Section 4 Flashcards
Bidding + Contract Negotiations • Construction Phase-Office • Construction Phase-Site • Project Management
What is a Stipulated Price Contract (Design-Bid-Build)?
Most building projects follow this traditional
method of project delivery (sometimes referred
to as “Design-Bid-Build”) in which:
- The owner engages an architect to prepare the design, drawings, and specifications
- The owner hires a contractor by competitive
bidding to build the facility under a
construction contract (usually CCDC 2,
Stipulated Price Contract); - The architect administers the contract, and
reviews and certifies the construction.
This design-bid-build form of project delivery
is characterized by:
its three distinct phases; its two independent contracts between: the architect and the client/owner; the contractor and the client/owner; the linear sequencing of the process.
What are the advantages to a stipulated price contract?
- Widespread use and familiarity;
- Clear roles assigned to each party;
- Generally a transparent process
- Thorough resolution of the program requirements and design prior to construction;
- Direct professional relationship between the client / building users and the architect; has a known price before construction begins
What are the disadvantages to a stipulated price contract?
- Separation of design and construction
restricts useful communication; - Clients sometimes perceive “extras” to be
more prevalent and costly in this form of project delivery than others (although every form of project delivery carries a construction contingency); - The contractor is unknown when the construction documents are prepared
- Contracts, particularly for public sector projects, are awarded to the low bidder who may not be well-qualified to do the work. Prequalification of contractors on public sector bids is not common
What do typical responsibilities of a Construction Manager (CM) include?
Typical responsibilities of a CM include:
- Assisting in preliminary planning relative to the design requirements for the project;
- Advising on schedules, budgets, and costs of various alternative methods, on material selection and availability, and on detailing during the design phase;
- Advising on and arranging for all services and all trade contractors and suppliers to carry out the various phases of the work;
- Planning, scheduling, coordinating, and supervising the activities of all trade contractors;
- Providing technical and clerical services in the administration of the project.
What is a Public Private Partnership? (P3)
P3s occur when the private sector works with
governments or other public agencies to bring
private sector capital and/or expertise to provide
and deliver public services. The scale of a P3
project usually is significant and may include
financing, design, construction, and very often
facilities management and operations.
What is the main difference between PROJECT MANAGEMENT and CONSTRUCTION MANAGEMENT?
The main difference between PROJECT
MANAGEMENT and CONSTRUCTION MANAGEMENT
is that the Project Manager has a contract with a client and in turn employs the architectural and engineering consultants to form his group, whereas under the Construction Management aspect the owner engages the architectural and engineering consultants, and at the same time or shortly afterwards, engages the services of a Construction Manager.
In this delivery method, the Project Manager (PM) is usually hired by an owner during the pre-design phase to manage the entire project and engage all the disciplines required, including the architect and the consulting engineers.
The typical project management project may
have the same three phases (Design-Bid-Build)
as traditional project delivery, or it may use
sequential tendering to achieve earlier
completion.
What is the Just in Time project delivery method?
This approach combines aspects of fast tracking,
partnering, systems architecture, and strong incentives for repeat work. Large projects are broken into small work packages. Small teams of architects and contractors program, plan, demolish, and construct these areas on an hourly basis driven primarily by schedule, where time is the most critical factor.
What is Turnkey Development?
Turnkey is generally described as a project delivery method that includes various real estate functions as well as design and construction. These functions may include site acquisition, entitlements, construction and/or long-term financing or other functions. This method may be carried out under Design-Build or developer proposal methods.
What is Unit Rates project delivery?
Use of this method is limited primarily to heavy
civil engineering work — such as roads, and site preparation — where the contractor is paid for measured quantities at quoted unit rates. The method could be appropriate for the cost of repetitive units or identical buildings. The architect should ensure that unit rates are applied only to the design and documentation phases. The bidding and contract negotiations phase, as well as the contract administration phase, require full services.
What is Lease-Back project delivery?
Under this method, the project is financed,
constructed, and owned by the builder, and
the building is “leased-back” to the owner.
What is a Cost-Plus project delivery?
In the cost plus method, the contractor is compensated for the actual costs of the work, plus a fee. The fee is based on:
- an agreed-upon fixed sum; or
- a percentage of the cost of the work.
