Construction Management & Engineering
CIEG 467-013
Construction Management & Engineering
CIEG 467-013
Method or System of Project Delivery
• Traditional design-bid-build
• Phased or Fast-track
• Design-build
Design Phase
Bid
Construction phase
Traditional Design-Bid-Build
Time
Savin
gs
Design Phase
Construction phase
Phased or Fast-Track Construction
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Brid g e D e c k
T ru sse s/F ra m in g
Su sp e n d e d Ste e l
M a in C a b le s
T o w e rs
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Ea st P ie rs
A n c h o ra g e s
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Construction Management & Engineering
CIEG 467-013
Contract Types
• Traditional vs. alternative
• Classification by method of award and
method of pricing
• Model contracts have been developed
by AIA, AGC, CEC, DBIA, CMAA, and
Engineers Joint Contract Documents
Committee (EJCDC)
Construction Management & Engineering
CIEG 467-013
Contract Types
v Method of Award
1. Competitive bidding
– formally advertised public work
– selective invitation for private work
– awarding of contracts by:
• Lowest responsible bid or
• Best value i.e.: technical score  price or
price + time(ft), and other variations
Construction Management & Engineering
CIEG 467-013
Contract Types
v
Method of Award
2. Negotiated contracts
– Generally private work
– Benefits include flexibility of pricing arrangement
– Often used on projects of large size and great
complexity
– Owner may value expertise and integrity of a
particular contractor and can award contract without
competition that may otherwise exclude that
contractor from the work
Construction Management & Engineering
CIEG 467-013
v Method of Pricing
 Fixed-price
1. Lump sum
– Traditional, single fixed price
– Predetermined price that includes profit,
overhead, and all other costs
– Greatest risk to contractor resulting in a
higher markup (the greater the risk, the
higher required rate of return )
– Most common contract form
Construction Management & Engineering
CIEG 467-013
v Method of Pricing
 Fixed-price
2. Unit-price contract
– Prices of specified units of work are fixed or
predetermined
– Actual cost to the owner will vary with actual
quantities placed
– Best used when details and general character
of the work are known, but quantities are
subject to variation
– Risk of unbalanced bids
Construction Management & Engineering
CIEG 467-013
v Method of Pricing
 Cost-plus
•
•
•
Contractor agrees to perform the work for a fixed
or variable fee covering profit and home office
costs (general overhead)
Field costs are reimbursable at actual cost
Used when:
– nature of the work or physical conditions are
unpredictable
– scope is unknown or difficult to define
Construction Management & Engineering
CIEG 467-013
v Method of Pricing
 Cost-plus
•
•
•
•
All cost-plus contracts depend on cooperation
among A/E, owner, and contractor
Record keeping and timely evaluation are
extremely critical
Detail record of labor hours and salaries,
material and equipment must be maintained
Good application for professional CM services
Construction Management & Engineering
CIEG 467-013
Types of Cost-plus Contracts
3. Cost plus fixed %
– Fixed % based on portion or all of
reimbursable costs
– Used in construction involving new
technology or extremely pressing needs
– Owner assumes risk
– Contractor cooperation very high
– Little or no incentive for cost savings
Construction Management & Engineering
CIEG 467-013
Types of Cost-plus Contracts
4. Cost plus fixed fee
–
–
–
More incentive for cost savings
Incentive for timely completion
Risk shared by owner and contractor
5. Cost plus variable %
–
–
–
Also called “sliding scale %”
Keeps fee in line with type & volume of work
Fee becomes progressively smaller on work that is
repetitive, requires little or no re-engineering, replanning, or additional layout
Construction Management & Engineering
CIEG 467-013
Types of Cost-plus Contracts
6. Target estimate
–
–
–
May be based on dollar amounts, man-hours,
schedule, or combination
Cost savings or overrun shared by owner and
contractor at predetermined split
Cost underrun increases contractor profit, overrun
decreases profit
7. Guaranteed maximum price
–
–
–
–
Used with well defined scope of work
Particularly suitable for turnkey operation
Contractor or design-builder assumes all risk
Provisions to share savings can be applied
Construction Management & Engineering
CIEG 467-013
Excel Spreadsheet
Contract Types
Construction Management & Engineering
CIEG 467-013
Construction Contracts
• Prequalification of bidders
– Evidence of satisfactory previous experience
– Financial stability
– Advanced or specialized prequalification may be
required as dictated by the magnitude and nature
of the work
– Bid bonds are often required
Construction Management & Engineering
CIEG 467-013
Elements of a legal contract
• offer
• acceptance
• consideration
• legal in every respect
• requires a meeting of the minds
• offer + acceptance = binding obligation
Construction Contract Documents
•
•
•
•
•
•
•
•
Advertisement for bids
Information for bidders
Bid form
General notices
Notice of award
Notice to proceed
Bid bond
Performance bond
• Payment bond
• Contract form or
agreement
• General conditions or
provisions
• Supplemental and/or
special conditions
• Plans
• Specifications
Construction Contract Documents
Characteristics of a “good” contract document:
1.
