Contract Management and Administration

1
URRAP-Training of Trainers for Contractors and
Coordinators
Ministry of Transport Ethiopian Roads Authority

• Contract Management and Administration
• Tsegaye Borse(ERA)
• (BSc. CoTM)
• DAY 4- Tuesday August 06, 2013

2
Outline of the Presentation

• Introduction
• Results of Neglected Contract Management
• Learning Objectives
• Contract and its Legal Framework
• Definition of Contract and its nature
• Primary Ingredients of Contract
• So why do we need a written contract??
• Project Delivery System, Contract Types and
  Construction Risk
• Types of Project Delivery System
• Contract Types

3
Outline of the Presentation.contd

• Types of Risk in Construction Contracting
• Contract Management and Administration
• What do you mean by Contract Management and
  Administration
• Main tasks of Contract Management
• What effective contract Management accomplishes??
  
• Primary Roles and obligations of the Parties to
  the Construction Contract
• Types of Standard Conditions of Contract
• Communications

4
Outline of the Presentation.contd

• Claims Management and Dispute Resolution
• Typical Claims Against the Owner
• Typical Claims Against the Contractor
• Likely source of construction Delay and
  Disruption
• Claims Analysis
• Claims Prevention Suggestions
• Dispute Resolution Mechanisms
• Discussion Points and Feedbacks
• Selected Contractual Issues

5
Introduction

• Results of Neglected Contract Management
• Learning Objectives

6
Introduction..contd

• Results of Neglected Contract Management
• End user frustration because of poor contract
  performance in timeliness quality
• Lack of contractor accountability
• Implementing Agency acceptance of poor quality
• Increased costs and
• Under or overpayment to a contractor
• Keep the End in Mind at the Beginning!!!

7
Introduction..contd

• Learning O bjectives
• Understand about Contract and contract
  management
• Understand roles and responsibilities of parties
  under General Conditions of Contract
• Role, Relationships, expectations and
  communications between the owner, design,
  contractor and supplier teams
• Understand Contract types and Delivery systems
• Construction Risk
• Brain storming about claims and Dispute

8
Contract and its Legal Framework

• Definition of Contract and its nature
• Primary Ingredients of Contract
• So why do we need written contract??

9
Contract and its Legal Frameworkcontd

• Definition of Contract and its nature
• A contract is a legally binding agreement between
  the parties(t w o or more) identified in the
  agreement to fulfil all the terms and conditions
  outlined in the agreement.
• All construction is done within a contract except
  that is done by a person for himself.
• A contract determines the actions of the parties
  in their dealings with each other. The parties to
  a contract are bound to each other for a certain
  period of time by a unique and exclusive
  relationship (pri vity of contract) they have
  created for their mutual benefit.

10
Contract and its Legal Frameworkcontd

• This contractual relationship persists until the
  contract is discharged or terminated (because of
  impossibility, agreement, bankruptcy, or breach
  of contract).
• It is important that the construction contract,
  whatever form it may take, accurately documents a
  meeting of the minds states clearly the roles
  and responsibilities of the parties without
  overlaps or voids and aims squarely at achieving
  a quality project.

11
Contract and its Legal Frameworkcontd

• Primary Ingredients of Contract
• Mutual Agreement and Genuine Intention
• Offer and Acceptance
• Capacity to Contract
• Consideration in a Contract
• Lawful Object of a Contract
• Contract Time

12
Contract and its Legal Frameworkcontd

• Mutual Agreement and Genuine Intention
• Mutual agreement is the fundamental and mutual
  consent which is normally expressed by the
  parties to a contract in the offer originally
  made by one, which then is accepted by other.
• Sometimes the acceptance of an offer may be
  unspoken and indicated or accepted by an action,
  rather than by actual words.
• A contract may be defined as a promise enforcea
  ble by la w, and there must be genuine intention
  on the parties to take on obligations agreed in
  the contract.

13
Contract and its Legal Frameworkcontd

• Offer and Acceptance
• Offer and acceptance of the offer are natural
  expressions of mutual agreement. As such, both
  the offer and the acceptance must be identical to
  their sub stance.
• When an offer is made it should be accepted
  without qualification. No change to an offer
  should be made in the acceptance, and what is
  offered should be accepted as it is offered.
  Otherwise, the offer should be refused, and, if
  required, notice may then be given that a
  different kind of offer is sought.

14
Contract and its Legal Frameworkcontd

• An offer may be withdrawn at any time prior to
  its acceptance.
• Mutual agreement must be based on free assent
  without duress or undue influence, so that there
  is a real meeting of the minds of the parties.
  Anything less than this may result in an invalid
  contract.
• Once an offer is accepted, however, the offer
  cannot be withdrawn because it has been changed
  by its acceptance into a contract.
• The primary purpose of a bid bond/security is to
  guarantee the owner that the bidder whose bid he
  accepts will enter into and perform the contract.

