Construction Contracts Flashcards
What is a Construction Contract?
A private law agreement between
- a person wanting something built (Owner)
- a builder (Contractor)
What items are set out in a Construction Contract?
- The work to be performed
- The schedule for the work
- The price for the work
- Other rights and responsibilities of the parties
What are the main players in Construction Projects?
- Owner
- General Contractor
- Architect
- Engineers
- Trade Contractors
- Suppliers
What are the three main Standard Form Documents for industry in Canada?
- CCDC (Canadian Construction Documents Committee)
- CCA (Canadian Contractors Association)
- MMCD (Master Municipal Construction Documents)
What are the Types of Standard Form Contracts?
- Lump Sum
- Unit Price
- Cost Plus Fee (Negotiated)
What is Lump Sum suitable for?
Projects where project scope is well defined, and quantities of materials known
What are advantages of Lump Sum?
- Owner has price certainty
- Owner knows what the end project will be
- Contractor can realize profit if project completed below fixed price (incentive to be efficient)
- Contractor receives monthly progress payments based on job completion
What are disadvantages of Lump Sum?
- Flexibility to incorporate design changes is limited
- Complete set of plans required before bidding and construction can begin
- Can be risky to contractors
What is Unit Price suitable for?
- Projects where project scope is well defined, but uncertainty in material quantities
- Projects that can be broken into work items that can be characterized by units
- Often used on highway projects where earthwork is predominant
What are advantages of Unit Price?
- Allows some flexibility in meeting variations in the quantity of work
- Contractors don’t need to be as precise in their takeoffs
What are disadvantages of Unit Price?
- Owner does not have a precise overall cost for the work until it’s complete
- Measured field quantities are pay quantities (Owner must measure precisely)
- Can be manipulated by contractors (unbalancing the bid)
What deviation in Unit Price Contracts requires renegotiating?
+/- 15%
+15% Owner will request Unit Price reduction
-15% Contractor will request Unit Price be increased
What are the key factors in a Negotiated Contract?
- Owner has flexibility to select contractor on a basis other than low bid
- Owner invites contractors to review project documents available at time of negotiation
- Documents can be complete or incomplete
- Owner will evaluate contractors based on experience, reputation, staff availability etc. all in addition to cost
What are the four common fee structures of a Negotiated Contract?
- Cost + % of Cost
- Cost + Fixed Fee
- Cost + Fixed Fee plus profit-sharing clause
- Cost + Sliding Fee
