4) Section D Flashcards
What are some different construction contracts?
NZIA SCC
NBC (National Building Contract)
NZS3910 (Building and civil engineering construction)
NZS3915 (As above, but no person appointed to act as engineer to the contract)
NZIA SCC vs SF Comparison
SCC full form suit project of any size and complexity, with wide range of risks.
Short forms intended for alterations or simple new building work, with a low value and short contract period.
What is the NZIA SCC for?
Contract between Principal and Contractor for construction of Contract Works of any size or complexity, where the ARCHITECT ADMINISTERS the contract on behalf of the Principal.
What is the NZIA SCC SF intended for?
Alterations or new building work of simple nature with relatively low value and competed within short contract period.
What is National Building Contract (General and SF) for?
Provided by the NZIA when the architect isn’t contractually involved in the administration or control of the contracts. There is provision for Architect to act as Principals agent.
General - larger projects
Short form - small works projects.
What are the benefits of the NZIA Conditions of Contract?
a. only form of contract which provides the role of an architect during construction.
b. contractors are familiar with Standard Conditions of Tender and Contract and help to bid competitively, tenders are comparable.
c. widely used in the industry, architect can easily administer and contractor readily comply.
d. architects role to administer is well defined
What do you do if Client decides not to use NZIA Conditions of Contract?
- Consider seeking legal advice and professional indemnity insurers advice
- Advise the client in writing of any professional risk limitations, quality assurance limitations and definition of the Architects role
What should you consider for cost reimbursement contracts (CRC)?
Important for Contractor at Tender stage to provide an estimate of direct costa and lump sum items when possible for establishing a notational Contract Price, if only for insurance purposes. This can be revised as project continues. The CRC does put an increased duty on the Architect administering the Contract to monitor costs on a regular basis and keep the Principal informed.
What is a Prime Cost Sum?
A sum that includes the net purchase price of the materials and an allowance for Contractors margin and expense. DOES NOT INCLUDE COSTS ASSOCIATED WITH INSTALLATION OF MATERIALS.
What is novation?
A form of design build contract. In the context of the Agreement for Architects Services “Novation” means replacing one party to the agreement (the Client) with another party (the Builder),
Design and documentation often limited to identifying the clients needs, intent, quality and price. Contractor takes over the consultant agreements & responsibility to deliver project.
What are some risks of Novation?
Resources of the contractor to manage
Cost risk may impact design
Risk transfer
Check legal agreements with insurer & solicitor
Conflict between contractor & client needs as arch acts as consultant
fee & insolvency security
copyright
What types of project delivery methods are there?
Traditional - Design, Bid, Build
(Design team and Contractor both working for owner under seperate contracts)
Design & Build
(contractor responsible design + construction)
ECI
(early contractor involvement)
Management
(contractor manages packages of work)
Private Finance Initiative
(single integrated supply team formed for the project)
Partnering (collaborative management)
Subcontractor design
Labour only
Staged / Packages
Seperate contractors
Direct negotiation
Fast track
2 Stage Tender
What Contract Types are there?
Lump sum/Fixed Price
(a fixed price to establish all labour and materials required for the project)
Cost Reimbursement/Cost Plus(reimburses contractor for construction costs; labour, materials and equipment with a predetermined margin)
Guaranteed Maximum Price
(maximum project cost, any costs exceeding are responsibility of contractor, who will see their profit margin cut)
Time and Materials
(reimburse contractors for materials and pay a fixed daily or hourly rate for labour)
Unit Price
(set a fixed price for a distinct, repeatable aspect of a project, which is defined as a “unit.” Would work for apartments, hotels)
Labour only
(client buys materials, trades all engaged by client to install - not recommended - no specific contract. No manages)
How would you evaluate multiple tenders?
Like for like comparison
Weight against criteria with scoring cost and non cost attributes
What are things you must consider during Tender (ethics)?
FAIRNESS
Honesty
Legal obligations
Ownership
Intention to proceed
No improper advantage = equality of conditions
No collusion
Clarity of evaluation criteria
Confidentiality
Conflict of interest
How does SCC vs 3910 define Principal?
3910 - person whose tender has been accepted by the principal or the person named in the contract
SCC - person named in specific conditions
How does SCC vs 3910 define Engineer/Architect?
3910 - professional engineer, architect, surveyor or NATURAL PERSON named in the specific conditions or natural person subsequently appointed by the Principal.
SCC - Architectural practice named in the specific conditions
What is the NZIA SCC for?
Contract between principal & contractor for construction of contract works of any size or complexity where the ARCHITECT ADMINISTERS the contract on behalf of the Principal
What is the NZIA SCC SF intended for?
Alterations or new building work of a simple nature with a relatively low value and completed within a short contract period
What is NZS 3910 for?