15
Contract and its Legal Frameworkcontd

• Capacity to Contract
• Capacity refers to the competency to make valid
  and enforcea b le contracts.
• A citizen who is
• Not under the age of majority
• Sane, and not a drunkard
• Not under legal restraint
• Not restricted by his or her occupation or
  profession
• has the greatest possible freedom to enter into
  and make contracts

16
Contract and its Legal Frameworkcontd

• Considerations in a Contract
• Consideration is something of value given by one
  party in a contract to the second party in
  exchange for something else.
• A contract is an agreement with consideration.
• In contract law, consideration can be anything of
  value and the law usually is not concerned with
  the amount of value. Its sufficiency is a matter
  for the parties to bar gain over and agree to.
• Consideration can be a promise not to do
  something such that the result will be of value
  to the other party.

17
Contract and its Legal Frameworkcontd

• Lawful object of a Contract
• The object of a contract must be lawful, for the
  law will not enforce a contract for an illicit
  purpose.
• It is more probable to see illegal work done
  under a contracts change order, because changes
  are not always subjected to the same official
  scrutiny as the work originally proposed and
  shown in the contract documents, and it is
  possible that a change could be made to do
  construction work that would be illegal (e.g.
  increase rooms seating capacity beyond its legal
  limit).

18
Contract and its Legal Frameworkcontd

• Contract Time
• Time is the scarcest of all construction
  resources (capital, labor, material, equipment,
  etc.).
• Contract time affects contract sum since most
  costs depend on time (e.g. costs of labor,
  equipment use, and overhead costs).

19
Contract and its Legal Frameworkcontd

• So why do we need a written contract??
• Basic lack of trust
• Clearly establishes the risks and obligations of
  each party
• Provides means by which performance can be
  assessed and measured
• Provides means by which breaches can be
  identified
• Provides means by which default can be
  established
• Establishes the owners means of control
• Establishes the contractors scope of work

20
Contract and its Legal Frameworkcontd

• Discharge of a Contract
• Contracts are said to be discharged when the
  contracting parties are released form their
  contractual obligations.
• Once the contract is discharged, the parties are
  no longer bounded by its terms although the
  discharge itself may result in enforceable
  rights.
• In general, there are four ways in which a
  contract may be discharged

21
Contract and its Legal Frameworkcontd

• Performance
• parties have performed all their respective
  obligations, as for example, when the contractor
  has carried out the work fully in accordance with
  the contract and when the employer has paid all
  amounts due to the contractor.
• Frustration
• where the parties are unable to perform their
  obligations owing to events outside their
  control, force majeure but contracts are not
  frustrated if there become too difficult or too
  expensive to perform.

22
Contract and its Legal Frameworkcontd

• Breach
• where one party fails to perform his contractual
  obligations.
• Agreement
• where both parties agree to terminate the
  contract before complete performance.

23
Project Delivery System, Contract Types and Risk

• Types of Project Delivery System
• Contract Types
• Types of Risk in Construction Contracting

24
Project Delivery System, Contract Types and
Risk.Contd

• Types of Project Delivery System
• Owner-provided delivery
• Traditional Design Bid-Build
• Construction Management
• Design-Build
• Design-Build variations
• Fast Tracking

25
Project Delivery System, Contract Types and
Risk.Contd

• Owners, designers, and contractors make the
  decisions, provide the services, and perform the
  work to deliver constructed projects. These
  activities are known collectively as project
  delivery.
• The generic term project delivery system
  describes how the participants are organized to
  interact, transforming the owners project goals
  and objectives into a finished facility.

26
Project Delivery System, Contract Types and
Risk.Contd

• Types of Project Delivery System
• Owner-provided delivery/Force Account
• Mostly applicable to projects where the scope of
  the work is within the owners range of skills,
  experience, and resources.
• Owners perform some or all of the design services
  and construction work themselves.
• E.g. simple modifications to an existing
  facility, projects with limited cost or
  complexity, repetitive projects.

27
Project Delivery System, Contract Types and
Risk.Contd

• Traditional Design Bid Build
• For many years, DBB has been the most common
  method of project delivery for public projects,
  and for many private projects as well.
• Design Bid-Build is effective on projects
• where the owner needs both professional design
  services and construction services
• where the designer does not require detailed
  knowledge of the means and methods of
  construction.
• DBB provides the owner with a high degree of
  control and the most preferred project delivery
  system.

28
Project Delivery System, Contract Types and
Risk.Contd

• Construction Management
• Many owners engage construction managers (CMs) to
  assist in developing bid documents and overseeing
  project construction.
• CM
• Is a professional or a firm trained in the
  management of construction processes.
• Is generally interposed between the owner and
  some or all of the other participants.

29
Project Delivery System, Contract Types and
Risk.Contd

• Design Build
• Design-build provides the owner with a single
  point of contact for project responsibilities,
  eliminating the need to assist in resolving
  designer-contractor disputes.
• With the contractor playing a major role in
  design, costs are typically defined and
  maintained to a greater degree, and the
  coordination of fast-track management to achieve
  early completion is greatly simplified.
• The design-builder makes many decisions that
  owner would make under DBB, due to delegation of
  greatly increased authority

30
Project Delivery System, Contract Types and
Risk.Contd

• Design Build variations
• Funding Option variations
• Turnkey
• Developer Financed Projects
• Turnkey V ariations

31
Project Delivery System, Contract Types and
Risk.Contd

• Funding Option variations
• Private capital and developer participation offer
  private owners several variations on
  design-build.
• Lease-develop-operate arrangement The owner
  gives a private operator a long-term lease to
  use, operate, and expand an existing facility.
• Public-private partnership or wrap around
  Ownership of or fiduciary responsibility for a
  project is assigned to a private party. That
  party designs, builds, and may even own, operate
  and maintain the new facility.

