Chapter 3 - Management concepts Flashcards
Three common types of contracts
lump sum, unit price, and cost plus
Four elements must be present for a contract to be valid
mutual agreement (offer and acceptance): an offer is the proposed terms of the contract and the acceptance is the agreement to the offer. Capactiy: both parties must be legally competent and able to get into a contract (legally) Consideration: the promise of exchange of something of value by one party for something of value to another party Lawful object: the contract must be for legal purposes. A contract cannon be created if it is engaging in legal activity
what is the most common type of contract? This stype ofcontract gives the owner a single price to complete the contracted scope of work. Changes are addressed by change orders
Lump sum contract
In this type of contract the contractors provide a price for a unit of work such as square feet of sidewalks or cubic yards of concrete
Unit price contract
In this type of contract a contractor is paid for all direct costs such as labor, material, equipment, subcontracts, and field supervision, plus an agreed upon fee
Cost Plus Contract
GMP
Guranteed max price
1. Which of the following is a fundamental element of a contract? A. exchange of money B. revised scope of work C. time extension D. mutual acceptance
Mutual acceptance
2. Which of the following contract types is generally considered to have the most risk for the contractor? A. lump sum B. unit price C. cost plus D. cost plus with GMP
lump sum
3. Which of the following contract types is best used if the scope is well defined but not the quantities of material? A. lump sum B. unit price C. cost plus D. cost plus with GMP
unit price
3 well known entities that offer standardized contract forms
American Institute of Architects (AIA)
Engineers Joint Contract Documents Comittee (EJDC)
Consesus Docs
In this type of delivery method the owner has seperate contracts directly with the architect and contractor
Design-bid-build
Advantages and Disadvantages of DBB
Advantages
• The process and the roles of each party are well known and understood.
• Projects typically involve competitive bidding, giving the owner the lowest price the market will allow.
• A set price for work included in the contract documents is known before construction begins.
• This method does not require the owner to be involved in the day-to-day construction processes.
Disadvantages
• The contractor has the highest risk from cost overruns, such as labor inefficiencies, cost inflation, or nonperforming subs.
• This method can result in significant added cost to the owner on projects for which the scope is not clearly defined.
• It requires a longer schedule because design and construction phases are done in series.
• The contractor is not involved during preconstruction.
• The relationship between the owner, architect, and contractor is more an arms-length relationship.
In this type of delivery method the owner contracts with a single entity for both design and construction services
Design-Build
Advantages and Disadvantages of DB
Advantages
• Good communication between design and construction teams
• Allows for expedited, fast-track design and construction schedule
• Allows for easier incorporation of changes in work
• Does not require owner to be involved in the day-to-day designer and construction communications or processes
• Allows for value engineering and constructability reviews during preconstruction
• Single point of fault from owner’s perspective for building failures
Disadvantages
• In fast-tracked projects, owner may have limited time to make decisions without affecting cost.
• There are fewer checks and balances than in the design-bid-build method. The owner must rely on the quality and ethics of the firm.
In this type of delivery method an independent agency acts as the owners representative and coordinates work between the design and construction teams
CM agency delivery method.
During construction, the construction manager provides the construction administration for the owner.
Advantages and Disadvantages of CM Agency
Advantages
• Good communication among the owner, designer, and construction teams early in the project
• Allows for value engineering and constructability reviews during preconstruction
• Allows the owner to have control of multiple contracts directly and avoid a middle-man administration fee
• Allows for easier incorporation of changes in work
Disadvantages
• Early contractor selection and involvement may increase cost over competitively bid design-bid-build projects.
• In fast-tracked projects, the owner may have limited time to make decisions without affecting cost.
• The owner is responsible for cost overruns.
In this type of delivery method the contractor acts as the owners representative and coordinates work between the design and construction teams in a manner similar to that of the CM agency
CM at risk.
the CM at risk is responsible for the work and contracts directly with the contractor/subcontractors.
Advantages & Disadvantages of CM at risk
Advantages for Contractors
• Good communication among owner, designer, and construction teams early in the project
• Allows for expedited, fast-track design and construction schedule
• Allows for value engineering and constructability reviews during preconstruction
• Allows for easier incorporation of changes in work
Disadvantages
• Early contractor selection and involvement may increase cost over competitively bid design-bid-build projects.
• In fast-tracked projects, the owner may have limited time to make decisions without affecting cost.
This type of delivery method is most recently developed and is a collaborative multiparty contract with a reward pool to incentivize high standards of performance. The more successful the job, the bigger the reward pool and vice versa
IPD Integrated Project Delivery
Advantages and Disadvantages of IPD
Advantages
• Good communication among owner, designer, and construction teams early in the project
• Improves collaboration and aligns all parties’ goals with the success of the project, thus creating a win-win construction/design environment.
• Open-book bidding and change orders, which reduces the risk of cost overruns
• Fewer claims and disputes, which reduce costs from reduced liability
• More efficient design and building process
• Negotiated pricing rather than bidding
Disadvantages
• Typically requires a higher level of owner involvement
• Newer and less tested delivery method
• Little to no case law in the event of disputes
• More risk associated with construction for owner and designer and more risk associated with a poor design for contractor
• Little experience with delivery method for most major players
• Difficulty changing thought process from self-serving to community risk sharing
1. In which delivery method is the construction administrator most like a consultant? A. lump sum B. CM agency C. CM at risk D. integrated project delivery
CM agency
- Which statement is true about the design-build delivery method from the owner’s perspective?
A. Design is complete when contractor is hired.
B. Fast tracking is difficult with this delivery method.
C. There is a single source of fault for building system failures.
D. Design Build firms are rarely temporary joint ventures.
There is a single source of fault for building system failures
3. Which delivery method has the most risk for the contractor? A. design-bid-build B. design-build C. CM at risk D. integrated project delivery
design-build
- Which of the following is a major difference between a CM agency and a CM at risk?
A. manages construction on the owner’s behalf
B. has a contract with the designer
C. provides a lump sum price for construction services
D. caps the construction costs the owner is required to pay
caps the construction costs the owner has to pay
This type of business entity are owned , operated, and managed by a single person
Sole proprieterships
This type of business entity is owned by two or more people
partnerships