the provision of the contract;
 Claims outside the provision of the contract;
 Claims in tort;
 Quantum Meruit claims;
 Ex-gratia claims; and
 Disruption and delay claims.
151
3. Types of Claims
3.1. Claims within the provision of the contract
 Claims as a result of certain anticipated and specified
events and for which a remedy is designated in the
contract.
 Claims as a result of an event where a certain term of the
contract is breached and for which a remedy is not
designated in the contract.
 Certain ‘common’ breaches of contract, such as denied
access or late information are also covered by claims
procedures included within the claims clauses of the
contract.
 Claims made under the expressed provisions of a contract
which are dealt with under the provisions of the contract.
 The terms of the contract define the situations in which
such claims may be made and how they may be handled.
152
3. Types of Claims
3.2. Claims outside the provision of the contract
 Claims which are either not made under the conditions of

contract or are those allegedly made under them but
considered legally unenforceable by the employer on the
basis that they do not fall within their provisions.
 Such claims are invariably concerned with the recovery

of damages and even though they may be outside the
scope of the contract, they are nevertheless subject to
resolution within it.
153
3. Types of Claims
3.3. Claims in Tort
 Tort is a legal term used to describe the various wrongs,
which may give rise to civil proceedings, mainly in the
form of action for damages.
 Although the law of tort regulates a wide variety of
unlawful behavior, those related to construction include:
nuisance, slander, libel, trespasses and negligence.
 In construction projects the emission of: excessive dust,
noise, vibration, fumes, seepage, gasses, smoke etc.
produced by someone may expose him to liability for
nuisance.
 The court may order the nuisance to be stopped by an
injunction or may award damages or both.
154
3. Types of Claims
3.4. Quantum Meruit Claims
 It is just to mean “As much as it is Worth”.