32
Project Delivery System, Contract Types and
Risk.Contd

• Turnkey
• Turnkey adds to the design-builders
  responsibilities the operation and/or maintenance
  of the completed project.
• Turnkey delivery has the potential for bringing a
  new project on line more quickly.
• Three forms of turnkey project delivery
• Design-build-operate-transfer
• Design-build-operate-maintain
• Design-build-own-operate-transfer

33
Project Delivery System, Contract Types and
Risk.Contd

• Developer Financed Projects
• For highly specialized projects and
  circumstances, financing from a private or public
  developer or other third parties can offer
  additional variations on design-build and turnkey
  project delivery, each with new roles for owners,
  designers, and contractors.

34
Project Delivery System, Contract Types and
Risk.Contd

• Turnkey V ariations
• V ariations on turnkey add financing as a key
  component. While financing arrangements are
  unique for each project, developer financed
  projects generally resemble one of the turnkey
  delivery methods
• FDBT (Finance, design, build, transfer)
• FDBOT (Finance, design, build, operate, transfer)
• FDBOOT (Finance, design, build ,own, operate,
  transfer)
• In each case, the transfer of the project occurs
  only after the developers interests and
  financial obligations have been satisfied.

35
Project Delivery System, Contract Types and
Risk.Contd

• Fast Tracking
• Fast-track approach compresses the schedule by se
  quencing the start of construction on underlying
  project elements (e.g. foundation, basic
  supporting structures) before final design is
  complete for interior or adjacent elements.
• Fast-tracking is not a method of delivery,
  rather, its a management strategy within
  delivery methods.
• While often successful in achieving schedule
  reductions, problems on fast-track contracts can
  create a domino effect on follow-on contracts for
  the project.
• Fast-track is more successful on projects that
  are straightforward and have a high level of
  predictability

36
Project Delivery System, Contract Types and
Risk.Contd

• The owner usually considers the following factors
  to decide how project resources are to be
  organized
• Past practices, traditions, and experience
• The advice of consultants
• Funding sources and constraints
• The effective use of staff and working capital
• The interests of other project stakeholders.

37
Project Delivery System, Contract Types and
Risk.Contd

• Contract Types
• Competitive Bidding(Lump Sum, Unit Price)
• Negotiated Cost-Plus(Various Types)
• Combination(CM administered)

38
Project Delivery System, Contract Types and
Risk.Contd
39
Project Delivery System, Contract Types and
Risk.Contd

• Lump-sum
• One price for the whole contract
• Lump sum includes costs plus overheads and
  profits
• Higher risk to contractor
• Price quoted is a guaranteed price as per
  contract documents.
• Payment based on a scheduled percentage scheme
  (monthly progress claims)
• The contractor is free to use means and methods
  to complete the work and responsible for proper
  performance
• Work must be well defined at bid time.
• Low risk on the owner, Higher risk to the
  contractor
• Cost known at outset

40
Project Delivery System, Contract Types and
Risk.Contd

• Unit Price
• Quote Rates / Prices by units
• No total final price
• Re-negotiate for rates if the quantity or work
  considerably exceeds the initial target
• Payment to contractor is based on the measure.
• Unbalanced bids
• Higher risk to owner
• Ideal for work where quantities can not be
  accurately established before construction starts

41
Project Delivery System, Contract Types and
Risk.Contd

• Require sufficient design definition to estimate
  quantities of units
• Contractors bid based on units of works
• Time cost risk (shared)
• Owner at risk for total quantities
• Contractor at risk for fixed unit price.
• Large quantities changes (gt15-25) can lead to
  increase or decrease of unit price.

42
Project Delivery System, Contract Types and
Risk.Contd

• Cost plus
• Actual cost plus a negotiated reimbursement to
  cover overheads and profit.
• Compromise guaranteed maximum price (GMP)
  reduces risk to owner while maintain advantage of
  cost plus contract.
• By using this type of contract the contractor can
  start work without a clearly defined project
  scope, since all costs will be reimbursed and a
  profit guaranteed.
• In this type of contract the contractor is
  reimbursed at cost with an agreed-upon fee up to
  the GMP, which is essentially a cap beyond this
  point the contractor is responsible for covering
  any additional costs within the original project
  scope

43
Project Delivery System, Contract Types and
Risk.Contd

• Types of Construction Risks

Legal Risk Associated with drafting of the construction contract and documentation
Dispute Risk Without a detailed understanding of the terms and conditions of contract
Design Risk Defective and deficient drawing and specifications. Design risk is proportional to the time which is made available to produce the design documentation and sufficient time to establish the client need
44
Project Delivery System, Contract Types and
Risk.Contd
Buildability Risk Ease of convertibility of the drawings and specification into a built form
Procurement risk Related with the project delivery system chosen
Biddability risk The risk associated with bidders misinterpreting what is often directly related to the quality of the tender documentation and the time which has been made available to prepare it. Were there are omissions from the specifications and drawings there is likely to be higher degree of uncertainty as to the quality and quantity of work to be undertaken, the bidder needs to make suitable allowance in his contract price
45
Project Delivery System, Contract Types and
Risk.Contd

• Primary source of risk
• By those who have construction obligations
• By circumstances outside the control of
  controlling parties
• By compliance with statutory obligations

46
Contract Management and Administration

• What do you mean by Contract Management and
  Administration
• Main tasks of Contract Management
• What effective contract Management accomplishes??
  
