Successful Int. Projects thru Effective Contract Docs - The Construction Contract

Question 1

The simplest form of contract is:

Answer 1

The single lump sum contract (Typically the contractor would do a portion of the work and subcontract out those portions that are more efficiently done by others)

Question 2

Describe the single lump sum contract

Answer 2

Typically the contractor would do a portion of the work and subcontract out those portions that are more efficiently done by others

Question 3

Describe a negotiated ccontract

Answer 3

In the negotiated contract there is no official bidding involved. The contractor is selected based on his/her credentials, enters into negotiations with the owner to arrive at a contract sum

Question 4

What is commonly known as value engineering

Answer 4

It’s when the contractor is engaged very early in the project and has input into some of the design decisions by providing cost perameters in a process.

Question 5

Define the segregated contract:

Answer 5

There are a number of seperate prime contractors, one for each major portion of the work. Each seperate contractor may have his/her own subcontractors. The task of coordinating the work of a number of contractors rests with the owner, who often relies on the design professional to act as coordinator

Question 6

What is a cost plus contract?

Answer 6

The contractor agrees to complete the work of the project for whatever amount is costs him/her plus a fixed fee, or a percentage of the cost to cover overhead and profit

Question 7

List one pro for the cost plus contract

Answer 7

Pro: The contractor cannot lose money, and the owner is assured of getting exaclty what they pay for

Question 8

List one con for the cost plus contract?

Answer 8

The contractor has no real incentive to save money for the owner

Question 9

What is one way to potentially avoid a delimma in the cost plus contract would be to:

Answer 9

Let the contractor suggest means of saving costs and sharing in the resulting savings (i.e.: the contractor proposed to furnish a fully acceptable material for a stipulated savings his/her fee would be increased by a pre-arranged percentage of that savings) An accurate method of cost accounting and verification along with complete and well prepared documents is essential.

Question 10

When is a construction manager contract typically used?

Answer 10

On large projects, or a larger scale project. In this case the individual is simply the broker/contractor in a different role.

Question 11

What are the (5) fundamental tasks that are covered in a legally binding document between the owner and the contractor?

Answer 11

Identify the agreeing parties - Identifying the work to be performed by the contractor - Set forth the terms of payment for the work (what the law calls consideration) - State the time for performance - be sealed with the signatures of the parties

Question 12

List the documents that make up a contract

Answer 12

Conditions of the Contract - Agreement - the drawings, specifications, any addenda incorporated before the agreement - any change orders incorporated after the agreement

Question 13

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article I simply defines what?

Answer 13

The contract documents

Question 14

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article II defines what?

Answer 14

The scope of work

Question 15

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article III establishes what?

Answer 15

The time for performance, which is the date of commencement, often the same as the Notice to Proceed. Also establishes the date of substantial completion and provides for liquidated damages if applicable

Question 16

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article IV states what?

Answer 16

The contract sum and acknowledges any accepted alternates that are included in the contract

Question 17

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article V covers what?

Answer 17

Progress payments, including retainage which is usually 10%

Question 18

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article VI does what?

Answer 18

Sets forth conditions for the final payment including any special requirements if it is desirable, such as pending receipt of specific approvals or permits

Question 19

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article VII covers what?

Answer 19

Miscellaneous provisions which allows the insertion of interest due on any unpaid approved payments

Question 20

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article VIII does what?

Answer 20

Invokes the terms of the General Conditions relative to termination or suspension of the project

Question 21

AIA Form A101, Standard Form of Agreement Between Owner & Contractor, Article IX does what?

Answer 21

Ennumerates the contract documents including documents contained within the project manual, the specification, the drawings and any addenda. It is common to describe them and attach them as exhibits to the agreement

Question 22

What do the General Conditions define?

Answer 22

The rights, responsibilities and relationship of the parties to the agreement. They also deal with the rights and responsibilities of third parties such as the design professional

Question 23

Which AIA document covers the General Conditions

Answer 23

A201

Question 24

How are supplementary conditions indended to be used?

Answer 24

To expand the terms of the General Conditions and modify them to suit the reaquirements of a specific project. They cannot stand alone

Question 25

(3) things that supplementary conditions are intended to accomplish are:

Answer 25

Modify the General Conditions to suit particula requirements such as specific amounts of insurance coverage - Delete material from the General Conditions that may be inapplicable to a particular project such as deleting all reference to arbitration prefering to leave open other avenues of dispute resolution - Insert additional provisions such as the payment of pre-determined prevailing wage rates or the inclusion of equal employment opportunity requirements

Question 26

(3) devices that enable the owner and designer to forstall making decisions in regard to items that may represent unknown conditions at the time the contract documents are prepared are:

Answer 26

Alternates - Allowances - Unit Prices

Question 27

(3) things an alternate can be used for

Answer 27

To expand the scope of the contract by adding work - To reduce the scope by taking items away - or substituting one material for another (this is the most common type of alternate)

Question 28

Why are alternates used?

Answer 28

Budget constraints dictate exploring ways to save money

Question 29

What is the most cost efficient way to use alternates?

Answer 29

Design to the minimum desired finish and use alternates to add higher quality finishes. This keeps the contractor from not reducing overhead and profit figures in deducting the alternates from the original bid

Question 30

When should allowances be used?

Answer 30

When a selection cannot be made at the time the contract documents are prepared

Question 31

What is the definition of an allowance according to the General Conditions

Answer 31

The actual cost of the material delivered to the job site - all other costs, including installation are usually included in the stipulated sum

Question 32

If the quantity of an allowance is unclear what should occur?

Answer 32

It should be expanded in the supplementary conditions for the allowance to also included installlation costs

Question 33

What is a contingency allowance?

Answer 33

It’s used when the owner recognized that it is almost inevitable that there will be a few afterthoughts or unforseen conditions requiring extra work. To cover the cost of such items the owner instructs the contractor to set aside, within the contract sum, a stipulated amount that will be drawn upon as needed. This also reduces change orders because any changes can be taken from this line item account on the original contract documents

Question 34

When should unit prices be used?

Answer 34

They are used when the work can be adequately defined, but the scope of work cannot be ascertained at the time the contract documents are prepared

Question 35

Why is a bid bond or bid security submitted?

Answer 35

To furnish proof that the contractor is financially capable of performing the work

Question 36

What does a performance bond ensure

Answer 36

It ensures that the work of the project will be completed

Question 37

The labor and material payment bond protects the owner from what?

Answer 37

From liens or suits arising from the contractors failure to meet obligations to subcontractors or suppliers