 Quantum Meruit claims are claims where work has been
done but no contract or price has been agreed.
 Then it may be claimed that the work should be valued
and paid for what it is worth.
 A quantum meruit claim may also arise, for example
where work is done on the basis of a letter of intent and
there is no contractual liability.
155
3. Types of Claims
3.5. Ex-gratia Claims
 Ex-gratia claims made with no foundation in the
contract or at law but only in a sense of “fairness” or
equity.
 Such claims depend upon ‘ex-gratia’ or ‘kindness
payments’ by the employer made in the particular
circumstances.
 Sometimes such payments are made to avoid or to
terminate claims negotiations or a dispute.
 An ‘Ex-gratia’ claim might be made to recover cost
incurred by the contractor, the expenditure of which gave
benefit to the employer, but for which there are no
grounds for recovery under the contract.
156
3. Types of Claims
3.6. Disruption and Delay Claims
 These claims arise as a result of unanticipated changes
and lack of timely responses and actions.
 The following events may bring about such claims:
 Design changes or incomplete design;
 Delay to give information, late issue/approve
drawings and works;
 Delay in site handover (FIDIC Sub-clause 42.2);
 Right of way related issues; and
 Early occupancy (considered as interfering and
disrupting the works).
157
3. Types of Claims
3.6. Disruption and Delay Claims
 The possible causes of delay in construction projects
include:
 Delay caused by the Contractor: unjustified and non-
compensable.
 Delay caused by Employer/Engineer: Justified and
compensable.
 Delay caused by External factors: Justified,
compensable or non-compensable.
 Delay caused by both the contractor and Employer:
justified or unjustified and compensable or non-
compensable.
158
4.1 Dispute: Definition
 Dispute can be defined in many ways. Some of them
given by different authors are presented as follows:
 Brown et al., (1993): a dispute is defined as a class or
kind of conflict, which manifests itself in distinct and
justifiable issues. It involves disagreement over issues
capable of resolution by negotiation, mediation or third
party adjudication.
 Bachner (1988): a dispute will not exist until a claim is
asserted by one party which is disputed by the other
party.
159
4.1 Dispute: Definition
 Kumaraswarmy and Yogeswaran (1997): a dispute can
be said to exist when a claim or assertion made is made
by one party is rejected by the other party and that
rejection is not accepted.
 The Oxford dictionary defines Conflict as a dispute or
two parties failing to reach a common understanding.
 It is therefore wise to resolve the conflicts within the
industry than involving people who are not well vest
about the industry.
160
4.2 Dispute Categories
 Construction disputes may take different forms in relation to
the demands in relation to: time (delay), cost, both time and
cost and other form of disputes.
4.2.1 Delay (time) related Disputes
 The contractor or the employer may have their own respective
claims with respect to delay .
 The employer’s claim is related to liquidated damages.
 The contractor’s claim mostly related to prolongation and/or
disruption claims.
 Prolongation: a critical delay which results when the time
necessary to complete a critical activity is prolonged, thus
extending the time for completion of the whole of the works.
 Disruption: the effect of an event or a number of events on
efficiency of execution of the works, irrespective of whether
or not there had been a delay to a critical activity
161
4.2.2 Financial (Cost) related Disputes
 Delays in completion of the works might result in a number
of added costs to the contractor.
 If such delay is determined by the engineer to be the
responsibility of the employer, then a number of claims for
financial compensation can be pursued by the contractor.
These claims include:
 Direct costs,
 On-site establishments, and
 Off-site (head office) overhead.
 Finance charges and interest,
 Profit on direct costs,
 Loss of profit, and
 Interest on late payment.
162
4.2.2 Financial (Cost) related Disputes
 Delays in completion of the works might result in a number
of added costs to the contractor.
 If such delay is determined by the engineer to be the
responsibility of the employer, then a number of claims for
financial compensation can be pursued by the contractor.
These claims include:
 Direct costs,
 On-site establishments, and
 Off-site (head office) overhead.
 Finance charges and interest,
 Profit on direct costs,
 Loss of profit, and
 Interest on late payment.
163
5. Disputes Resolution
5.1 General
 Dispute resolution may have the following aspects/
dimensions:
 Preventive,
 Amicable settlement:
o Negotiation,
o Mediation, and
o Conciliation.
 Judgmental:
o Adjudication,
o Arbitration, and
o Litigation.
164
5.1 General
 The concept of ADR (Alternative Dispute Resolution),
Alternative to what?
 The concept of ADR is related to alternative to litigation
or sometimes alternative to all binding decision making
process (including the decision of the adjudicator and
arbitrator).
 Both preventive and amicable dispute resolution systems
may be categorized under ADR. There is no any binding
or imposed decision by a third party in preventive and
amicable settlement.
165
3.2 Dispute Prevention
 The following aspects may contribute to the prevention
of construction disputes.
 To have a well planned, studied, and designed project;
 To have a clear, accurate and complete tender dossier,
and document;
 To have a clear, accurate and complete contract document;
 To have a balanced (in terms of allocation and distribution
of risks, rights and obligations among the contracting
parties) contract document;
 To discharge the expected contractual and legal
obligations by the contracting parties;
 To have a good project governance; and
 To have a well thought and suitable dispute prevention
system.
166
6. Disputes Resolution Mechanisms
6.1 Amicable Settlement
 The very feature of amicable settlement is that the
disputing parties shall have full control both over the
process and the outcome.
 There is no third party imposition of solution on the
parties to the dispute.
 The following are some of the highly recognized
amicable settlement methods.
 Negotiation;
 Mediation; and
 Conciliation.
167
6.1.1 Negotiation
 Negotiation is a give and take process, a serious attempt
to reach a settlement agreement (Sub-clause 67.2 of
FIDIC IV; Sub-clause 20.5 of FIDIC 1999, 2006 MDB).
 Negotiation could be:
 Direct negotiation; or
 Assisted negotiation.
 Direct negotiation is held directly between parties to the
dispute. The parties may, of course, be assisted by their
own internal advisors.