Contract between principal & contractor of contract works of any size and complexity where the ENGINEER to the contract ADMINISTERS the contract on behalf on the principal (AGS WAS THIS WITH A PROJECT MANAGER)
What is NZS3915 intended for?
Building & civil engineering construction where no person is appointed engineer to the contract
What is the Construction Contracts Act 2002 (amended 2015)?
CCA sets out:
- Defaults for processing payment claims & payments
- dispute resolution - applies to all NZ contracts, binds the Crown, cannot be contracted out of and affects all contract administration procedures
What is the purpose of the CCA?
Facilitate regular & timely payments
Provide for speedy resolution of disputes
Provide remedies for the recovery of payments
What is a performance bond?
A document arranged between Principal & Contractor to provide protection against financial loss resulting from default of a party. NZIA recommend these for contracts over $1.5m and is discharged at Practical Completion
Suggest that if this is needed for trust then it should be offered by both parties.
See PN.9404
Who should fill in the Insurance Schedules?
The Principal (or Contractor if arranging). Architects are not experts in insurance.
What is the stated period for submission of final payment claims under NZIA SCC or the CCA?
SCC in Specific Conditions - 3 months from the date of achieving Practical Completion (check this with the CCA as noted as not stated?)
What are the standard rates for retentions? (SCC)
10% on the first 200k
5% on the next 800k
1.75% any amount in excess of 1mil
TO MAXIMUM 200K
What are implied warranties under the Building Act?
All residential building work is covered by implied warranties. These last for 10 years and cannot be contracted out of.
All building work will be done properly, competently and according to the plans and specifications in your approved consent
All materials used will be suitable, and unless stated in the contract
The building work will be consistent with the building act and the building code
The building work will be carried out with reasonable care and skill, and completed within the time specified or a reasonable time if no time is specified. The home will be suitable for the occupant at the end of the work
Plus there is a 12 month defect repair period.
Summarise the relevancy of the Consumer Guarantees Act?
Applies to services provided by the building industry but not to buildings. Work should be done with a reasonable skill and care, materials fit for purpose and done in a timely manner.
Residential buildings are covered by implied warranties under the Building Act.
What is a main consideration when preparing documents for Tender?
What items are critical to a commercial offer by the tenderer
Why might you consider sectional completion?
Insurance
Cashflow
Ensure contractor engaged for staged work
When would the Contractor hold contract works insurance vs the Principal?
If the Principal has owner ship then they would have contract works insurance i.e vacant house, office building, small alteration while living in house. New build contract - not a finished house so no “ownership/asset”
What should you consider for Cost Reimbursement Contracts?
It is important that the Contractor at the Tender stage provides an estimate of direct costs and lump sum items, when possible, for the purpose of establishing a notional Contract Price, if only for insurance purposes. This can be revised as the contract continues. The CRC does put an increased duty on the Architect administering the Contract to monitor costs on a regular basis to keep the Principal informed.
What other insurance steps should be considered when working in an existing building?
The Principal should be advices to maintain the permanent insurance
The Principal should advise the insurer of the intended alterations as a “material disclosure” to keep the existing insurance in force.
The Principal should take advice on other appropriate insurances - e.g loss of business continuity etc, should damage or destruction occur during the performance of work.
When might you allow offsite payment of goods?
early procurement has been demonstrated to avoid significant cost increases
materials required are only available “on order” and so would otherwise be unavailable to meet the agreed construction programme
bulk materials identified for the work are required to be stored off-site, but are progressively delivered to site
SCC Schedule G2 Security for off-site goods and materials - contract works insurance allows for
How do you deal with mistakes in Tenders?
Ask them to stand by them or withdraw
What is a Duty of Care Deed?
A Principal may require a Contractor under a design and build Contract to procure such a deed from a sub-consultant for the benefit of the Principal. Consultants should ensure there are no terms in a Duty of Care Deed that extend liability or the scope of work beyond the original Contract of engagement. Particularly that there are no higher standards of care or warranties, and that the limitations within the original contract of engagement are carried over into the duty of care deed.
What is a Deed of Continuity?
A Principal may require a head consultant or a contractor to procure such a deed from a sub-consultant for the benefit of the Principal in the event that the head consultant or contractor’s agreement are terminated. Consultants should ensure there are no terms in a deed of continuity that extend liability or the scope of work beyond the original contract of engagement. Particularly that there are no higher standards of care or warranties and the limitations within the original contract of engagement are carried over into the deed of continuity.
What is deductible in Contract Works insurance arranged by the Principal?
The excess is payable (i.e amount builder may pay if their fault)
Why might you apply liquidated damages?
Not as a penalty but to reflect actual cost risks i.e rent, moving in costs of delay
What are the 5 main Tender types?
Open/Public (advert)
Selected (from list, 3 preferred)
Pre-qualified (EOI)
Invited (recognised for specialist projects)
Direct negotiation
Why might you use selected or approved Tender process?