2.
3.
4.
5.
6.
7.
Carefully considered
Expressed clearly
Time-tested
Comprehensive
Fair
Balanced
Applicable to the elements of a construction projects
Construction Management & Engineering
CIEG 467-013
Construction Contracts
……bidders are required to:
–
–
–
–
examine all portions of the contract documents
examine the physical conditions of the site
determine legal requirements affecting the work
complete these investigations prior to bidding
Construction Management & Engineering
CIEG 467-013
Construction Contracts
……contract documents should:
– Include a hierarchy to determine which
documents govern in case of conflict, i.e.:
DelDOT’s hierarchy
– Not contain ambiguous language
– Not contain exculpatory clauses
Construction Contracts -- General Conditions
• Contractor’s warranties
• Defective drawings
• Approval of contractor’s
plans and equipment
• Approval of shop drawings
other submittals
• Guarantee by the
Contractor
• Conduct of the work
• Defective work
• Relations with other
contractors and
subcontractors
•
•
•
•
•
•
•
•
•
•
•
Inspection of materials
Inspection of field work
Authority of the Eng’r.
Duties of the inspector
Permits and licenses
Labor considerations
Work done by the owner
Lines and grades
Order and discipline
Performance
Final inspection &
acceptance
Construction Contracts -- General Conditions
• Federal, state, and local
government regulations
• Employment (EOE rules)
• Emergencies
• Minimum wage rate
• Domestic vs.foreign
materials and labor
• Construction reports
• Payrolls and bills of material
• Cooperation among
contractors
• Patents
•
•
•
•
•
Retainage
Bonding and insurance
Guarantee of equipment
Borings
Spare parts
Risk Allocations -- General Conditions
•
•
•
•
•
•
•
Force majeure
Indemnification
Liens
Labor laws
Differing site conditions
Delays and extension of time
Liquidated damages
• Consequential damage
• Occupational safety, and
health of workers
• Permits, licenses, and
regulations
• Termination for default by
contractor
• Suspension of work
• Warranties and guarantees
Construction Management & Engineering
CIEG 467-013
Specifications
• Standard, supplemental, and special
provisions
• two types of specifications:
– method specification dictates equipment
and procedures
– performance spec specifies only the
desired end result or product
– should include hierarchy
Construction Management & Engineering
CIEG 467-013
Hierarchy
Governing ranking of contract components in
case of a discrepancy (DelDOT)
• General Notices
• Special Provisions
• Plans
• Supplemental Specifications
• Standard Construction Details
• Standard Specifications
Construction Management & Engineering
CIEG 467-013
Classification Coding System
• Architectural building and site development
industry employees the CSI Format that
includes 16 divisions of work.