 In case of assisted negotiation, mediation and
conciliation come in to picture.
168
6.1.2 Mediation
 Mediation describes the process of a neutral and
disinterested person helping disputing parties to
negotiate a resolution to their dispute.
 Mediation is simply a facilitated or assisted negotiation.
To agree or not to agree is left to the decision of the
parties.
 The mediator helps disputing parties to understand the
dispute in a way that will maximize their chances to
reach a mutually acceptable and lasting solution.
 A mediator facilitates the discussion or negotiation, but
will never propose a solution for the settlement of the
dispute.
169
6.1.2 Mediation
 The advantages of mediation include informality, speed and
economy; but more importantly perhaps, it often leads to an
agreed settlement between the parties rather than an imposed
award or judgment.
 The process or structure of mediation is described as follows:
 Setting the Table;
 Story Telling;
 Determining Interests;
 Setting out the Issues;
 Brainstorming Options;
 Selecting the Durable Options; and
 Closure.
170
6.1.3 Conciliation
 Conciliation is a voluntary form of dispute resolution where
a neutral party, the Conciliator, is appointed to facilitate
negotiation between the parties in dispute and to act as a
catalyst for them to reach a resolution of their dispute.
 Unlike the mediator, the conciliator under the conciliation
process, takes a more active role probing the strengths and
weaknesses of the parties’ case,
 Making suggestions;
 Giving advice;
 Finding persuasive arguments for and against each of
the parties’ positions; and
 Creating new ideas which might induce them to settle
their dispute.
171
6.1.4 Difference of Mediation and Conciliation
 Under the mediation method of dispute resolution, if the
parties to the dispute fail to reach agreement, the
mediator himself is then required to draw up and propose
a solution which represents what, in his view, is a fair
and reasonable compromise of the dispute.
 Conciliation is a more formal process than mediation
and it generally involves the engagement of legal
representatives, thus making it a more expensive process
than mediation.
172
6.2 Judgmental Settlement
 The very feature of the judgmental dispute resolution is
that the third party known as the court judge, the
arbitrator or the adjudicator decides the case before
him/her for the parties.
 The parties to the dispute shall have no control over the
process (especially in case of the court system) and/or the
outcome in all the three cases.
 Under the judgmental dispute resolution the following are
recognized:
 Adjudication ;
 Arbitration; and
 Litigation.
173
6.2.1 Adjudication
 Adjudication can be defined as a process whereby an
appointed neutral and impartial party is entrusted to take
the initiative in ascertaining the facts; the law relating to a
dispute and to reach a decision within a short period of
time.
 Under the new FIDIC conditions of contract Dispute Board
(DB) is suggested (Sub-clause 20.2 of FIDIC 1999, 2006
MDB).
 Dispute Board can, according to ICC, be of three types,
namely,
 Dispute Review Board (DRB);
 Dispute Adjudication Board (DAB);
 Combined Dispute Board(CDB);
174
6.2.1 Adjudication
 Adjudication can take the following types:
 Permanent adjudication; or
 Ad-hoc adjudication.
 The permanent one is normally set up at the course of the
contract which remains in place and the members are
remunerated throughout its duration.
 An ad-hoc adjudication is only established after the dispute
has been arisen and its existence comes to an end after it
gives its Determination, Recommendation or Decision.
 The Adjudication could also be composed of:-
 Sole member; or
 Three members.
175
4.2.2 Arbitration
 Arbitration is a process whereby parties in dispute agree to
submit the matter in dispute to the decision of a person or
persons in whom they have confidence, trust and undertake
to abide by that decision.
 Many contract forms have arbitration provisions such as:
Sub-clause 67.3 of FIDIC IV and Sub-clause 20.6 of FIDIC
1999, 2006 MDB.
 According to Article 3325(1) of the Civil Code: “The arbitral
submission is the contract whereby the parties to a dispute
entrust its solution to a third party, the arbitrator, who
undertakes to settle the dispute in accordance with the
principles of law.”
 The parties to the dispute control the process but not the
outcome i.e. the decision called the award.
176
4.2.2 Arbitration
 The pre-requisite to a valid arbitration are the following:
 The existence of a dispute;
 Agreement to refer the dispute to arbitration when the
dispute arises;
 Agreement to be bound by the award; and
 Initiation of the arbitration.
 In relative terms, the following may be taken as advantages of
arbitration.
 Neutrality; (of the arbitrators)
 Confidentiality; (no publicity of both the process and the
outcome)
 Procedural flexibility; (the parties in dispute are capable
of designing their own process)
177
4.2.2 Arbitration
 In relative terms, the following may be taken as
advantages of arbitration.
 Expert arbitrators well versed with the industry;
 Speed and cost;
 Finality of awards; (no appeal, if not always)
 Enforcement of awards; (recognition of the award by
national courts)
 Limited powers of arbitrators; ( no coercive power)
 Multi-party disputes; (no joiner and no consolidation
of third parties without their express consent)
 Awards not binding on third parties.
178
4.2.3 Litigation
 Litigation takes place at the court of law having jurisdiction
over the case. The courts play here their dispute resolution
role.
 Litigation is the most serious and adversarial method of
dispute resolution.
 The procedure before the court is so rigid and not tailor
made to the construction dispute resolution.
 The courts are following the standard procedure established
under the civil procedure code, which applies for all types of
disputes brought to them.
 The advantages of arbitration are all missing under litigation.
 The clear disadvantage of litigation is that it being the most
time consuming.
179
4.2.3 Litigation
 The clear advantage of litigation is that the court itself
enforces its own orders and judgments.
 The role of courts, however, very important in terms of:
 Enforcing an agreement to arbitrate;
 Recognizing and enforcing domestic arbitral award;
 Recognizing and enforcing foreign arbitral award;
 Rendering judicial assistance to the arbitration
process or to the settlement agreement;
 Hearing appeals against the arbitral award, if not
final and appealable; and
 Setting aside of an arbitral award, if, legally qualified
to be set aside.
180
THANK YOU!
181
Project Time Management/Control
182
 Periodically, perhaps monthly, the

