CE LAW LONG QUIZ Flashcards
Is a type of agreement in which one party gets compensated for the price of the materials needed to accomplish a task, together with a fixed hourly salary and other expenses connected to the service being done. This type of contract is common in the construction industry. It is common for contractors to bill their clients for time spent on the project, the materials used, and a markup for the cost of materials in a T&M contract.
Time and materials (T&M)*
- Is a standard phrase in a contract for construction, product development or any other piece of work in which the employer agrees to pay the contractor based upon the time spent by the contractor’s employees and subcontractors’ employees to perform the work, and for materials used in the project
.Time and materials (T&M)
the primary components of the T&M contract include:
o Labor rates
o Maximum labor hours
o Materials markup
o Time and materials not-to-exceed clause (T&M NTE)
o Payment milestones
- Wages for hourly workers as well as independent contractors, administrators, and managers that oversee projects and contracts are included in labor rates.
Labor rates
Clients might request a maximum number of hours of labor to guard against unanticipated increases in labor costs.
Maximum labor hours
Individuals will be charged the real cost of materials plus the markup. Typically, a markup of 15% to 35% will be added to the real cost of supplies (including freight) that the client is responsible for paying,
Materials markup
To ensure that the client knows the project’s maximum cost, a not-to-exceed quote might be included.
Time and materials not-to-exceed clause (T&M NTE)
In some circumstances, one may want to specify agreed-upon milestones for progress payments to protect the contractor’s workflow
Payment milestones
Disadvantages of T &M Contract
Clients often prefer a fixed price contract because their risk is lower and budgeting is easier. When bidding against a fixed price contract, the contractor with a time and materials contract may lose the bid. Tracking materials costs and labor hours is extra work for the contractor. With open-ended labor hours, the contractor’s laborers may not be motivated to work efficiently. Including a not-to-exceed clause can help offset this problem
Advantages of T &M Contract
- Therefore, Time and materials contracts work best when the scope and duration of a project is unpredictable before work begins. The simplicity of a time and materials contract ensures the contractor, a profit but adds an administrative burden in terms of tracking time and costs.
- However, good accounting software can automate much or all of that added burden.
Guaranteed maximum price (GMP)
The maximum price can be increased via a change order if the project’s scope changes but not for cost overruns or estimating errors.
Elements of GMP
- The project’s tasks
- Direct project costs
- The indirect overhead costs a contractor incurs
- The profit a contractor wants to make
BOT
Build Operate and Transfer contract
a private company is granted a concession by the government to finance, design, construct, and operate a public infrastructure project such as a toll road, power plant, or water treatment facility.
Build-Operate-Transfer (BOT)
The mechanics of a BOT contract can be broken down into three phases:
- Build
2.Operate
3.Transfer
: In the first phase, the private company finances,
designs, and constructs the infrastructure project
according to the specifications agreed upon with the
government. This phase is typically financed by the
private company through loans or equity investment.
Build Phase
: In the second phase, the private company
operates the infrastructure project and is responsible
for its maintenance and upkeep. The company
generates revenue from user fees, such as tolls or
electricity bills, and uses this revenue to pay off its debt
and cover its operating expenses.
Operate Phase
In the final phase, the private company
transfers ownership of the infrastructure project to the
government. This transfer may occur after a set period
of time or after the private company has recouped its
initial investment, depending on the terms of the
contract.
Transfer
Advantages of a Build-Operate-Transfer (BOT) contract:
- Private sector financing: The BOT scheme allows
governments to leverage private sector financing to deliver
public infrastructure projects without relying on public funds. - Efficient project delivery: Private companies have the
expertise and experience to deliver projects efficiently,
which can lead to faster completion times and lower costs. - Risk transfer: The private company assumes much of the
financial and operational risk associated with the project,
reducing the government’s exposure to these risks. - Quality assurance: Private companies have a strong
incentive to ensure that the infrastructure project is well designed, built to high standards, and operated efficiently,
in order to maximize their revenue.
Disadvantages of a Build-Operate-Transfer (BOT) contract:
- Potential for high user fees: The private company must
generate sufficient revenue to recoup its investment and
make a profit, which can result in high user fees for the
public. - Long-term commitment: The government may be
committed to a long-term contract with the private company,
which can limit its flexibility to adapt to changing
circumstances or terminate the contract. - Limited public control: The government may have limited
control over the design and operation of the infrastructure
project during the contract period, which can limit its ability
to respond to public needs or demands.
PPP
Public-Private Partnership (PPP) contract
a type of agreement between a public sector entity, such as a government agency or municipality, and a private sector partner, such as a corporation or consortium, to jointly finance, design, construct, operate, and maintain a public infrastructure project.
Public-Private Partnership (PPP) contract
Mechanics of a PPP contract can be broken down into
several stages:
- Planning and Procurement:
- Design and Construction:
- Operation and Maintenance:
- Transfer or Renewal:
RA 544
Civil Engineering Law
* RA 544 is the civil engineering law which covers all the practices of civil engineering in the Philippines.
* The practice of civil engineering within the meaning and intent of this Act shall embrace services in the form of consultation, design, preparation of plans, specifications, estimates, erection, installation and supervision of the construction of streets, bridges, highways, railroads, airports and hangars, port works, canals, river and shore improvements, lighthouses, and dry docks; buildings, fixed structures for irrigation, flood protection, drainage, water supply and sewerage works; demolition of permanent structures; and tunnels. The enumeration of any work in this section shall not be construed as excluding any other work requiring civil engineering knowledge and application
The public sector entity determines the need for a particular infrastructure project and evaluates the feasibility of using a PPP approach. It then develops a procurement strategy and solicits proposals from private sector partners through a competitive bidding process.
- Planning and Procurement:
The private sector partner is responsible for designing and constructing the infrastructure project according to the specifications agreed upon with the public sector entity. The private partner typically finances the construction phase through loans or equity investment.
- Design and Construction:
The private sector partner is also responsible for operating and maintaining the infrastructure project, often through a long-term concession agreement. The private partner generates revenue from user fees or other sources, and uses this revenue to pay off its debt and cover its operating expenses.
- Operation and Maintenance:
At the end of the concession period, the ownership of the infrastructure project may revert back to the public sector entity, or the concession may be renewed for an additional period of time.
- Transfer or Renewal:
