Contracts Flashcards
Where to find:
- Contracts 3910 and SCC
- 3910 Form of Tender
- 3910 Schedules to Conditions of Tender
SCC located on NZIA website, template.
https://www.nzia.co.nz/member-area/resources/practice-resources/contract-documents#series=&keyword=,&pg=2
Schedules to Conditions of Tender template: in 3910 appendix
Form of Tender
- Contract number
- Project name
- Tender for: Client
- Name of Tenderer: Main Contractor offers to complete and maintain the above mentioned work in accordance with the drawings, spec and conditions of contract for SUM
- Tenderers GST registration #
- Signature
- Address and contract details
Schedules to Conditions of Tender
- deposit
- View site
- Tender close at time and location
- supplementary information required
- On-site Overheads and Off-site Overheads and Profit
- Working Day rate
- percentage for processing variations
- tender evaluation
Schedule of Quantities
Which schedule is it in SCC?
C2
SCC schedules
A1 Contract Agreement
B1 Specific Conditions
B2 Special conditions
C1 Fluctuations in cost
C2 Schedule of quantities
D1 Contractor’s performance bond
D2 Principal’s bond
D3 Contractor’s bond in lieu of retentions
E1 Contractor’s application for Practical Completion
E3 Practical Completion Certificate
E4 Defects liability certificate
F1 Specific Conditions of insurance
F2 Confirmation of insurance - Contract works
F3 Confirmation of insurance - public liability
F4 Confirmation of insurance Motor vehicle third party liability
F5 Confirmation of insurance - Contractor arranged professional indemnity insurance
G1 Warranty agreement
G2 Security for off Site goods or materials. - Architect must not allow any amount claimed to materials and fittings not yet delivered to site unless it has been provided for in the specific conditions and the Contractor has provided the duly executed G2, properly and separately stored, labelled property of the Principal and insured in the names of the Principal and Contractor
SCC General conditions: Release of Contractors Bond
Within 5 Working Days of the date of issue of the Practical Completion Certificate the Principal must deliver to the Contractor a notice stating that the surety’s obligations under the bond are discharged. The original signed bond form must be returned to the Contractor with this notice.
Surety is a third party company - BANK! KiwiBankLtd
compensate CMDHB if Focus does not perform
SCC General conditions 3.4 Breach of bond obligations by Contractor
Who notifies?
How many does notice?
Breach of bond obligations by Contractor
If at any time the Principal considers that the Contractor has failed to perform the Contractor’s obligations under the Contract or has otherwise failed to satisfy the bond conditions, the Architect must notify the Contractor of this.
The Architect must advise the Contractor that the bond will be called up in 10 Working Days of the notice if the failure has not been rectified within that time.
The Architect must make an estimate of the costs of any remedial or other work outstanding and of all other liabilities of the Contractor under the Contract.
The Architect must notify the Principal and the Contractor of the estimate.
What does SCC stand for
NZIA
Standard Construction Contract
On site overheads
Provide examples
What is P&G
Expenses or losses incurred by the Contractor for the carrying out of the Contract works which are not readily identifiable with an particular work item
The cost of site management personnel, such as project managers and supervisors.
The cost of site facilities, such as storage containers, offices, and restrooms.
The cost of site utilities, such as electricity, water, and internet.
The cost of site security personnel and equipment.
The cost of site transportation, such as vehicles and fuel.
The cost of site equipment rental and maintenance.
The cost of site insurance, such as liability and workers’ compensation.
The cost of site permits and inspections.
The cost of site cleanup and waste disposal.
The cost of site communication systems and equipment.
P&G is on site and off site overheads
Offsite overheads, and onsite overheads (commonly referred to as Preliminary & General, or P&G).
To figure out what fits into each category, you need to understand the definition each term has.
Onsite overheads – costs that exist because the job you are charging them to exist.
Offsite overheads – costs that directly relate to running your business.
To break it down further, here are some things that would be considered Onsite Overheads;
Cartage
Health and Safety
Access equipment hire
Signage
Site supervision
Site set out
Job administration
Asbestos testing
Site security
Portaloo
Tool and plant hire
Now for offsite overheads, remember, these are related to running your business;
Marketing
Yard lease
Entertainment
Office administration
Accounting
Legal fees
Company uniforms
Stationery and printing
Computers and IT
Power/Internet/Phone
Offsite overheads and profit
Expenses or losses incurred in the operation of the Contractor’s business and which are not required for carrying out of the Contract works plus and allowance for profit
- what is contained in a Contract Agreement
- What are the contract documents?
Q1 Project
Between Principal and Contractor
Agreed:
1. Contractor will carry out the obligations imposed on the Contractor by the Contract documents
2. Principal will pay the Contractor the Contract price or such greater or lesser sum as will become payable under the contract documents together with good and services tax at the times and in the manner provided in the contract documents
3. each part will carry out and fulfil all other obligations imposed on that party by the Contract Documents
Q2
the Contract Agreement and all other schedules
Principal’s letter of acceptance
post tender correspondence
tender - contractors tender submissions, and summary
NTTs
Documents required at Practical Completion
Warranties and another information from the Contractor essential for Principals use of the Contract works
Docs required for certificate of public use
docs required for Code of Compliance Certificate
CPU and CCC stand for?
Certificate of Public use
Code of Compliance Certificate
How are retentions calculated?
When are retentions released and how much ?
Set out in SCC
10% of the first $200K
5% of next 800K
1.75% of any mount over 1mil
max 200K
40% payable when Practical Completion has been achieved.
Phase 2: FCC demanded rest of retentions be released for Phase 1, however Phase 2 was a separable portion and the contract noted the DLP of Phase 1 would be at the end of Phase 2 rather than after 12months, so I did not release the retentions
3910
Amount agreed
50% at PC
50% at DLP
Principals main obligations ?
Pay the contractor - section 14 payments
Provide contractor possession of the site - section 7 site
Provide Contractor all necessary consent appoval documentation - 4.4 Principal to obtain consent and approvals.
Architect’s role
Architect’s rep
represents the Principal
issues all direction (AIs)
administers the contract impartially
Contractor may object to the appointed architect’s rep - do in 5 working days - Architect to consider the objection and issue a direction
Architects rep is acting on behalf of the architect and is not assuming personal responsibility
Change of architect
Principal must notify the contractor as soon as reasonability practicable
appoint a suitably qualitied architect to act in the interim
notify the contractor as soon as possible of proposed new architect . If contractor objects for reasons the principal accepts, Principal to appoint new architect.
New architect to have regard for previous directions issued
Contractor must keep on site?
a copy of the contract documents including all changes to the contract documents directed by the architect
copies of all architects directions
Which sections in general SCC conditions advise how how Variations are claimed and valued?
way stated in section 9 variations and section 11 time for completing the contract works
When is the bond provided?
What if the Contractor hasn’t provided it within the timeframe
within 2 months of the date of acceptance of tender
in the form included in Schedule D1 Contractor’s performance bond
No payment otherwise due will be payable until the contractor has delivered the executed bond to the principal.
If the executed contractors performance bond is not delivered to the principal by the time/date stated, the Principal is entitled to treat this as a default by the contractor. Contractor bears the cost of obtaining this bond
Release of contractors bond / when does the Contractor get their bond back
Within 5 working days of date of issue of Practical completion
Principal deliver to contractor notice: the surety’s obligations under the bond are discharged. The original signed bond form must be returned to the Contractor
What if the Contractor’s bond in lieu of retentions has not been received?
Retentions will be deducted until the contractor has delivered the executed bond to the principal.
Once bond received: Retentions deducted will be certified for payment in the next Payment Schedule
Breach of bond obligations by contractor
Principal considers that the contractor has failed to perform the contractors obligatons under the contract , then Architect must notify the Contractor of this
Gastro - Project Manager notified.
Architect must advise the contractor that the bond will be called up in 10 working days of the notice if the failure has not been rectified within that time
Architect must make an estimate of the costs of any remedial or other work outstanding and of all other liabilities of the Contractor under the contract
Notify the Principal and Contractor of this estimate
Principals bond - how much, when is it provided and how to set up
what if the Principals bond is not received by the time stated?
How is this released?
amount stated in specific conditions
provided prior to the Contractor commencing work on site
Schedule D2 Principals bond
No delivered in 20 working days?
Contractor is entitled to treat this s a default by the Principal and the Contractor is entitled to suspend works
within 5 working days of the date of the Contractor’s receiving final payment, the Contractor must deliver to the Principal notice: that the Principal and surety are released from the Principals performance bond and original signed bond form must be returned to Principal.
Administration
What if architect administer issues, payment?
What circumstances is the contractor required to obtain consents and approvals ?
