Lesson 1: Contracts and Specifications

Construction Contracts and Construction Specifications

Construction Specification are detailed written descriptions that provide the
technical requirements for materials, products, services and workmanship required
in construction projects. The specification is a field guide on what materials to be
use, how to install them and the desired level of quality. These documents
complement the plans provided how the work is done and the standards that must
be followed.
They are incredibly technical. It is composed of sections and numbers used to
categorize specs and project information.

Type of Construction Specification

1. Prescriptive Specification “Material & Methods”

This provides step by step details and instruction on how the types of
materials to be used and the desire installation methods. Focus on Detailing
the exact approach, materials and performance standards.

2. Performance Specification

These focuses on the desired outcome or performance criteria to be achieved

without specifying exact methods or materials. This provides all of the
operations requirements to complete a project. Instead of giving detailed
instructions it describe anticipated result. This leaves a broad amount of
discretion to decide how to perform as long as the desired outcome is
achieved.

3. Proprietary Specifications

These third types of specifications are the rarest of the breed. They are used
when a specific type of product, brand or material is required for installation.
Typically, proprietary specs are used when doing renovations to an existing
structure, and the client needs to match the improvements to the completed
portion.

4. Open Specifications

Allow contractors to choose products and methods as long as they meet

certain performance standards.
Structure of Construction Specification
1. General Condition

Provide an overview of the responsibilities, rights and obligations of the

parties involved. Include definitions, scope of work, projects timelines and
environmental regulations.

2. Technical Specifications

Provide detailed instruction on how the work should be performed, including

the quality, type, size and durability of materials.

3. Drawings and Attachments

Visual representations complementing the specifications, such as floor plans,

electrical wiring diagrams or HVAC layouts.

4. Material Specifications

Clearly specify the types, grade and brands of materials to be used in

construction, ensuring consistency and quality.

Liability for Specification & Defects

So, what’s the point of splitting these specifications into different categories? The
“implied warranty of specifications.” Since subs are required to rely on these specs,
they are presumed to be accurate. That is, unless there are glaring errors or
omissions that should have been caught in the first place. Thus, when a
construction defect arises, the party who will ultimately be held liable depends on
what type of specification the sub was working from.

Construction Contracts
Construction Contracts is an agreement between two or more parties, to
exchange providing a specific work (Scope of Work) with agreed
compensations (mainly cost and/or any others specified in the contract) with
terms and conditions. The Contract terms and conditions including both
parties' obligation, liability, payment, and other terms and conditions are
legally binding.

Definitions of Terms
  Agreement is 1) a position or result of the same opinion or accept
something; 2) an explicit or implicit arrangement between organizations to
their mutual benefit that is a negotiated terms and conditions of contract,
usually covers deeds. The Agreement is usually legally binding, and often
formal and written documents.

 Contractor is a person or company that arranges to supply materials or

works including services in accordance with a contract, such as vendor,
supplier, manufacturer, fabricator, construction contractor or subcontractor,
professional consulting services, etc.

 Subcontractor is a company or individual being contracted by a main

contractor to perform work or carry out or deliver services, labour, or
materials as a part under the main contractor management. The Subcontract
is an agreement or arrangement with the main contractor in which any
person of the subcontractor do not stand in the relationship of a company
employer and employee.

 Contract Scope of Work (SOW) is a foundation of the contract and project

baseline. The Contract SOW document is initiated by owner included in the
ITB (Invitation to Bid), and developed and proposed by contractor, and
finalized after clarification and negotiation meeting between owner and
contractor and included in the contract document. The project execution
members including a project manager should review the project Contract
Scope of Work (SOW) document and agree them with internal and external
organization before the contract is signed.

 Acceptance is a formal permitting action by a person organization to declare

that the project or activity me defined requirements to proceed subsequent
activiti The Acceptance is an unconditional agreement to t offer or proposal.

 Act of God is a very bad situation and cannot be prevented or controlled

that is a contractual term used to denote an event such as an earthquake,
flood, hurricane, lightning, snowstorm, etc. The Acts of God is insurable
accidents and valid excuses for non-performance of a contract. (Refer to the
Force Majeure)

 Addendum is a written document attached or added to clarify, modify, or

support the information in the original document or written contract
document.

 Advance Payment Bond (AP Bond) is to manage the risk of a contractor’s

failure to earn the whole of any advance payment from the owner by failing
to provide goods and services to an equivalent value.

Types of Contracts
 1. Fixed Price Contract (Lump Sum Contract)

A type of contract in which the contracted amount (Contract Price) is not

changed for the entire project life cycle where the contract amount (fixed
cost) does not depend on resources used or time expended.

2. Unit Price Contract

A type of contract in which the contracted amount (Contract Price) is based

on a unit rate for specific work item.