• Primary Roles and obligations of the Parties to
  the Construction Contract
• Types of Standard Conditions of Contract(Emphasis
  on MoWUD 1994)

47
Contract Management and Administration.contd

• What do you mean by Contract Management and
  Administration
• Contract Management
• The art and science of managing a contractual
  agreement throughout the contracting process.
• All activity that occurs in the contracting
  process
• Using procurement tools in the contract formation
  process to develop specifications a contract that
  effectively addresses the established contract
  objectives
• Within contract management there are two key
  components
• (Contract administration Contract compliance)

48
Contract Management and Administration.contd

• Contract Administration
• Manages the contractual relationship with the
  contractor in accordance with the contract
  specifications, scope of work and performance
  requirements.
• The management of all actions, after the award of
  a contract, that must be taken to assure
  compliance with contract

49
Contract Management and Administration.contd

• Main tasks of Contract Management
• Obtains commitments from subcontractors
• Establishes a contract administration plan
• Plans and conducts a pre performance conference
• Monitors, measure and reports progress
• Read and analyze the contract
• Evaluate organizations ability to comply
• Function as focal point for internal
  support/team-members
• Protect the financial interests of the
  organization
• Manages contract changes
• Resolves disputes
• Ensures timely delivery

50
Contract Management and Administration.contd

• Manages the invoice and payment process
• Documents decisions and events
• Closes out or terminates the contract
• What effective contract Management accomplishes??
  
• Serves customers by providing them with a
  controlled effective job and good communications
• Establishes clear expectations of both parties
• Anticipates and handles disputes as they arise
• Ensures compensation for the deliverables
  achieved.

51
Contract Management and Administration.contd

• Primary Roles and obligations of the Parties to
  the
• Construction Contract

STAKEHOLDER MAJOR ROLES/OBLIGATIONS
Employer/Client/Owner Make Payment Give Possession of Site Ensure Construction information is available timely
Contractor Perform Work in a workable manner Deliver the Work on time Abide by the Contract Conditions
Engineer/Designer/Supervisor Responsible for the project design administers the contract and supervises the works
52
Contract Management and Administration.contd
General Rule General Rule
Contractor is Not Liable for Contractor is Liable for
Design Workmanship
Ensuring that works are fit for the purpose for which they were intended Ensuring that materials are fit for purpose and free of defects
Ensuring that specifications, instructions and design are appropriate for the purpose for which the works are intended Ensuring that all materials and workmanship fulfill the specification, instructions and design
53
Contract Management and Administration.contd

• Types of Standard Conditions of Contract(Emphasis
  on MoWUD 1994)
• Widely used general conditions of the
  contracts include
• FIDIC, General Conditions of the Contract for
  Construction
• Institute Of Civil Engineers (ICE), General
  Conditions of the Contract for Construction
• American Institute of Architects (AIA), A201-
  General Conditions of the Contract for
  Construction.
• The Engineers Joint Contract Documents Committee
  (EJCDC), C-700 - Standard General Conditions of
  the Construction Contract.
• NEC
• PPPAA for domestic contracts- 2006
• MoWUD 1994

54
Contract Management and Administration.contd

• Ministry of Works and Urban Development (MoWUD)
• DECEMBER 1994

55
Contract Management and Administration.contd

• MoWUD GCC Categorizations
• Definitions and Interpretations Clause 1
• Engineer and Engineers Representative Cl 2
• Assignment and Subletting Cl 3-4
• Contract Documents Cl 5-7
• General Obligations Cl 8-33
• Labour Cl 34-35
• Materials and Workmanship and Tests Cl 36-40
• Commencement Time and Delays Cl 41-48
• Maintenance and Defects Cl 49-50

56
Contract Management and Administration.contd

• Alterations, Additions, and Omissions Cl 51-54
• Measurement Cl 55-57
• Provisional Sums Cl 58
• Nominated Subcontractor Cl 59
• Certificates and Payments Cl 60-62
• Remedies and Powers Cl 63-64
• Special Risks Cl 65
• Frustration Cl 66
• Settlement of Disputes Cl 67
• Notices Cl 68
• Default of Employer Cl 69

57
Contract Management and Administration.contd

• Changes in Costs and Legislation Cl 70
• Other Matters Cl 71-75

58
Contract Management and Administration.contd

• CoPA, Sub-Clause 5 Priority of Contract
  Document
• The Contract Agreement
• Appendix to contract and Addendum (if any)
• Condition of particular Application part II
• Standard condition of contract for construction
  of Civil Works projects. (MoWUD Dec, 1994 part)
• Technical Specification special provision
• The standard specification (if any)
• Other documents, as listed in the Appendix to
  contract.