Directions by Architect
Architect not responsible for payments to Contractor: if architect has not propoerly administered the contract and Contractor has incurred costs or time delay the Principal is to pay
Contractor’s supervision and site rep
Contractor must appoint a site rep .
Architect is entitled to direct any person employed on the Contract works to leave site with proper reason
Principal to obtain consent and approvals
Contractor to obtain consents and approvals for temp amenities and temp services during the construction of the contract works : fees for construction zones, temp power, water, sewage and rubbish removal.
What does indemnity mean?
Contractor must indemnify the Principal mean?
security or protection against a loss or other financial burden.
compensate (someone) for harm or loss.
Insurance
What would you do if Contractor’s insurance becomes ineffective?
Who pays excess
Excess payment by contractor:
arrising from any loss or liability to the Contract Works or carrying out the Contract works. If loss or liability is caused by the Principal , Principal to pay this portion of excess.
Excess by Principal:
any loss or liability to existing structures.
Pay premium on Contractors behalf and notify the contractor. Principal can deduct the premium from the contract price.
Or if Principals insurance is ineffective, Contractor can add to the Contract Price.
When does Principal take over the risk on a new project ?
What if the Principal doesn’t?
from date of Practical Completion certificate
or for PC of separable portion.
If Principal does not take over?
Principal is to reimburse the Contractor for the cost of providing insurance for the period from isue of the certificate until the risk is taken over.
Why would you have 2 bonds in lieu of retentions and when would they be paid out
Separable portions. Paid 5 working days from practical completion
How do you set up, execute, discharge or up a bond
Set up:
Include SCC schedule D1-D3
Execute: Principal to engage solicitor to execute the deed or sight with two witnesses. Confirm bond is in place prior to first process payment. If it isn’t, can deduct from form progress payment.
Discharge: following practical completion. Always discuss and reach agreement with Principal before issuing PC and releasing bond
Call up: contractor in default, advise principal estimate damages and outline circumstances in writing, notify defaulter and surety, follow up after a week to ensure payment has been made
Difference between a Demand vs performance bond
On demand; surety (bank of insurer) promises to pay without delay when requested by the benefactor
Performance bond or conditional bond: is a guarantee of performance and loss needs to be challenged and proven before payment is made
Eg dispute identified, reviewed by contract administrator referred to mediation and if required determined by arbitration.
How is interest from a bond held
Banks charge 1-1.5% plus interest, insurance or surety companies 3.5% and annual fee holding security in cash ready forms eg bank account, stocks, government bonds
What are monetary allowances
PN9.505
Speechified amount included in the contract and allocated to items when the installed value is currently unknown. A placeholder estimates until final prices are calculated and defined. The contract price is then adjusted to it down to suit
3 types of monetary allowances:
Provisional sum: installed all inclusive (labour, materials, delivery, handling overheads, Margins)
Prime cost sums: material supply only (delivered to site only, but not installed)
3. Contingency sum; percentage amount set aside to manage unforeseen issues
What is a deed of continuity
PN3.122 and PN3.127
MoE design build contract agreement that contract enters into that confirms strict timeframe for defects
What are off site materials, how are they paid for, how is ownership typically recorded and how do they affect insurance
Listed in the personal properties and securities register to establish security of title
Insured in the name of the Principal of Contractor
What does contractors P&G cover
P&G spec
Read this!
Scaffolding
Tender deposit
Security to cover documents
Can the nominated Architect to the SCC contract be anyone other than a registered architect
PN9.201
NZIA practice named in specific conditions
Arch representative can be an arch grad
What is an invitation to tender
PN9.302
Formal letter
What does fast tracked mean?
Accelerated documentation process - typically staged consents, involve an uplift of fees
What are the implications of the Contract and Commercial Law Act 2017?!
11 laws
What does the Architect typically prepare for tender?
Tender, sanitary documents, spec and drawings, finishes, hardware schedules. Draft copy of contract, tender summary, schedule of quantities by QS
How is information given to tenderers during the procurement phase and what are the requirements around this
Read Buckland NTT
Such as commercial series was replaced by residential series by MoE
Issue a NTT to all Tenderers
When and why would separate contractors be engaged rather than subcontractors
Avoid if possible
Be aware of responsibility of health and safety Lie, coordination, insurance, performance liability, P&Gs, extent of works
What is an open book tender
Contract shows transparency in tendered price eg expenses and profit are shared in ledger
Implications of the Building Amendment Act 2013
Mandatory written contract on residential work costing $30,000 or more