Repetitive work types regularly carried out by a client who may rotate an established list
Good working relationships and experience with Contractors who have experience with type/scale
Why might you use a EOI/Pre-qualified tender process?
Selection criteria can be set for complex projects with a high risk and high cost
For Value Engineering process, input on build-ability, material and market knowledge on availability
What are some key differences between SCC & 3910?
- Administrator (Architect, NZIA registered practice/Arch representative vs Engineer, ‘any suitably qualified person’ a name req.; not a firm/body corp)
2.Payment Timing (5+10 vs 7+12) for arch/eng issue schedule + revised if principal amends schedule) Still payment after 17 days
- Practical Completion sequence (Final payment, defects, retentions vs Claim, defects, final claim)
- Retentions: SCC 40% PC, 60% Defects, NZS 3910 50% pc, 50% Defects
5.AD’s as Architect vs CI’s as engineer to Contract
What is a CWA?
a Contractual Works Agreement is a contractual arrangement which see two parties enter a long term business arrangement which is designed to deliver shares goals on integrated planning, customer service and delivery, efficiencies and value for money.
What is the difference between demand and performance bonds?
Demand - On request / “demanded” at any time during the construction project, without proving a breach in court
Performance - Conditional, if there is a breach
What do Contractors P&G normally cover?
On-site overheads such as site supervision / management, site offices, stores, hoardings, amenities, plant cranes, temporary works etc
What is a performance bond?
Performance bonds guarantee that the contractor will perform their contract. If they fail to do so the principal can use the bond to cover the costs of engaging a replacement contractor.
What does the Contractors margin usually cover?
Margins cover the cost of contributions to the Main Contractors profit and off-site overhead costs i.e expenses or losses incurred in the operation of the Contractor’s business
What is the difference between annual run-off or annual cut-off insurances?
Termination can be on either a cutoff or runoff basis. Under cutoff provisions, the parties’ obligations are fixed as of the agreed cutoff date.
Otherwise, obligations incurred while the agreement was in force are run off to their natural extinction.
What is the PPSR register?
Personal Property Security Register
Established under the Personal Property Security Act 1999.
A centralised electronic data base that serves as a public notice system for recording and searching security interests in personal property. Items such as vehicles, furniture, electronics, artwork and other tangible goods that are not land and immoveable structures. The PPSR plays a crucial role in facilitating secured lending and protecting the interested of secured parties, particularly in the context of business transactions and financing arrangements.
What should be in a Tender set?
a.) drawings and specifications
b.) NZIA Standard Conditions of Contract
c.) a copy of the schedule of quantities, where applicable,
d.) copies of a tender submission form
e.) instructions for the submission of the Tender, including date and time, to be recorded in the appropriate addendum.
Can tenderers know who is tendering?
No reason to stop them knowing, i.e no requirement not to tell them
Can the client be present at Tender opening?
Yes, you are calling Tenders on their behalf.
Advise the client that you will assess and recommend the best tender to give the best result for the project.
Manage client expectations, and discussion not to just take lowest price.
What is a tenderer submits a lower level of PL insurance than required?
Treat as a mistake in Tender, they can stand by to increase at the same cost or withdraw.
Note insurances must be in place.
What if you receive non-standard Tender responses?
You could consider this, however if you wanted to avoid this, it needs to be clear in the special conditions of tender that non-standard responses will be invalid.
Can you move one sub-contractor from one contractor offer to another?
No. The contractor has submitted their price and team and may have selected these people for good relationship and workmanship reasons that the cost will not capture.
What is open book tendering?
Tender P+G and margins and day rates. Essential a labour and materials contract.
How could you advertise an open tender?
GETS etc.
Note generally only government projects use this tendering model.
What is a schedule of quantities?
A schedule of quantities is usually available at the later stages of the projects development and often coincides with the Tendering stage. They relive the tenderer of the onus and cost of compiling their own, a cost that could otherwise be passed onto the client in the tender price.
Allows for all tenderers to price for the same amount.
What is a lump sum contract?
In a lump sum contract the Contract Price shall be the sum stated in the Contract, subject to such adjustments as are provided for in the Contract.
Lump sum + Fixed Price = SAME THING
What is a measure and value contract?
In a measure and value contract, the contract price shall be calculated according to the measured quantity and determined by the Engineer to the Contract, of each item of work carried out at the rates setout in the schedule of prices, subject to such adjustments as are provided for in the Contract.
What is a Cost Reimbursement Contract?
In a Cost Reimbursement Contract, the contract price shall be determined as follows:
The Net Cost or contract rates for the quantities of labour, materials, plant and sub-contractors used in the execution of the Contract Works
An allowance (if any) for on-site overheads and/or off-site overheads and profit at the relevant percentages stated in the Special Conditions