59
Contract Management and Administration.contd

• Sub-Clause 8 Contractor General Obligations
• Contractor to execute and maintain the Works and
  provide all labour (including the supervision),
  materials, Plant/machineries, etc subject to
  the provision of the contract the necessity of
  which is specified in the contract or reasonably
  inferred from the contract (c25)
• Full Responsibility for the adequacy, stability,
  and safety of all site operations and methods of
  construction
• Contractor Shall inform the employer/engineer of
  any error, omission, fault, other defects in
  the design of or specification which are
  discovered when reviewing the contract documents
  or in the process of execution of the Works

60
Contract Management and Administration.contd

• Sub-Clause 10 Performance Bond
• Letter of acceptance ? within 30 days performance
  bond in the sum of 10 of CP
• Reduced to 5 at the completion of works
• for the due proper performance of the contract
  and observance of all provisions, conditions,
  stipulations
• Bond shall not be released until the employer has
  given a certificate in writing that all
  outstanding matters in dispute b/n the employer
  the contractor have been settled
• CoPA Without limitation to the provisions of the
  preceding paragraph, whenever the Engineer
  determines an addition to the Contract Price as a
  result of a change in cost and /or legislation or
  as a result of a variation amounting to not more
  than 25 percent of the portion of the Contract
  Price payable, the Contractor, at the Engineer's
  written request, shall promptly increase the
  value of the performance security by an equal
  percentage

61
Contract Management and Administration.contd

• Sub-Clause 11 Site Inspection
• Contractor deemed to inspected examined the
  site its surroundings to have satisfied
  himself as to all
• matters necessary for the due performance of the
  contract including, risks, contingencies, all
  other circumstances which may influence his
  tender
• Form nature of the site
• Geological, hydrological subsurface climatic
  conditions
• Details, locations levels of all existing
  projected utilities services / above and below
  ground/
• Nature carrying capacities of existing
  projected roads
• The extent nature of the work, materials,
  labour, and all things necessary for the
  completion of the works, etc

62
Contract Management and Administration.contd

• CoPA Whenever an Opinion is made available to
  the Contractor in respect of any data provided to
  the Contractor by Employer, the Contractor shall
  be solely responsible for ascertaining the
  correctness of such Opinion and the Employer
  shall in no manner be liable in this regard.
• In particular and without limiting the generality
  of the aforesaid, the Contractor shall not rely
  upon such opinion or interpretation for any claim
  with respect to additional time or cost under the
  Contract

63
Contract Management and Administration.contd

• Sub-Clause 12 Sufficiency of Tender
• Contractor deemed to have satisfied himself as
  to
• the correctness sufficiency of his tenders for
  the works, of the rates prices stated in the
  priced BoQ
• Rates prices shall cover all the obligations
  under the contract, all matters and things
  necessary for the proper execution maintenance
  of the works
• but if the contractor encounters,
• Physical conditions other than climatic
  conditions
• Artificial obstructions
• which conditions and obstructions could not have
  been reasonably foreseen by an experienced
  contractor (in the opinion of the eng)

64
Contract Management and Administration.contd

• Engineer to certify and employer to pay the
  additional cost to which the contractor incurred
  by the reason of such conditions including the
  proper reasonable cost of complying with any
  instruction of the engineer proper reasonable
  measures to be taken
• Sub-Clause 13 Work to be to the satisfaction of
  the Engineer
• save in so far as it is legally physically
  impossible
• Contractor to execute maintain the works in
  strict accordance with the contract to the
  satisfaction of the engineer
• Contractor to take instructions only from the
  engineer (channels of communication) Core of
  contract management

65
Contract Management and Administration.contd

• Contractor to comply with adhere strictly to
  the engineers instructions directions on any
  matters whether mentioned in the contract or not,
  touching or concerning the works
• Sub-Clause 14 Program to be Furnished
• Within 15 days of letter of acceptance
• To be revised at intervals of three months
  ??clause 46, engineer to notify the contractor if
  rate of progress is to slow to ensure timely
  completion of the works
• i.e. to expedite progress so as to complete the
  works

66
Contract Management and Administration.contd

• Sub-Clause 20 Care of the Works
• Contractor responsibility for care of works
  from commencement of works till completion of
  works
• Responsibility passed to the employer from
  completion of works till issue of maintenance
  certificate
• save and except the EXEMPTED Risks defined
• Any damage/loss or injury from excepted risks ?
  cont may repair make good at the expense of the
  employer
• Exempted risks war, hostilities, invasion, act
  of foreign enemies, rebellion, revolution,
  military power, civil war, riot, disorder (not
  contractors), use or occupation by the employer,
  cause due to engineers design, ionizing
  radiations, pressure waves --- or other forces of
  nature which an experienced cont could not
  foresee

