15. Construction Contract and Procurement

Question 1

What is the purpose of a contract?

Answer 1

To record intentions and responsibilities and provide procedures for all eventualities

Question 2

What are the 4 things needed for a contract (common law)?

Answer 2

Offer
Acceptance
Consideration
Meeting of minds (clear understanding)

Question 3

What are 9 important aspects of a contract?

Answer 3

1. Scope
2. Payment
3. Programme
4. Changes
5. Progress claims
6. Responsibilities
7. Disputes
8. Arbitration
9. Insurance

Question 4

What is a land purchase agreement? (3)

Answer 4

Often starts with deposit
Has a period for due diligence and to go unconditional
Settlement period for legal transaction and payment

Question 5

What is a heads of agreement? (2)

Answer 5

Outlining an agreement on how they will progress a project
Used to progress early stages which is superseded by a contract later

Question 6

What is a professional services agreement? (2)

Answer 6

For purchasing design services (consultants)
May have professional indemnity + public liability insurance

Question 7

What is professional indemnity insurance?

Answer 7

Allows developer to get money if error made in building

Question 8

What is public liability insurance?

Answer 8

Usually taken by contractor for any damage caused during construction

Question 9

What is a leasing agreement?

Answer 9

Sets out rent, outgoings, rent reviews, lease period etc.

Question 10

What is a sale agreement?

Answer 10

Like a land purchase agreement - has deposit, settlement and due diligence periods and may have conditional clauses
Sunset clause allows developer to cancel

Question 11

How are most building contracts formed?

Answer 11

Using the Standards Association general conditions and then adding special provisions to tailor it to this project

Question 12

What are 2 additional risks commonly being put onto contractors?

Answer 12

Design details and obtaining Council building consents

Question 13

What is open tendering?

Answer 13

Publicly advertised opportunity so high competition

Question 14

What is selective tendering?

Answer 14

Tenders accepted from a select group of 3-4 narrowed down from initial expressions of interest

Question 15

What is negotiated tendering?

Answer 15

Choose preferred contractor and price set through negotiation

Question 16

How are non price considerations done in tendering?

Answer 16

Usually less than 20% of the assessment
Considers track record, dispute history, environment awareness etc.

Question 17

What is two envelope tendering?

Answer 17

One envelope has price and the other has non-price considerations. Price is only considered if non-price considerations are met.

Question 18

What is two staged tendering?

Answer 18

Contractor selected and establishes profit at conceptual project stage
Works with design team to develop scope and then a contract price is established

Question 19

What are 5 risks contractors are often made to take on now?

Answer 19

1. Design coordination and compliance
2. Fit for purpose
3. Design risk to achieve specifications
4. Council consenting requirements
5. Underground conditions

Question 20

What do exclusions/allowances usually account for in lump sum contracts?

Answer 20

High risk areas like ground conditions and change of regulations

Question 21

What is a lump sum contract?

Answer 21

Price agreed but subject to exclusions and allowances

Question 22

What is a schedule of quantities contract?

Answer 22

Price determined by pre-agreed rates applied to actual quantities

Question 23

What is a cost plus contract?

Answer 23

Price determined by a selected % applied to an actual cost

Question 24

What is a guaranteed maximum price contract?

Answer 24

Maximum price set - if actual price is more, the contractor bears the extra cost; if it is less, they share the savings

Question 25

What are 3 collaborative strategies?

Answer 25

1. Partnering
2. Alliances
3. Joint Ventures

Question 26

What is partnering?

Answer 26

Commitment of parties to a cooperative relationship to share resources while focusing on their own expertise

Question 27

What does partnering try to encourage?

Answer 27

Less conflict and joint ownership of issues

Question 28

What is an alliance?

Answer 28

Like a partnership but for long term collaboration; formal agreement with mutually agreed practices

Question 29

What is a benefit of an alliance?

Answer 29

Contractor has ongoing involvement with the client so have more certainty and can focus more on innovation

Question 30

What is a joint venture?

Answer 30

Firms joining temporarily for a specific project and formalised legally with a joint venture agreement

Question 31

Who are joint ventures commonly between?

Answer 31

International firms with specialist expertise and local firms with local market knowledge

Question 32

What is the fastest and most convenient contract for simple projects?

Answer 32

Design and construct

Question 33

What contract is common in the current market for early focus on risks?

Answer 33

Project manager consultant and tender

Question 34

What contracts promote innovation and added value, but are more suited to complex projects?

Answer 34

Project manager organisation and collaborative categories