Suarez, Jenny Vi E.

CE 5-2

1. Contracts and Specifications

Contracts. Construction contract is a formal agreement for construction,
alteration, or repair of buildings or structures (bridges, dams, facilities, roads,
tanks, etc.). A construction contract is distinct from a contract to assemble,
fabricate, or manufacture. Under Article 1713 of the Philippine Civil Code, a
construction contract falls within the general classification of a contract for a
piece of work whereby the contractor binds himself to execute a piece of
work for the employer, in consideration of a certain price or compensation.
The contractor may either employ only his labor or skill, or also furnish the
material.
The term construction can include the erection, repair and demolition of
things as diverse as houses, offices, shops, dams, bridges, expressways,
home extensions, factories and airports. Different firms may carry out
specialist work relating to particular technologies, but few firms are confined
to only one building type or technology. Thus, the industryand issues that
affect construction projectsis sometimes be difficult to comprehend fully
because:
The relationships between the parts are not always clear.
The boundary of the industry is unclear.1
A construction contract encompasses a building contract related to the
construction of a building, as distinguished from the construction of
infrastructure or engineering projects. Engineering contracts refer to the
engineering and construction of an industrial facility designed by engineers,
such as an offshore oil and gas platform or a mineral processing facility
(Ibid.).
Types of construction contract:
EPC/Turnkey, where the contractor takes total responsibility for the
engineering, procurement and construction (EPC), and provides a
fully equipped facility ready for operation at the turn of a key.
Design and construct, in which the contractor prepares the design
to satisfy the owners requirements and then constructs that
design.
Construct only, the traditional form of construction contract
between an owner and contractor in which the contractor
constructs the design prepared for the owner by the owners
engineer/architect, who has a separate design contract with the
owner. These contracts can be:

(a) Lump sum - This is the most basic form of agreement between a supplier
of services and a customer. The supplier or contractor agrees to provide
specified services for a specific price. The owner then agrees to pay the price
upon completion of the work or according to a negotiated payment schedule.
In developing a lump sum bid, the builder will estimate the costs of labor and
materials and add to it a standard amount for overhead and the desired
amount of profit.
(b) Unit price - In this contract, the work to be performed is broken into
various parts, usually by construction trade, and a fixed price is established
for each unit of work. For example, painting is typically done on a square foot
basis. Unit price contracts are seldom used for an entire major construction
project, but they are frequently used for agreements with sub-contractors. In
a unit price contract, like a lump sum contract, the contractor is paid the
agreed upon price, regardless of the actual cost to do the work.
Project management, where the owner engages a project manager
to act as its agent with control over the whole project, which may
or may not be divided into discrete parts.
EPCM (Engineering, Procurement, and Construction Management),
in which the contractor designs, procures and as agent for the
owner manages the construction.
Construction management, in which

the

owner

engages

construction manager to program and coordinate the design and

construction activities, which are divided into discrete parts.
Specification. The purpose of construction specifications is to indicate the
requirements regarding the materials, products, installation procedures and
quality aspects involved with execution of the work and fulfillment of the
contract. According to the American Institute of Architects (AIA) Document
A201-2007, the Contract Documents for a construction project consist of the
Agreement, Conditions of the Contract, Drawing, Specifications, Addenda,
as well as other miscellaneous documents associated with the contract
between the project Owner and the Contractor hired to complete the work.
Construction specifications, as noted, become a part of the legal documents
of the agreement and form a cornerstone of the project design. In fact, in
most cases, the construction specifications override the project drawings in
the event of conflicting information.
Three Primary Categories of Construction Specification
a. Performance Specifications
A performance specification is a document that specifies the operational
requirements of a component or installation. Simply put, a performance
specification tells the contractor what the final installed product must be
capable of doing. The contractor is not instructed as to how to accomplish
the task of meeting the performance specification requirements - only as to

how the component must function after installation. The general concept
behind the performance specification is for the architect or engineer to
describe what they need, and the contractor to determine the best way to
get there. The performance specification focuses on the outcome and shifts
the selection of materials and methods, as well as a portion of the design
work, onto the shoulders of the contractor. This approach can provide
incentives for innovation and flexibility in the construction approach, but also
reduces the amount of control that the architect or engineer has over the
project.
b. Prescriptive Specifications
Prescriptive specifications convey the requirements of a project through a
detailed explanation of the materials that the contractor must use, and the
means of installing those materials. This type of specification will typically be
formatted in a manner similar to the following sections:
1.

General: This section will typically contain references to

national/international standards, design requirements, a list of required
submittals from the contractor to the architect/engineer, quality control
requirements and product handling requirements.