contractor will compare schedule progress
with that shown on the project programme
 The purpose is to determine whether the
various activities that were planned to be

active during the previous period were
actually active, the extent of their progress
and, especially, the anticipated project
completion date based on progress to date.
1. Activity definition
 Defining the schedule activities involves identifying and

documenting the work that is planned to be performed. The Activity
Definition process will identify the deliverables at the lowest level
in the work breakdown structure (WBS), which is called the work
package. Project work packages are planned (decomposed) into
smaller components called schedule activities to provide a basis for
estimating, scheduling, executing, and monitoring and controlling
the project work.
183
Cont…
184
2. Activity Sequencing
 Activity sequencing involves identifying and documenting the
logical relationships among schedule activities. Schedule

activities can be logically sequenced with proper precedence
relationships, as well as leads and lags to support later
development of a realistic and achievable project schedule.
 Sequencing can be performed by using project management
software or by using manual techniques.
185
Cont…
186
3.Activity Resource Estimating
 Estimating schedule activity resources involves determining
what resources (persons, equipment, or materiel) and what

quantities of each resource will be used, and when each resource
will be available to perform project activities. The Activity
Resource Estimating process is closely coordinated with the Cost
Estimating process
187
4. Activity Duration Estimating
 The process of estimating schedule activity durations uses
information on schedule activity scope of work, required

resource types, estimated resource quantities, and resource
calendars with resource availabilities.
 The inputs for the estimates of schedule activity duration
originate from the person or group on the project team who is

most familiar with the nature of the work content in the specific
schedule activity.
188
Cont…
189
5. Schedule Development
 Project schedule development, an iterative process, determines
planned start and finish dates for project activities.

 Schedule development can require that duration estimates and
resource estimates are reviewed and revised to create an

approved project schedule that can serve as a baseline against
which progress can be tracked.
190
Cont…
191
6. Schedule Control
 Schedule control is concerned with:
 Determining the current status of the project schedule
 Influencing the factors that create schedule changes
 Determining that the project schedule has changed
 Managing the actual changes as they occur.
 Schedule control is a portion of the Integrated Project
management system
192
Cont…
193
Earned Value Analysis

Project Cost Management/ Control
 Project Cost Management includes the processes involved
in
 planning,
 estimating,
 budgeting and,
 controling costs so that the project can be completed
within the approved budget.
To achieve this purpose we need to develop a
proper cash flow
 In the subsequent discussion we

 Using;
will see how can we develop a
proper cash flow to achieve this
 Projection of Income
objective; and expenses during the

life of the project
To facilitate this several

time scheduling are used
by contractor
Developing Cash Flow
Activity Days Cost ($) Cost/day

A 2 200 100
B 5 500 100
C 2 200 100
D 7 500 71.4
E 1 100 100
F 2 100 50
Cash Flow Daily Expenses
180
160
140
120
Cost ($)
100
Activity Days Cost ($) Cost/day
80
A 2 200 100
60
B 5 500 100
C 2 200 100 40
D 7 500 71.4 20
E 1 100 100 0
F 2 100 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Day
Day Activity Cost of day Total cost
Cumulative Expenses
1 A 100 100
2 A 100 200 1800
3 B 100 300 1600

4 B 100 400
5 B 100 500 1400
6 B 100 600 1200
7 B 100 700
Cost ($)
1000
8 C,D 171.4 871
9 C,D 171.4 1043 800
10 D,E 171.4 1214 600
11 D 71.4 1286 400