Often called “time and materials,” this method
is appropriate for small, complicated projects in
which time is a factor or total costs are initially
difficult to determine. A variation of cost plus
is “cost plus to a maximum upset price” or guaranteed upset price. The cost plus method normally uses CCDC 3, Cost Plus Contract, but is now frequently replaced by the construction management delivery method, which includes many of the advantages and few of the
disadvantages.
What is the most common type of fixed-price contract?
CCDC 2, Stipulated Price Contract:
The stipulated price is established through bidding — either open bidding or invitation of bids from pre-qualified bidders. The successful contractor is paid a fixed price for the completed construction. The fixed price or time for construction can only be adjusted by Change Orders.
The contractor is required to perform work called for in the contract, regardless of what it actually costs. Thus, the contractor must take great care when pricing such work, taking into account potential cost increases caused by inflation, material shortages, or difficulties in meeting performance requirements.
A stipulated price contract can produce maximum profit for the contractor, who also assumes maximum risk, including the risk of unexpected additional costs such as those that might result from inflation or material shortages. This type of contract should be used when the construction costs are reasonably predictable and
when full documentation is available.
What are the features of a cost-plus contract?
A cost plus contract is one of the simplest types of cost-reimbursement contracts. It has the following features:
- The owner reimburses the contractor for the allowable costs incurred in the course of construction;
- Costs are paid regardless of the progress of the work and no matter how far the task is from completion;
- Work may cease when the construction costs equal the funds provided for under the contract.
What is a Unit Price contract and how are contract prices determined?
Unit Price Contract (CCDC 4)
In a unit price contract, the contractor is paid a pre-determined price for each unit or quantity of work or material used in the project’s construction. The unit price can be derived through bidding or negotiation. The actual quantities involved are generally verified by
independent inspection, for example, by a clerk of the works or a quantity surveyor.
Unit prices form the basis for payment of the contract price. Quantities in the schedule of prices are estimated. The contract price is:
- The final sum of the product of each unit price stated in the schedule of prices; multiplied by
- The actual quantity of each item that is incorporated in or made necessary by the work; plus
- Lump sums and allowances, if any, stated in
the schedule of prices.
What is a Construction Manager’s role?
A CM is an individual employed to oversee and direct the construction elements of a project, usually the whole of the construction elements, and the parties who are to perform them; a company which contracts with an owner to perform such services for a fee.
What is a Design-Build?
Methods of project delivery in which one business entity or alliance (Design-Builder) forges a single contract with the owner, and undertakes to provide both the professional design services (architectural/engineering) and the construction.
What is a Project Manager’s role?
A PM is the leader of the team of all necessary disciplines (design, construction, supply, etc.). The project manager provides all major essentials for the project. (The term “project manager” may be confused with construction manager; the meaning has become blurred and is currently often used merely for the individual within the conventional hierarchy.)
Explain the purpose of the CCDC construction documents.
To form a standardized set of legal relationships (Agreement between Owner and Contractor; Definitions; and General Conditions) that are reviewed periodically by the CCDC.
In the construction industry, what is a bond?
A bond permits a contractor to provide an owner with a guarantee from a bonding company, known as a surety. The guarantee ensures that the contractor satisfactorily performs his/her obligations under a contract.
Bonds are a “useful means of ensuring responsible contract performance and financial security and, consequently, are often an essential requirement in construction procurement today” (CCDC 22, A Guide to
Construction Surety Bonds).
A bond is not an insurance policy but instead a three-party undertaking whereby the surety agrees to indemnify the owner against loss arising from the failure of the contractor to perform obligations under contract.
What are the three main types of bonds?
- Bid bond;
- Performance bond;
- Labour and material payment bond.
What are Open Competitive Bids (or Public Tender Call)?
In this type of tender call, the bidders are not usually “screened” or otherwise pre-qualified, and the capability of the contractor may be uncertain. The contractor may be selected on price alone. This type of tender call is frequently used when the project involves public funds.
A Notice of Tender is often prepared and is advertised on various websites or electronic tendering services, in daily newspapers and construction journals.
The Notice enables contractors to decide whether
or not they are interested in the project.
What are Invited Competitive Bids
(or Invited Tender Call)?