2.

Products: This section will describe, in detail, the various products

required for the task covered by the specification along with the individual
structural and performance requirements of each product.

3.

Execution: This section will explain how to prepare the materials and
conduct the installation, including the testing requirements to be
followed.

Prescriptive specifications shift more of the project design control onto the
shoulders of the architect or engineer and away from the contractor by
establishing a set of rules that is to be followed for each project component.
This type of specification provides more certainty regarding the final product
composition than the performance specification, and is very frequently used
for highly complex portions of a project.
c. Proprietary Specifications
Proprietary specifications are those that require the use of a single approved
product type for any particular installation. Proprietary specifications are
often used in cases where there is existing equipment or installations already
on site. In these cases the owner may want to maintain consistency of
materials or possibly simply prefers a specific type of product. Also, in highly
complex installations where there is only one specific piece of equipment
that will accomplish a specified task, a proprietary specification is required.
Architects and engineers typically try to avoid utilizing proprietary
specifications except when absolutely necessary, and will usually allow the

contractor to select from a list of approved suppliers. Requiring the use of

one specific product type can lead to the perception of favoritism towards a
certain manufacturer and may eliminate competition during the bid phase,
which may increase the project cost.
2. Construction Project Organization
It is the art of directing and coordinating human and material resources
throughout the life of a project by using modern management techniques to
achieve predetermined objectives of scope, cost, time, quality and
participation satisfaction.
The management of construction projects requires knowledge of modern
management as well as an understanding of the design and construction
process. Construction projects have a specific set of objectives and
constraints such as a required time frame for completion. While the relevant
technology, institutional arrangements or processes will differ, the
management of such projects has much in common with the management of
similar types of projects in other specialty or technology domains such as
aerospace, pharmaceutical and energy developments.
Generally, project management is distinguished from the general
management of corporations by the mission-oriented nature of a project. A
project organization will generally be terminated when the mission is
accomplished.

Figure 2-1: Basic Ingredients in Project Management

The Project Management Institute focuses on nine distinct areas requiring
project manager knowledge and attention:
1. Project integration management to ensure that the various project
elements are effectively coordinated.
2. Project scope management to ensure that all the work required (and
only the required work) is included.

3. Project time management to provide an effective project schedule.

4. Project cost management to identify needed resources and maintain
budget control.
5. Project quality management to ensure functional requirements are
met.
6. Project human resource management to development and effectively
employ project personnel.
7. Project communications management to ensure effective internal and
external communications.
8. Project risk management to analyze and mitigate potential risks.
9. Project procurement management to obtain necessary resources from
external sources.
3. Planning and Scheduling (PERT/CPM)
CPM (Critical Path Method) and PERT (Program Evaluation Review Technique)
are project management techniques, which have been created out of the
need of Western industrial and military establishments to plan, schedule and
control complex projects. CPM (Critical Path Method) and PERT (Program
Evaluation Review Technique) are project management techniques, which
have been created out of the need of Western industrial and military
establishments to plan, schedule and control complex projects. Essentially,
there are six steps which are common to both the techniques. The procedure
is listed below:
I.

Define the Project and all of its significant activities or tasks. The
Project (made up of several tasks) should have only a single start
activity and a single finish activity.

II.

Develop the relationships among the activities. Decide which activities

must precede and which must follow others.

III.

Draw the "Network" connecting all the activities. Each Activity should
have unique event numbers. Dummy arrows are used where required
to avoid giving the same numbering to two activities.

IV.

Assign time and/or cost estimates to each activity

V.

Compute the longest time path through the network. This is called the
critical path.

VI.

Use the Network to help plan, schedule, monitor and control the
project.

The Key Concept used by CPM/PERT is that a small set of activities, which
make up the longest path through the activity network control the entire
project. If these "critical" activities could be identified and assigned to
responsible persons, management resources could be optimally used by
concentrating on the few activities which determine the fate of the entire
project.
Non-critical activities can be replanned, rescheduled and resources for them
can be reallocated flexibly, without affecting the whole project.
Five useful questions to ask when preparing an activity network are:

Is this a Start Activity?

Is this a Finish Activity?

What Activity Precedes this?

What Activity Follows this?

What Activity is Concurrent with this?

Some activities are serially linked. The second activity can begin only after
the first activity is completed. In certain cases, the activities are concurrent,
because they are independent of each other and can start simultaneously.
This is especially the case in organizations which have supervisory resources
so that work can be delegated to various departments which will be
responsible for the activities and their completion as planned. When work is
delegated like this, the need for constant feedback and co-ordination
becomes an important senior management pre-occupation.