12 D 71.4 1357
13 D 71.4 1428 200
14 D 71.4 1500 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
15 F 50 1550
Day
16 F 50 1600
Source: Dr. L. K. Gaafar
Example 1
Month Budgeted Cost in Month Cumulative Budgeted Cost at end
(Birr) of month (Birr
January 500,000 500,000
February 1,000,000 1,500,000
March 2,000,000 3,500,000
April 2,500,000 6,000,000
May 3,500,000 9,500,000
June 5,000,000 14,500,000
July 5,000,000 19,500,000
August 4,000,000 23,500,000
September 3,000,000 26,500,000
October 2,000,000 28,500,000
November 1,000,000 29,500,000
December 500,000 30,000,000
198
Total for Year 30,000,000 30,000,000
Chart 1
Chart 1: Cumulative Cost Curve Based on Budget Costs at Planned Time
35000000
30000000
Budget Cost of Work at

25000000 Planned Time (Table 1)
Cumulative Costs; Birr
20000000
15000000
10000000
5000000
0
0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar
199 Months of Project
200
Chart 3
40000000
Chart 3: Comparison of Budget & Actual Costs Based on Actual Timing
35000000
Actual Cost of Work
Completed (Table 3)
30000000
Cumulative Costs: Birr
25000000 Measure of Cost Overspend of

Work Completed at Eash Stage
20000000
Budget Cost of Work

15000000
Completed (Table 2)
10000000
5000000
0
0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar
Months of Project
201
All together
Estimate of Final Cost (Contract Sum)
Curve 1; Budget Cost of

Work at Planned Time
C u m u la tive C ost/V alu e
Amount Behind Schedule
Curve 2; Planned Cash Payments
Curve 3; Budget Cost

of Work Completed
Current Date
Maintenance
Construction Period
202 Period
Earned Value Analysis
 The earned value technique uses the cost and schedule
baseline to assess project progress and the magnitude of

any variations that occur. The earned value technique
involves developing these key values for each schedule
activity, work package, or control account:
203
Earned Value Analyses (Cont…)
 Planned value (PV) is the budgeted cost for the work scheduled to be
completed on an activity up to a given point in time.

 Earned value (EV) is the budgeted amount for the work actually completed
on the schedule activity or WBS component during a given time period.

 Actual cost (AC) is the total cost incurred in accomplishing work on the
schedule activity or WBS component during a given time period. This AC

must correspond in definition and coverage to whatever was budgeted for
the PV and the EV (e.g., direct hours only, direct costs only, or all costs
including indirect costs).
204
Cont…
Planned Numerical Examples on Earned Value Analysis
Week Price
1 18000
Actual Performance
After 5 weeks
2 18000
3 72000
4 72000
5 125000
Total 305,000
Numerical Examples on Earned Value Analysis
Week Price
1 18000
2 18000
SV = EV – PV
3 72000
CV= EV – AC 4 72000
5 125000
207
Total 305,000
Resource Management
 If the construction manager’s job during project operation is
about monitoring and control, it is also about the management of

resources.
 Halpin and Woodhead (1998), in their introduction to
construction management, state that ‘construction management
addresses how the resources available to the manager can best be
applied’
 They suggest that the four primary resources to be managed are
the ‘four Ms’ of manpower, machines, materials and money.

1 Resources definition
 The first step in resource management is to decide exactly what
resources are considered important enough to be managed.

 The most important resources that project managers have to plan and
manage on day-to-day basis are people, machines, materials, and

money.
 Obviously, if these resources are available in abundance then the
project could be accelerated to achieve shorter project duration.

 On the other hand, if these resources are severely limited, then the
result most likely will be a delay in the project completion time

2 Resources allocation
 Resource allocation, also called resource loading, is concerned with
assigning the required number of resources identified for each activity

in the plan. More than one type of resource may be assigned to a
specific activity.
 For example, fixing steel plates on a certain foundation may require different types
of resources such as: welders, laborers and a certain type of welding machine.
 From a practical view, resource allocation does not have to follow a
constant pattern; some activities may initially require fewer resources

but may require more of the same resources during the later stages of
the project.
3 Resources aggregation
 After each activity has been assigned its resources, the next step is to
aggregate the resources used by all activities.