3. Cost Plus Contract

A type of contract in which the owner agrees to pay for the actual cost of
construction plus an additional fee for the contractor’s overhead and profit.

4. Time and Materials Contract

The owner pays for the time spent and the materials used by the contractor.
This contract is often used when the scope of the work is unclear or
constantly changing.

5. Reimbursable Contract (Cost + Fee Contract)

A type of the contracts in which a contractor is reimbursed reasonable and

allowable actual costs incurred by a contractor plus additional profits in
accordance with the contract terms and conditions.

Key Components of a Construction Contract

1. Parties Involved

Identifies the owner (client) and contractor (builder), along with any third-
party stakeholders such as subcontractors, architects, and engineers.

2. Technical Specifications

Clearly defines the tasks, activities, and deliverables that the contractor is
required to complete. It provides the basis for project planning, timelines, and
quality standards.

3. Contract Price and Payment Terms

Specifies the total price of the project (if applicable) and the payment
schedule. It may include progress payments, retainage, or lump sum
arrangements.
 4. Timeline

Outlines the start and completion dates, as well as milestones or

intermediate deadlines for major phases of construction. Delays and
extensions of time are also covered.

5. Project Specification and Standards

Refers to the set of construction specifications that the contractor must

follow. This includes materials, methods, and quality standards for the work.

6. Change Orders

Describes the process for handling changes to the original scope of work,
whether due to unforeseen conditions, owner requests, or design
modifications.

7. Terms of Completion and Acceptance

Defines the conditions under which the project will be considered complete.
This may include inspections, punch lists, and sign-off procedures to ensure
that all work meets the agreed-upon specifications.

8. Dispute Resolution

Describes the process for resolving disputes, such as arbitration, mediation,

or litigation. This helps prevent.

9. Warranties and Guarantees

Specifies any warranties for the work performed and materials supplied. This
ensures the owner that the contractor will correct defects or failures during
the warranty period.

Roles and Responsibilities of Parties Involved in a Contract

1. Owner (Client) – To provide the intended funding for the project.
2. Contractor – Preparation of different quality materials needed for the
project.
3. Architect/Engineer & Other Professional – To check/inspect if the
materials used are according to the code and specifications.
4. Subcontractor – To install specialized work items.
Conclusion
Construction specifications and contracts are fundamental in managing
the complex processes of a construction project. Specifications ensure that
everyone understands the technical requirements, while contracts outline
the roles, responsibilities, timelines, and financial agreements. Properly
prepared and managed, these documents help mitigate risks, ensure
compliance with regulations, and guarantee that the project meets the
desired outcome. For both contractors and owners, understanding and
drafting clear specifications and contracts are essential for the success of
any construction project.
Lesson 2: Project Management & Contract Administration

Construction Project Management and Contract Administration

Construction project management and contract administration are vital aspects of
any construction project. They are closely related but distinct processes that focus
on delivering a project on time, within budget, and in compliance with quality
standards.

Construction Project Management involves planning, coordinating, and

overseeing the execution of a construction project from start to finish.
“Effective project management will provide efficiency in reaching goals at a
specified period. Having a systematic approach and organized process will yield
best result.”

Contract Administration refers to the process of managing the terms and

conditions of the construction contract, ensuring that all parties fulfill their
obligations and that the project progresses according to agreed-upon standards.

Phase of Construction Project Management: Project Management Life Cycle

What is Project Management Life Cycle?

 A project life cycle is an arranged sequence that projects goes through from
inception to its closure.
 Affected by various factors: need of the organization, nature of the project
and its application
 Phases have a definite start and control points in reference to time and can
be modified.
 Predictive or plan driven approach - defined at the start of the project and
any changes are carefully addressed
 Adaptive or change driven approach - project is developed over multiple
iterations

Phases of Project Management Life Cycle

 Initiation: Conception “Briefing Stage”
  This stage is also called “Report stage”. It is where ideas originated by
individuals are studied with regards to cost and benefits so as to
establish the economic viability or social utility of a project.
 The first phase involves defining the project's goals and objectives. The
project's feasibility is evaluated, and key stakeholders are identified.
 The project manager also defines the scope, budget, and timeline and
begins gathering the necessary resources.

 Key Tasks:
 Project charter development.
 Initial project planning.
 Identifying key stakeholders

 Is the project Possible and feasible?

 What are the resources required?
 How many days to complete the project?

Definition of Terms
 Business case – a structure document that justify the cost, risk
and benefit of the project.
 Feasibility Study – Factors that affect the project like
economic, technical, operational etc.. That will to successful
completion of project. It also determines if project is possible for
completion.
 Project Charter – one of the most important tool, it is a
document that contains information about the project (Vision &
mission, Goals and Benefits, List of Stakeholder, Deliverables,
Beneficiaries, project brief & description, budget and resources,
scope of project (building profile).