At the outset, pre-qualification helps to eliminate candidates who do not demonstrate that they have the necessary financial capacity, relevant experience, and human resources for the project at hand. Refer to CCDC 11, Contractor’s Qualification Statement.
Once pre-qualified, bidders should generally be considered to be equal in competence and the contract should then be awarded to the lowest bidder.
What types of projects are invited bids typically used for?
- projects with private clients who prefer to select from a group of proven contractors;
- specialized projects that require particular expertise;
- small projects that might not attract the attention of contractors if they were advertised publicly.
Which types of construction contracts does Direct Selection and negotiation often lead to?
- stipulated price (such as CCDC 2, Stipulated Price Contract);
- cost plus, or cost to a guaranteed maximum price (such as CCDC 3, Cost Plus Contract);
- construction management contracts.
What is a bid bond?
The bid bond submitted by the contractor (bidder) guarantees that if the bid is accepted within the time period stated, the contractor will enter into a formal contract with the owner.
If the contractor fails to enter into a contract, the surety will guarantee — up to the amount of the bid bond — to pay the difference in money between the amount of the contractor’s bid and the amount for which the owner legally contracts with another contractor for the project.
Bid bonds are usually between 5% and 10% of the estimated construction cost; on very large projects, 2.5% is considered an appropriate amount.
Which CCDC form is used if a bond bond is selected as the appropriate form of bid security?
CCDC Form 220, Bid Bond
What is a performance bond?
The function of a performance bond is to indemnify the owner up to the amount of the bond in the event of default (bankruptcy or insolvency) on the part of the contractor.
In the event of a contractor’s default, the performance bond will cover the costs of completing the contract as well as other costs for which the surety is liable, up to the total amount of the bond. Frequently, the amount of a performance bond is based on a percentage of the contract amount, such as 50% or 100% of the contract amount.
Bid bonds do not ensure that a surety will provide the necessary performance bond once the bid is accepted; therefore, it is prudent to request a separate undertaking signed by a surety company to issue a performance bond if the contractor is awarded the contract.
A performance bond will not cover payment of labour and material claims.
What is a labor and material payments bond?
A labour and material payment bond guarantees
that claimants (sub-contractors, sub-trades, and
suppliers who have direct contracts with the
contractor) will be paid for labour and materials provided to the contractor for use on the project identified in the bond.
What CCDC form is used for performance bonds?
The use of CCDC Form 221, Performance Bond,
is recommended for performance bonds;
however, many sureties have their own type
of documentation.
What CCDC form is used for labor and materials payment bond?
The use of CCDC Form 222, Labour and Material
Payment Bond, is recommended; however, many
sureties have their own type of documentation.
In preparing a bid package, what CCDC document should architects refer to?
CCDC 23, a Guide to Calling Bids and Awarding Construction Contracts
When would an architect prepare an addenda to the bid documents?
When those preparing bid documents (contractors, sub-trades, and manufacturers) identify omissions or contradictions in the project documents or items which need clarification or correction. The architect and engineers may also discover inconsistencies or omissions. Additional products which are approved as alternatives may have been identified.
What is an addendum?
A change to the bid package (usually a modification of the drawings and specifications) issued during the bid period and before execution of the contract.
What are the two possible solutions when the lowest of the formal bids is higher than construction cost estimates, and the client does not wish to revise the budget or abandon the project?
- If the difference is >15% of the construction cost estimate:
The Canadian Standard Form of Contract Between Client and Architect: RAIC Document Six states that architect, if requested by the client, will revise the construction documents and administer a new tender call, at no additional fee;
- If the difference is <15% of the latest approved cost estimate:
It is generally possible to propose alternatives and to negotiate an acceptable price with the lowest bidder.
What is included in a bid package?
- Bid information & requirements
- Contract forms & bond requirements
- Specifications
- Site information (legal, i.e. topo, survey, utilities)
- Drawings
- Construction scheduling restrictions & milestones (phasing & occupancy requirements)
- Addenda
What is a Design-Bid-Build project delivery method?
A Design-Bid-Build is when the Owner engages the architect to provide design services and prepare construction documents which are issued for competitive bids. General contractors submit bids for the project and the construction contract is awarded to the lowest bidder. The architect administers the construction contract.