• Public owners generally use a system of
sections or divisions developed and
employed for several decades
Construction Management & Engineering
CIEG 467-013
Codes, Standards, and Regulations
Model Codes
•
•
•
•
Basic/National Building Code (BOCA Code)
Uniform Building Code
Standard Building Code
National Electric Code (NEC) and Life Safety Code
by the NFPA under ANSI
• The International Building Code 2000 (IBC) replaces
the first three codes. Several subcodes of the IBC
include Fire, Residential, Plumbing, Energy
Conservation, Mechanical, & Private Sewage
Construction Management & Engineering
CIEG 467-013
Codes, Standards, and Regulations
Model Codes
• Model codes are adopted in whole or in part by the
local municipality, and become enforceable under the
law
Zoning Regulations
• imposed by local zoning commissions
Environmental Regulations
• imposed by the EPA, State DEP (DNREC), or local
agency
Construction Management & Engineering
CIEG 467-013
Codes, Standards, and Regulations
Standards
• ASTM
• Underwriters Laboratories, Inc. (UL)
• AASHTO
• ACI
• AISC
• many, many others
• no enforcement by these agencies
• specifications generally refer back to these
standards
Construction Management & Engineering
CIEG 467-013
Submittals required in the contract
– copies of subcontracts
– shop drawings and support calculations
– catalog cuts
– material or equipment samples
– schedule(s)
– certified payrolls
– certificates of insurance
– environmental test reports
– material test reports & certifications
Construction Management & Engineering
CIEG 467-013
Shop Drawings
– structural steel details & erection plan
– erection procedures (safety)
– PS/PC concrete items
– shoring & underpinning details
– jacking plans and calculations
– scaffolding and falsework
– concrete formwork design and details
– construction sequencing diagrams
Construction Management & Engineering
CIEG 467-013
Shop Drawings
– cofferdam design & details
– dewatering procedure
– stream diversions
– pipe and ductwork fabrication details
– reinforcing steel bending diagrams and bar lists
– structural timber elements
– ornamental iron or steel
– maintenance of traffic plans (alternates)
Construction Management & Engineering
CIEG 467-013
Payments and related issues
– mobilization and initial costs
– retainage
– progress payments and partial payments
– material payments
– change orders
– substantial completion
– punchlist
– final acceptance and payment
Construction Management & Engineering
CIEG 467-013
Changes in plans and specs
– clarification, correction, modifications prior to bid
are referred to as “addenda”
• owner must maintain a system of distributing and
acknowledging receipt of addendum
– plan and spec changes after award are referred
to as “revisions”, and generally require issuance
of a change order(s)
Construction Management & Engineering
CIEG 467-013
Change Orders
– a written order issued by the owner to the
contractor for a change to the contract within
the scope of work
– change orders are written for:
• extra work
• increasing or decreasing the contract quantities
• alterations
– change orders state the basis and amount of
payment and time extensions
Construction Management & Engineering
CIEG 467-013
Contracts
• Liquidated damages
• Incentive/Disincentive (bonus/penalty)
• Acceleration
– Increase crew levels, crew size
– Add shifts and/or extend work hours
• CPM schedule is an extremely valuable tool in
analyzing delay claims
Construction Management & Engineering
CIEG 467-013
Claims and Disputes
• a claim is a request by a contractor for additional
compensation or time extension for occurrences
beyond the contractor’s control including:
– differing or unexpected site conditions
– change in scope
– delays caused by the owner
• owner has duty to provide adequate, accurate
data to the bidders
Construction Management & Engineering
CIEG 467-013
Claims and Disputes
• Owner is liable to contractor when:
– inaccurate data are given
– extras develop because of improper design
– design is significantly changed after the contract
is signed (constructive change)
• Contractor must prove entitlement and the
associated damages
• Contractor must provide timely notice of claim
upon discovering impact
Construction Management & Engineering
CIEG 467-013
Types of Claims
– delay claim
– extra work claim
– acceleration
– impossibility-of-performance claim
– defective design claim (error or omission)