67
Contract Management and Administration.contd

• Sub-Clause 40 Suspension of works
• Instruction to suspend any work/part of it
  ?contractor to suspend the progress of the work
• Such suspension will be contractors risk if
• provided in the contract or by the default of the
  contractor
• for the proper execution of the works/ safety
  reasons (not arisen from any act/default of the
  Eng/Emp not exempted risks)
• Suspension lasting gt90 days (no order to resume
  works) if not contractors risk ?contractor to
  require permission within 28days

68
Contract Management and Administration.contd

• no permission ?contractor may treat the
  suspension as
• Omission of the work variation as per clause 51
• abandonment of the contract by employer if it
  affects the whole of the works (clause 69) ? 28
  days notice mandatory

69
Contract Management and Administration.contd

• Sub-Clause 44 Extension of Time for Completion
• (amount of) extra or additional work of any kind
• any cause of delay referred to in the conditions
• exceptional adverse climatic conditions
• other special circumstances of any kind
  whatsoever which may occur other than through a
  default of the contractor
• fairly entitle cont an EOT for completion of
  works
• NB (a) and (d) require notification within 28
  days or as soon as practicable plus full
  detailed particulars
• any cause of delay ? if contractor suffers
  delay and/or incurs cost ... ?Ex Sub clause
  6(4) delays of drawings, 42(1) possession of
  the site, etc

70
Contract Management and Administration.contd

•  
• CoPA 44 "Neither rains falling within the rainy
  seasons as occurs in the country, nor floods
  caused by such rains shall be deemed exceptional
  weather conditions such as may fairly entitle the
  Contractor to an extension of time for the
  completion of the Work.
• Similarly in respect of the provision of Clause
  12 of these Conditions, neither such rains nor
  such floods shall be deemed to be adverse
  physical conditions"

71
Contract Management and Administration.contd

• Sub-Clause 48 Certification of Completion of
  Works
• Substantially completed project (passing
  satisfactory tests)? notice by Contractor to
  Engineer (accompanied by an undertaking to finish
  any outstanding works) ? Engineer to issue the
  certificate or to give instructions specifying
  works to be done (within 21 days)
• If Engineer fails to certify within 21 days,
  default of the Employer sub clause 69(1)b
  ?Employer refusing any required approval to issue
  any such certificate

72
Contract Management and Administration.contd

• Sub-Clause 51 Alterations, additions and
  omission of works
• Increase/ decrease in qty of any work included in
  the contract
• Omissions of any such work
• Changes in the character/quantity/kind of any
  such work
• Change the levels, positions, lines dimensions
  of any part of the works
• Execution of additional works of any kind
  necessary for the completion of works
• No such variations shall invalidate/vitiate the
  contract
• Value of variations to be taken into account in
  ascertaining the amount of the contract price
• Order to be in writing if verbally, to be
  confirmed in writing

73
Contract Management and Administration.contd

• Art. 3031 of the Civil Code Alterations
  required by
• Client. - 1. Rights of client
• The client may demand that alterations be made in
  the work as originally planned where such
  alternations can technically be made and are not
  such as to impair the solidity of the work.
• Art. 3032. 2. Effect
• The client may require a reduction in the price
  as originally agreed where the alterations
  required by him reduce the expenses of the
  contractor.
• The contractor may require an increase in the
  price and his remuneration as originally agreed,
  where the alterations required by the client
  increase his expenses, work or liability.

74
Contract Management and Administration.contd

• Art. 3033. 3. Contractor refusing alteration
• The contractor may refuse the alterations
  required by the client where such alterations
  affect plans, schemes or other documents on which
  the parties had agreed.
• The contractor may also refuse the alterations
  where they are of such a nature or importance
  that they constitute a work absolutely different
  to the agreed work.
• The work shall be deemed to be absolutely
  different to the agreed work where it implies an
  alteration exceeding by twenty per cent of the
  value at which the original work was or could
  have been estimated.

75
Contract Management and Administration.contd

• Sub-Clause 52 Valuation of variation
• Rates prices contained in the contract to be
  used
• if not appropriate, new rate to be agreed upon
  b/n the cont and the eng ?failing to agree, by
  the eng (reasonable proper rates/prices having
  regard to circumstances)
• notice to be delivered ASAP by cont to claim
  extra payment or a varied rate/price ?otherwise
  no inc/dec or adjustment be
• notice of intention to vary a rate/price ? by the
  eng

76
Contract Management and Administration.contd

• Intention by the
• engineer of the
• variation

Cont to give a varied rate to the engineer
Engineer to give his comments on the varied rate
lt30days
lt15days
Engineer may forward the rate for approval by
MoWUD CoPAEmployer
77
Contract Management and Administration.contd

• Sub-Clause 52(3) (5) CP Adjustment/Claims
• Variations exceeding 10 of CP
• On certified completion of the whole of the works
  ? if the reduction/increase of the CP is greater
  that 10 of CP ? the amount of the CP shall be
  adjusted considering all material related
  factors including the contractors site/general
  overhead cost of the contract!!
• Arising from the aggregate effect of all
  variation orders all adjustments upon
  remeasurement of estimated quantities
• Claims
• Contractor to submit all claims for additional
  payment of all extra/additional order once
  every month with particulars
• Engineer to authorize payments notwithstanding
  the conts failure to comply with condition.