 Resource aggregation is simply the summation, on a period-by-
period basis, of the resources required to complete all activities

based on the resource allocation carried out previously. The results
are usually shown graphically as a histogram. Such aggregation may
be done on an hourly, daily, or weekly basis, depending on the time
unit used to allocate resources.
 When a bar chart is used, the resource aggregation is fairly simple
and straightforward. For a given bar chart, a resource aggregation

chart can be drawn underneath the bar chart.
 An example is shown in the following
figure, where, for a particular resource,

the required resource units for each
time period are written on the bar chart.
 The total number of resource units for
each time period can then be summed

and a resource aggregation or load
chart can be produced as presented
underneath the bar chart.
 Thus, having a project scheduling is
necessary to facilitate the bar chart

drawing.
4 Resources leveling
 A project is classified as time constrained in situations where the
project completion time can not be delayed even if additional

resources are required.
 However, the additional resource usage should be no more than what
is absolutely necessary.
 Accordingly, the primary focus, for purposes of scheduling, in time
constrained projects is to improve resource utilization. This process

is called resource leveling or smoothing.
 It applies when it is desired to reduce the hiring and firing of
resources and to smooth the fluctuation in the daily demand of a

resource, as shown in the following figure.
 In this case, resources are not limited and project duration is not
allowed to be delayed. The objective in this case is to shift non-

critical activities of the original schedule, within their float times so
that a better resource profile is achieved.
Cont…
 As shown in the following figure,
the problem of resource

fluctuation appears after the
initial scheduling of the project
without considering the
resources.
 The peaks and valleys in the
resource profile indicate high

day-to-day variation in the
resource demand.
Cont…
 Resource smoothing is the process that attempts to determine a resource
requirement that is "smooth" and where peaks and valleys are eliminated.
 Given that the resource requirements of those activities on the critical path
are fixed, some order or priority needs to be established for selecting which
activity and which particular resource associated with this activity should
be given priority in the smoothing process.
 Resource leveling shift non-critical activities within their float times so as
to move resources from the peak periods (high usage) to the valley periods
(low usage), without delaying the project
Cont…
217
Cont…
218
Cont…
219
THANK YOU!
220

Construction Project and Contract Management: For Tis Esat PLC Technical Stffs Tadesse Ayalew September 2017 Bahir Dar

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CONSTRUCTION PROJECT AND

FOR TIS ESAT PLC TECHNICAL STFFS

Training on Construction Project Management, Sep

01 Building 02 Road 13 Years

03 Energy 60,000 AA LRT

273 MW Under Bedele-366KM

Project Operation Phase

Project Closeout Phase

The project life cycle

5 Training on Construction Project Management, Sep 2017, Tadesse A.

product, service, or result.

and a definite end.

 when the project’s objectives have been achieved,

can involve a single person or many thousands. Their duration

ranges from a few weeks to several years.

 Examples of projects include, but are not limited to:

 Developing a new product or service

 Developing a new or modified information system/Implementing a new

business procedure or process

 Constructing a building or facility/ Building a water system for a

knowledge, skills, tools and techniques to

 It is accomplished through the application and integration of the project

management processes of initiating, planning, executing, monitoring and

Training on Construction Project Management, Sep

Training on Construction Project Management, Sep

objectives. Which include

 Establishing clear and achievable objectives

Training on Construction Project Management, Sep

 Application area knowledge, standards, and regulations

 Understanding the project environment

 General management knowledge and skills

Training on Construction Project Management, Sep 2017, Tadesse A.

Training on Construction Project Management, Sep

 Knowledge areas (Nine for all types

provide better management control with appropriate links to the

 Planning and design phase

 Contractor selection phase

 Project mobilization phase

 Project operations phase

 Project closeout and termination phase

Training on Construction Project Management, Sep

Project Delivery System

2.1 Contract Type

Training on Construction Project Management, Sep

 Prior to the commencement of the construction project, the project owner

faces two important decisions regarding the relationships among the

18 Training on Construction Project Management, Sep 2017, Tadesse A.

Training on Construction Project Management, Sep 2017,

Training on Construction Project Management, Sep

21 Training on Construction Project Management, Sep 2017, Tadesse

Training on Construction Project Management, Sep

Training on Construction Project Management, Sep

Training on Construction Project Management, Sep

 Construction Documents are defined as the written and

 The two major components that make up construction

Standard Bid Documents

MLDOs Business Asson’s Professional Asson’s

Public Authorities Public and / or

2.3 Methods and Criteria's

72 Training on Construction Project Management, Sep 2017, Tadesse A.

 To limit the number of firms allowed to submit tenders on a

project, some owners require that contractors be pre-qualified.

 They must submit information about their experience,