15. Construction Contract and Procurement Flashcards
What is the purpose of a contract?
To record intentions and responsibilities and provide procedures for all eventualities
What are the 4 things needed for a contract (common law)?
Offer
Acceptance
Consideration
Meeting of minds (clear understanding)
What are 9 important aspects of a contract?
- Scope
- Payment
- Programme
- Changes
- Progress claims
- Responsibilities
- Disputes
- Arbitration
- Insurance
What is a land purchase agreement? (3)
Often starts with deposit
Has a period for due diligence and to go unconditional
Settlement period for legal transaction and payment
What is a heads of agreement? (2)
Outlining an agreement on how they will progress a project
Used to progress early stages which is superseded by a contract later
What is a professional services agreement? (2)
For purchasing design services (consultants)
May have professional indemnity + public liability insurance
What is professional indemnity insurance?
Allows developer to get money if error made in building
What is public liability insurance?
Usually taken by contractor for any damage caused during construction
What is a leasing agreement?
Sets out rent, outgoings, rent reviews, lease period etc.
What is a sale agreement?
Like a land purchase agreement - has deposit, settlement and due diligence periods and may have conditional clauses
Sunset clause allows developer to cancel
How are most building contracts formed?
Using the Standards Association general conditions and then adding special provisions to tailor it to this project
What are 2 additional risks commonly being put onto contractors?
Design details and obtaining Council building consents
What is open tendering?
Publicly advertised opportunity so high competition
What is selective tendering?
Tenders accepted from a select group of 3-4 narrowed down from initial expressions of interest
What is negotiated tendering?
Choose preferred contractor and price set through negotiation
How are non price considerations done in tendering?
Usually less than 20% of the assessment
Considers track record, dispute history, environment awareness etc.
What is two envelope tendering?
One envelope has price and the other has non-price considerations. Price is only considered if non-price considerations are met.
What is two staged tendering?
Contractor selected and establishes profit at conceptual project stage
Works with design team to develop scope and then a contract price is established
What are 5 risks contractors are often made to take on now?
- Design coordination and compliance
- Fit for purpose
- Design risk to achieve specifications
- Council consenting requirements
- Underground conditions
What do exclusions/allowances usually account for in lump sum contracts?
High risk areas like ground conditions and change of regulations
What is a lump sum contract?
Price agreed but subject to exclusions and allowances
What is a schedule of quantities contract?
Price determined by pre-agreed rates applied to actual quantities
What is a cost plus contract?
Price determined by a selected % applied to an actual cost
What is a guaranteed maximum price contract?
Maximum price set - if actual price is more, the contractor bears the extra cost; if it is less, they share the savings