78
Contract Management and Administration.contd

• Sub-Clause 60 Monthly Payment
• Every month to be submitted, comprising of
• quantities value of executed permanent works
• value of materials on site intended to form part
  of the permanent work together with supporting
  invoices
• value of temporary works (if included in the
  BoQ)
• amounts reflecting any changes in cost (pursuant
  to clause 70)
• amounts approved in respect of day works
• Employer to pay within 30 days of the date of
  eng certificate
• Subject to 10 (5) retention to all the above
  payments

79
Contract Management and Administration.contd

• Eng may correct/modify/withhold any approved
  payments from latter PCs for mistakes made on
  PCs, works not carried out to his satisfaction,
  damages on materials/plants etc

80
Contract Management and Administration.contd

• Sub-Clause 63 Default of the Contractor
• If the contractor becomes bankrupt, assigns the
  contract without the consent of the employer,
  goes into liquidation, etc OR
• If the engineer certifies to the employer that
  the cont (in his opinion)
• Abandoned the contract
• Failed to commence works without reasonable
  excuse or suspended the progress of works for 28
  days (after notice)
• Failed to remove condemned materials for 28 days
  (after notice)
• Is not executing the works in accordance with the
  contract or is persistently flagrantly
  neglecting to carryout his obligations under the
  contract

81
Contract Management and Administration.contd

• Has sublet any part of the contract to the
  detriment of good workmanship or in defiance of
  the engineers instruction ??? default of the
  contractor ? breach of the contract..SEE
  PORCEDUR FOR DECLARING DEFAULT

82
Contract Management and Administration.contd

• enter upon the site works
• expels contractor from site
• may himself complete or employ other cont
• may use temporary works, plants to complete
• May sell any of materials, plants, temporary
• works ? applying proceedings of sale, to the
• satisfaction of any such sums due to him

• Employer to give 14 days
• written notice

Employer

• Eng to fix, determine certify
• Amounts reasonably earned or
• accrue to the cont
• value of unused or partially used
• materials, plants, or temporary works

• If the amount exceeds the sum payable
• to the cont ? cont to pay to the employer or
• a debt by the cont to the employer shall be
• recoverable accordingly!!
• If not ?? contractor entitled for the balance!!

• Eng to ascertain certify payment
• cost of execution maintenance
• Damage for delay in completion
• all expenses incurred by the employer

83
Contract Management and Administration.contd

• Employer entry expulsion ? contractor not
  entitled/employer not liable to payment (any
  Money) on account of the contract, until the
  expiration of the period of Maintenance!! ?
  withholding the money due to the con if any!

84
Contract Management and Administration.contd

• Sub-Clause 69 Default of the Employer
• Contractor entitled to terminate his employment
  under the contract in the events of the employer
  (giving 30 days prior notice)
• Fails to pay the contractor the amount due under
  any certificate of the engineer within 30 days
  after the same shall have become due.
• Interferes with or obstructing or refuses any
  required approval to issue payment certificate,
  completion certificate, work certificate,
  maintenance certificate
• Becomes bankrupt or goes in to liquidation
• Gives a formal notice to the contractor that for
  unforeseen reasons due to economic dislocation,
  it is impossible to continue to meet his
  contractual obligations and for convenience???

85
Contract Management and Administration.contd

• Sub-Clause 71 Warranties in Respect of Defects
• Unless otherwise provided, the Contractor shall
  be LIABLE to the Employer for any defects of the
  construction of the works DURING TEN YEARS FROM
  THE DAY ON WHICH THE EMPLOYER HAS ENTERED INTO
  THE POSSESSION OF THE WORKS

86
Contract Management and Administration.contd

• Communications(Meetings in Construction)
• Pre-construction Meetings
• Procedural Meeting
• Site Mobilization Meeting
• Utility Coordination Meeting
• Authorities Having Jurisdiction (AHJs)
• Progress Meetings
• Contractor/Subcontractor Meetings
• Pre installation Meetings
• SAFETY Meetings
• Other Meetings

87
Contract Management and Administration.contd

• Closeout Meeting
• Pre default meeting
• Preconstruction meetings are important for-
• Introducing the project team,
• Establishing the ground rules for communication,
  and explaining the administrative process. In
  many cases, a single meeting is all that is
  required however, large, complex, or multiprime
  contractor projects may require more than one
  meeting.
• A procedural meeting
• may cover administrative procedures, such as
  communication, submittals, testing, and
  inspection. A second mobilization meeting may
  address use of the site

88
Contract Management and Administration.contd

• Site Mobilization Meeting
• Access to the site, such as construction entrance
  and egress locations, including access roads,
  parking restrictions, and security.
• Environmental controls such as silt fences,
  biobags, inlet protection, temporary seeding and
  mulching, and oil booms and containment systems
  when working over or near water.
• Use of site and existing facilities by contractor
  and owner, including access to buildings or
  areas, use of elevators, and maintenance of fire
  exits. For public infrastructure projects, this
  might involve traffic control, detours, and
  barriers.