 Planning: Designing Stage

 It is very important stage in the field of construction because any

modification in the project after this stage would prove expensive.
 Once the design is finalized and approved, it’s time to move on to the
preconstruction phase.
 Deliverables and goals are documented along with the needed
requirements and objectives for proper function.

 Key Tasks:
 Scope Planning: Define the scope of the project in detail.
 Cost Estimation and Budgeting: Develop a detailed budget,
including contingencies for unexpected costs.
  Scheduling: Develop a detailed project schedule using
techniques like Gantt charts, Critical Path Method (CPM), or
Program Evaluation and Review Technique (PERT).
 Risk Management: Identify potential risks (e.g., material delays,
labor shortages) and create strategies to mitigate or respond to
them.
 Resource Planning: Determine the human resources, equipment,
and materials required.

Definition of Terms
 Project Plan - These are set of documents that will guide the
entire project.
 Statement of Work – is a document which basically has a work
agreement between two parties, usually contains scope of works
and other deliverables.
 Work Breakdown Structure “WBS” – Decomposition of the
total work into smaller deliverable components.
 Project Scope Management – involves the scope of the
project or the work included for the project. Scope of work may
vary in time.
 Schedule Management – a process which refers to how the
project manager manages his schedule for the project.
 Cost Management – The process that is concerned with
planning and controlling the finances for the project.
 Quality Management – is a main criterion to determine the
value of a project.
 Resource Management – how the project manager handles
the different project resources.
 Communication Management – project communication is
what keeps all the team members on the same page.
 Risk Management – risk management work includes process in
identification and analyzing risks, which later form a risk
response plan to control these risks.
 Stakeholder Management – involving the stakeholders from
beginning is crucial.

 Execution: Procurement: Preconstruction: Tendering Stage

 This phase involves coordinating people and resources to carry out the
project as planned.
 involves creating a roadmap that will guide you through the
construction process. It’s about building a game plan for the project
that shows everyone what they need to do, when they need to do it,
how they should accomplish it, and what it should cost. If all parties
 stick to the plan and execute their roles to perfection, they’ll deliver
the project on time, to standard, and within budget.
 During this stage tenders are invited, and the contract is awarded at
the best available terms agreed mutually between owner and
contractor.

 Key Tasks:
 Managing labor and materials. Overseeing procurement and
logistics.
 Quality assurance and control. Ensuring the work is done to
the required standards.
 Communication management. Keeping stakeholders
informed.

Definition of Terms
 Project Deliverables – Complete all deliverables, manager
make sure that they are delivered without compromising quality.
 Status Review – To monitor the progress of the project, the
manager holds status review meetings.
 Problem Solving – Curbing shortcomings with contingency
plans so as not to affect the project progress.

 Control & Monitoring: Construction Stage

 Procurement encompasses sourcing, purchasing, and transporting the

materials and services you need to complete a project. Procurement
and supply chain managers should provide input in the planning stages
to keep unexpected cost overruns to a minimum during this stage.
 The construction stage involves the execution of construction works as
per design, drawing and within agreed limits of time, cost and specified
quality.

Liquidated Damages= ( 101 )( 1001 )( %

remaining work )( N no .of days delayed )

 Key Tasks:
 Performance monitoring using key performance indicators (KPIs)
such as cost, schedule adherence, and quality.
 Change management (assessing the impact of any changes and
approving or rejecting them).
 Risk management and mitigation strategies.
 Regular progress meetings and updates.

Definition of Terms
  Quality Assurance – The group team required in Maintaining
certain quality standard with the deliverables.
 Cost Tracking – Monitoring of budget allocation while doing the
deliverables and maintain at a set of standards.
 Project Performance – Manage the teams and the
performance of the project from start to finish.

 Closing: Close out: Commissioning Stage

 This phase marks the completion of the project. The project manager
ensures all deliverables are met, all contractual obligations are fulfilled,
and the project is officially closed.
 It is the stage in which the performance of the structure is evaluated,
and the proposed nature of maintenance and repair are considered.

 Key Tasks:
 Final inspection and handover.
 Resolving any outstanding issues.
 Documenting lessons learned and closing out contracts.
 Obtaining client acceptance and sign-off.

Definition of Terms
 Project Performance – Teams submit their deliverables and
review if they are matching the requirements. Project Review
and Quality Assurance of All deliverables.