– interference claim
– superior knowledge claim
Construction Management & Engineering
CIEG 467-013
Dispute Resolution
• Early settlement between parties
• Alternative depute resolution (ADR)
– negotiation
– arbitration (1 or 3 members)
– mediation
– neutral advisors
– Dispute Review Board (DRB)
• 3 or more odd number of board members selected
evenly by both sides
• Litigation
– sometimes unavoidable; usually undesirable; but
sometimes best method
Construction Management & Engineering
CIEG 467-013
Credits
• Credits – reimbursement from contractor to
owner for work eliminated (lump sum
contract or item)
• Credit may also be given when specified
performance criteria is not met
Construction Management & Engineering
CIEG 467-013
Claims Avoidance
• producing comprehensive, accurate, contract
documents
• constructibility review
• clear understanding of contract requirements prior to
bidding
• having good administrative procedures in place
• open and honest communication
• timely troubleshooting
Construction Management & Engineering
CIEG 467-013
Claims Avoidance
• Claims avoidance begins in the preconstruction phase
• Contract documents need to be clear,
accurate, comprehensive, and fairly
distribute risk
Construction Management & Engineering
CIEG 467-013
Ability to influence cost over time
• Greatest potential to influence cost is during the
pre-construction design phase
• Claims avoidance begins during pre-construction
• Design phase
– Intensive preparation and review of contract
documents
– Careful consideration of methods and
equipment = consider overall constructibility
nsin
100%
Level of Influence on Cost
Aiiy

s
Infene
ss
0%
Concept &
Feasibility
Design and
Engineering
Procurement and Construction
Startup Oper.
Ability to Influence Construction Costs over Time
Construction Management & Engineering
CIEG 467-013
Design Professionals should:
• Specify locally available material
• Allow substitution of equal quality material
• Avoid one-of–a-kind or non-standard items
where possibly
• Design structures with as many redundant
elements as possible
• Design should allow construction using the
prevailing methods and equipment
Construction Management & Engineering
CIEG 467-013
Design Professionals should:
• Design to minimize required labor
• Specify a quality of workmanship consistent with
the quality of the project
• Do not require the contractor to assume
responsibility for information that should be
furnished by the design engineer/architect
• Produce simple, straight-forward specs = clearly
state what is expected
Construction Management & Engineering
CIEG 467-013
Construction Management
Contractual arrangement: at-risk or
management services for fee only
or
Act of managing the construction process
Construction Management & Engineering
CIEG 467-013
Construction Management
•
•
•
Contractual arrangement
Construction management personnel can
represent owner or contractor
CM manages the basic resources of
construction
Basic Resources
•
•
•
•
workforce
subcontractors
equipment
construction
plant
•
•
•
•
material
information
time
money
Construction Management & Engineering
CIEG 467-013
Project Management
• Optimize the three attributes of: quality, cost,
and time
• Principle objective of a construction manager
is to complete each project on time and within
budget, while maintaining acceptable levels
of safety and risk
Construction Management & Engineering
CIEG 467-013
Value Engineering
• Effect overall economy in the total life cycle
• Performed prior to the bid as part of the review
process, or
• Performed by the contractor under terms of the
contract = cost savings shared by the owner and
contractor
• Goal is to lower construction or life cycle cost
without reducing quality or usefulness
Value Engineering
Structured VE job plan consists of five phases
1. Information phase
• Function analysis
1.
2.
3.
4.
5.
What is its purpose?
What does it do?
What does it cost?
What is it worth?
What alternative would accomplish the same
function?
6. What would the alternative cost?
Value Engineering
2. Speculation/Creative Phase
“brainstorming”
3. Evaluation/Analytical Phase
4. Development Phase
5. Report Phase
Value Engineering
Economic evaluations considering
the time value of money
Present Worth vs. Future Worth
Minimum Attractive Rate of Return
(MARR)
Return on Investment (ROI)
Construction Management & Engineering
CIEG 467-013
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