CONTRACTS AND SPECIFICATION

Presented By: Program & School:

Adviser
Engr. Crispin S. Lictaoa
Contract and Specification for Construction Project

➢ It is a written document between a property owner and a general contractor, specifying the

construction, renovation, alteration or other work to be done on the property owner's home

or land.
v Construction Pricing and Contracting
v Competitive Bidding
v Negotiated Contracts
v Speculative Residential Construction
v Force Account Construction
v Contract Provisions for Risk Allocation
v Construction Pricing and Contracting
The construction price includes the direct project cost including field supervision expenses

plus the markup imposed by contractors for general overhead expenses and profit. The

factor's influencing a facility price will vary by type of facility and location as well.
v Competitive Bidding
The basic structure of the bidding process consists of the formulation of detailed plans and

specifications of a facility based on the objectives and requirements of the owner, and the

invitation of qualified contractors to bid for the right to execute the project.
v Negotiated Contracts
A major reason for using negotiated contracts is the flexibility of this type of pricing

arrangement, particularly for projects of large size and great complexity or for projects which

substantially duplicate previous facilities sponsored by the owner.

1. Cost plus fixed percentage

2. Cost plus fixed fee

3. Cost plus variable fee

4. Target estimate

5. Guaranteed maximum price or cost

they own. Speculative construction includes the activity commonly referred to as "house

flipping". The developers often build houses and condominiums in anticipation of the demand

of home buyers.
v Force-Account Construction
The use of a grantee's own labor force to carry out a capital project. Force account work may

consist of design, construction, refurbishment, inspection, and construction management

activities, if eligible for reimbursement under the grant.

areas in addition to the total construction price. Typically, these provisions assign

responsibility for covering the costs of possible or unforeseen occurrences.

- Force majeure
- Indemnification

- Liens
- Labor laws
- Delays and extensions of time
- Liquidated damages
- Consequential damages
- Occupational safety and health of workers
- Permits, licenses, laws, and regulations
- Equal employment opportunity regulations
- Termination for default by contractor

- Suspension of work
- Warranties and guarantees
Construction contract
➢ It is simply an agreement between two or more parties to provide services in exchange for

payment.

1. An offer

2. Acceptance

3. Consideration (i.e., money, or something of value)

4. Legality (you can’t contract to break the law!)

- This is the simplest form of construction contract.

➢ Cost-Plus-Fee Contracts

- These contracts require that a contractor be reimbursed for all costs incurred on the
project (costs).

➢ Time & Materials contracts

- This is an agreement where the contractor is paid an hourly rate for labor, the actual
cost of materials and equipment, and an additional amount to cover overhead and
profit.
➢ Unit Price Contracts

- An arrangement where the customer pays a fixed, agreed-upon amount for completion
of each unit of work.

➢ Guaranteed Maximum Price (GMP) Contracts

- A cost-type contract, where there is an agreed-upon limit to how much the customer will
be obligated to pay.
Requirements for a Valid Contract
➢ Mutual Assent
Each party must have a shared undestanding regarding what the subject matter of the
contract is.
➢ Offer and Acceptance
One party must make an offer by clearly communicating their intent to be bound in a contact.
➢ Consideration
This where both parties mutually exchange something of value in order to make the
agreement binding.
Specification for Construction

➢ This is part of construction contract. They detail the work, materials, and installation

required to complete a project.

➢ The specs are a subcontractor's field guide on what materials to use, how to install them,

and the desired level of quality.

➢ Prescriptive Specifications

- Provide step-by-step details and instructions on how the types of materials to be used
and the desired installation methods.
v General Provisions - These provisions will reference national or state building codes
and standards that must be complied with.
v Required Products - Lists the type of products and materials required, based on the
performance and structural requirements.
v Execution Procedure - Details the methods of installation and how to
measure quality or effectiveness.
Types of Construction Contract Specifications:

➢ Performance Specifications

- Provide all of the operations requirements to complete a project.

➢ Proprietary Specifications

- Are used when doing renovations to an existing structure, and the client needs to
match the improvements to the completed portion.
Common types of construction projects that may require
specifications include:

➢ Residential projects such as condos, single-family homes, dormitories and townhomes.

➢ Industrial projects such as production buildings, oil refineries and manufacturing.

➢ Civil infrastructure projects such as dams, railways and underground tunnels.

➢ Institutional projects such as stadiums, hospitals and schools.

The more details included in a contract, the more accurately construction companies may
complete a project.

➢ Setting expectations

Specifications are a great way to set clear expectations between a construction company
and its client.

➢ Determining pricing

Specifications often outline the materials and labor needed to complete a project.
THANK YOU!