Key Skills in Construction Project Management

 Leadership and Communication – The project manager must lead teams,
make decisions, and communicate effectively with stakeholders
 Time and Cost Management – Effective scheduling and budgeting are
critical to meeting project deadlines and staying within budget.
 Risk Management – Proactively identifying potential risks and implementing
mitigation strategies to minimize their impact on the project.
 Negotiation and Conflict Resolution – Managing conflicts, whether among
team members or with stakeholders, and negotiating favorable terms with
vendors, subcontractors, and clients.
 Technical Knowledge – A strong understanding of construction processes,
regulations, and industry standards is vital to making informed decisions.

Contract Administration in Construction

Contract Administration refers to managing the construction contract to ensure
that the terms and conditions are fulfilled by all parties involved. This includes
monitoring contract performance, handling changes or disputes, and ensuring
compliance with legal and regulatory requirements.

Key Elements of Contract Administration

1. Contract Formation

The first step in contract administration is ensuring that a valid, legally-

binding contract is created between the project owner and the contractor.

Key Tasks:
 Drafting the contract based on the agreed-upon terms (price, schedule,
scope, etc.).
 Negotiating contract terms and ensuring that all parties understand
their roles and responsibilities.

2. Contract Execution and Monitoring

This involves ensuring that both parties adhere to the terms of the contract
throughout the life of the project.

Key Tasks:
 Regular site inspections and progress reviews.
 Verifying that the contractor follows the project schedule and quality
standards.
 Reviewing and approving invoices and progress payments.

3. Change Orders and Amendments

Changes in the scope of work may arise due to unforeseen circumstances or

design modifications. Any change to the contract requires a formal process
called a change order, which modifies the contract terms.

Key Tasks:
 Assessing the impact of changes on the budget and schedule.
 Obtaining approval from the client for changes.
 Updating the contract to reflect the change.

4. Dispute Resolution

Disputes are common in construction projects due to misunderstandings,

delays, or non-compliance with contract terms. Contract administration
ensures there are clear procedures for resolving disputes.

Key Tasks:
  Following dispute resolution clauses in the contract (e.g., arbitration,
mediation, litigation).
 Maintaining communication and documentation to resolve issues
promptly.

5. Final Completion and Handover

Once the construction work is complete, the contract administrator ensures

that the contractor meets all obligations and that the project is handed over
to the client in accordance with the contract.

Key Tasks:
 Final inspection of the completed work.
 Addressing any deficiencies or remaining issues.
 Ensuring the client receives all warranties, as-built drawings, and other
contractual documents.

Handling Construction Project Management Challenges

1. Communication and Document Management

Maintaining lines of communication between everyone on a construction

project isn’t easy. And keeping an accessible, accurate repository of all
project documents can be even more difficult. But the risks that come with
poor communication and document management are too large to ignore.

2. Estimating

The complexity and importance of estimating costs, necessary resources, and

timeline in construction can’t be stressed enough. Even a minor error in
estimation can lead to a loss on a project given the tight margins in the
construction industry. A significant margin of error when estimating the cost
of a large-scale project, like constructing a power plant, could even lead to
the project being shut down midway, with a huge amount of sunk costs.

3. Siloed Data

When data is decentralized and hard to access, miscommunication runs

rampant, and projects rarely go according to plan. Data silos can affect cost
control, the project’s timeline, risk assessment, and more. If your contractor
is waiting on information that’s already available or decides to push through
without it, you’re going to either face delays or be forced to cross your fingers
and hope for the best.

4. Lack of Real-Time Data for Risk Assessment and Change Management

 Sharing data across your team doesn’t matter if the information is out of
date. Construction projects are, by their nature, works-in-progress, so you
need real-time data to stay on top of new developments and address
challenges as they arise.

Conclusion

 While Construction Project Management focuses on the broader aspects

of project planning, execution, and completion, Contract Administration deals
specifically with the legal and contractual aspects of the project. Both are
interrelated, and the effectiveness of one often depends on the successful
execution of the other.
 Project Managers need to understand the contract terms to effectively
manage the construction process and ensure that the project stays within the
agreed-upon scope, budget, and schedule.
 Contract Administrators need to be aware of project timelines and quality
standards to ensure that all contractual obligations are met and that any
issues are addressed in accordance with the contract.
 Construction Project Management and Contract Administration are
two integral components of any construction project. They work together to
ensure that the project is completed on time, within budget, and according to
quality standards.
 By having a clear understanding of both fields, professionals can ensure that
they effectively manage resources, address potential risks, resolve disputes,
and meet the goals set out at the beginning of the project.
Assignment #1

1. Tabulate Key Characteristics of different contract types compare

benefits and drawbacks.

Type of Contract Benefits Drawbacks

Fixed Price Contract
(Lump Sum Contract)
Unit Price Contract
Cost Plus Contract
Time and Materials
Contract
Reimbursable Contract
(Cost + Fee Contract)
Table 1. Tabulation of Key Characteristics of Different Contract Types

2. Prepare a set of specifications for a mock construction project, a

bungalow house.