89
Contract Management and Administration.contd

• Identification of benchmarks and data, including
  survey and layout of work.
• Occupancy and use by owner, tenants, and public
  during the construction stage, including partial
  use and occupancy of completed work, and the
  related coordination of insurance requirements
• Site mobilization meeting is a tool for laying
  effective management of site by addressing pre
  construction activities required by participants
  of the project. Typically held at the site, this
  meeting concerns issues about site use.

90
Contract Management and Administration.contd

• Utility Coordination Meeting
• On a projects where significant utility
  relocation work is required, it is prudent to
  have a utility coordination meeting.
• This meeting is usually held shortly after the
  preconstruction meeting. Participants may include
  representatives from the utility providers
  serving the project.
• Identifying the best time for each utility
  provider to perform their work
• Identifying the interface with other utility
  providers for work that must occur concurrently
• Establishing how long each utility providers
  work will take

91
Contract Management and Administration.contd

• Identifying the primary contact person
• Establishing how much notification (lead time)
  each utility provider will require to mobilize
• Identifying whether there are related costs that
  have not been identified
• Determining or confirming who will do the
  locating work for each utility provider
• Identifying special inspection requirements.
• Regardless of the project extent, a utility
  coordination meeting might be required by utility
  providers as a precondition of future connection
  to utilities.

92
Contract Management and Administration.contd

• Pre-installation Meeting
• Ascertain access to the work
• Review conditions of proper installation and
  environmental conditions
• Identify conditions detrimental to the
  installation
• Review preparation procedures, including
  protection of adjacent work
• Review coordination with other work such as
  substrates, connections, transitions, and
  existing and surrounding conditions
• Evaluate delivery schedule and progress schedule

93
Contract Management and Administration.contd

• Safety Meeting
• Several different types of safety meetings may
  occur on a project. Contractors hold weekly
  safety meetings, at which the supervisors and
  workers gather before start of shift and discuss
  a selected safety topic.
• Sometimes a contractor invites OSHA Consultative
  Services to visit the project and do a safety
  consultation.

94
Contract Management and Administration.contd

• Closeout Meeting
• The closeout meeting is used to review
  requirements for the completion of the contract
  and to obtain submittal of the necessary final
  documents. Separate meetings may be required for
  substantial completion, final completion, and
  warranty reviews.
• Many of the closeout documents are prepared
  during construction, even though their submission
  is not required until the project is nearing
  completion. These documents might include record
  documents, OM data, manufacturer certification
  of installations, and interim inspections and
  testing.

95
Contract Management and Administration.contd

• Completion time for correcting defective work
• Inspections by AHJs
• Certificate of use or occupancy and transfer of
  insurance responsibilities
• Partial release of retainage
• Final cleaning
• Preparation for final inspection
• Closeout submittals
• Record documents

96
Contract Management and Administration.contd

• Pre-default Meeting
• The performance bond provides the most important
  protection for the owner by guaranteeing that if
  the contractor defaults, the surety will either
  complete the contract in accordance with its
  terms or provide sufficient funds, up to the
  penal amount of the bond, to fund such completion.

97
Claims Management and Dispute Resolution

• Typical Claims Against the Owner
• Typical Claims Against the Contractor
• Likely source of construction Delay and
  Disruption
• Claims Analysis
• Claims Prevention Suggestions
• Dispute Resolution Mechanisms

98
Claims and Dispute Resolution.contd

• Typical Claims Against the Owner
• Poor project planning
• Scope changes
• Constructive change orders
• Errors and omissions
• Contract accelerations and stoppages
• Site access or availability
• Other construction interference and delays
• Strikes and acts of God

99
Claims and Dispute Resolution.contd

• Typical Claims Against the Contractor
• Late completion - liquidated damages
• Out of specification materials
• Defective work
• Property damage

100
Claims and Dispute Resolution.contd

• Likely Sources of Construction Delay and
  Disruption

Excusable/Neutral Delay Non-Excusable Delay
Delay or deferment in granting Possession of Site Late Mobilization Commencement
Unforeseeable ground conditions Shortage of Resources
Instructions (e.g. additional work, opening up for inspection and testing) Delayed Contractor s design (e.g. temporary works)
Variations or changes to work scope Poor site co-ordination
Increase in Quantities Price Fluctuation
Inaccurate quantities in contract BOQ Delayed Geo-technical investigation by the Contractor
101
Claims and Dispute Resolution.contd
Excusable/Neutral Delay Non-Excusable Delay
Late/Poor design information by the Engineer Re-work and maintenance works
Suspension of Works by the Engineer/Employer Provision of Engineers Facilities
Delay caused by statutory bodies stakeholders Improper Mgt. of Statutory obligations Traffic Safety Mgt
Exceptionally adverse weather conditions Lack of Early Warning for delaying events
Delay caused by Employer or his representatives Re-work and maintenance works
Civil commotion Industrial action(e.g. lock outs)
102
Claims and Dispute Resolution.contd

• Claims Analysis
• Brief of the case
• Owners position
• Contractors position
• Analysis and evaluation
• Recomm