B.

Sc Civil
Engineering

Project & Contract Management CE 206

Engr. Omer Altaf

Department of Civil Engineering

UET LAHORE
Lecture # 4 & 5

Contract
Some Important Terms Related To Tender

• Bid Opening: stands for the opening and tabulation of bid at

the prescribed time and place.
• Addenda: Any change to the tender document after they are
released for tendering actually requires issuance of addenda.
This formal document changes original tender or bid
document and becomes the part of original tender package.

Addenda may not be issued within about five days of tender

opening unless tender approval is also extended accordingly.
• Owner/Employer: “Owner means the person and legal
successor entitled to such a person, e.g. engineer”.
Engineer is only representative to contractor or sub
contractor.
Some Important Terms Related To Tender

• Letter of Acceptance: means the formal acceptance

by the employer of the tender.
• Commencement Date: means date upon which
contractor receive the notice to commence the
project.
• Notice To Proceed: It is a document that establishes
the contractor’s right to have access to the owner’s
property. It is issued after the contract between the
owner and general contractor is executed. It
establishes the official start date of the contract and
also the completion date of the project.
Local Contracts

• If the parties of the project (including client) are

the local companies of the country , then the
conditions of contract are always based on local
contract which is more applicable to the local
construction industry practices. The currency of
exchange and contract in local contract is always
PKR
International Contract

• If an international company is among any party of the

project and present either in the capacity of design,
construction or supervision, the contract of the client
with that party will be “FIDIC” contract. The currency
of exchange and contract in FIDIC contract is normally
US Dollars.
• In FIDIC contract, any arbitration or litigation is
covered at neutral country or neutral court. All the
Pakistani companies who are working abroad in
various projects are also observing the FIDIC contract.
Major types of Contract in Civil Engineering are :
• Item-Rate Contract.
• Non-scheduled Rate contract.
• Scheduled Rate Contract. Detail of each type
will be discussed in
• Lumpsum Contract. class and definitions
• BOQ Contract will be dictated
• Cost plus percentage contract
• Cost plus fixed fee contract
• Built Operate and Transfer Contract (BOT)
• Turn key contract
• Design built contract
• Labor contract
• Material Contract
• Machinery contract
• Serial Contract
Major conditions of contract include
• Mobilization advance
• Performance bond
• Defect liability period
Detail of each
• Escalation (Price Changes) point Included in
course
• Completion Time of Project
• Project start and finish dates
• Bills and invoices
• Liquidated Damages
• Unforeseen Circumstances
• Retention Money
• Program of work
• Secured Advance
Contract Administration

• Preconstruction conferences
• Subcontracts
• Submittals
• Pay estimates
• Change orders
• Claims
• Liquidated Damages
• Dispute Resolution
Preconstruction Conference

• Nearly all construction projects being with a

preconstruction meeting or conference. It is formally a
meeting with an agenda distributed by the owner
before the meeting. Minutes of the meeting published
by the owner are distributed to all attendees who are :
owner’s representative, designer, general contractor
and authorities.
Agenda includes
– Review policies(hour restriction), critical dates, critical
activities and pros and cons of the project)
– Technical details of the project.
• Safety and environmental protection
Subcontractors:

• It is a construction firm that performs work in a

specific area such as electrical or mechanical
installation and construction. They do not have the
contractual relationship with the owner but they
have a functional relationship. The general
contractor remains responsible for subcontractors
performance. If approval of subcontractor is
required by the owner, then an approval must be
obtained after a sub-contract is signed.
Submittals:

• They contain information concerning product to be

incorporated in construction project. The owner or
designer must approve the submittals before
products are ordered or purchased to be used on
construction site. Submittal consists of technical
data sheet, brochures, supplier’s details, catalogues.
Pay Estimates:

• Contractors are normally paid monthly, however, it is

necessary to go through the contract properly before
its implementation. One of the most important
aspects of any owner’s reputation with the
contractor is the time required to process a payment
after submission of monthly bills. The actual process
of submitting monthly pay estimate involves
estimating the percentage of completion of each
activity
Change orders:
• These are part of every construction project because each
project is a unique object and may have changes in design or
process of construction.
• Change orders do not change the scope of the work. For changes
that are outside the scope of the work, a supplement agreement
is to be made between the contractor and owner which are
different from change orders.
• The change orders change the detail or conditions of work and
are used to add or delete extra work.
• Change orders must be writing and must be issued properly by
an issuing authority .
• The contract does not allow contractors to refuse the change
orders, but it does entitle the contractor to additional time and
compensation for work as additional work. Change order work is
more expensive than original contract work.
Claims:

• Claims are a direct result of change orders that cannot

be resolved or agreed by the owner.
• Often, claims result from a disagreement on the
meaning of terms of contract. Claims often result and
compound due to poor communication.
• The contractor cannot refuse to proceed with work i.e.
winning original scope of work, but sometimes it is
difficult to determine whether work is within the original
scope of work or not.
• Successful settlement of claims depends on adequate
documentation, daily record of events and minutes of
meeting records, record of telephonic conversations and
photographs during construction.
Liquidated Damages & Substantial Completion:

• Liquidated damages are paid by contractor to owner if

the contractor exceeds the allowed contract time
period. A contract may require liquidated damages
from a few thousand of rupees per day. The amount is
determined well before the contract award and it is
based on an estimate of the actual cost. The owner or
the public would incur by late completion of work.
Dispute Resolution:
• The predominant method of dispute resolution in construction is litigation ,
even though, it is not the best way to resolve disputes. There has been a
trend over the last decade to find ways to resolve disputes without
litigation , however, the results are mixed. Disputes are generally unsolved
claims, unsolved disagreements or unsolved change orders that somehow
result in a court case. Disputes are not caused by illegal actions but unsolved
disagreement about compensation for which contractor sees himself right
but the owner sees it as an unnecessary expense that should have been
included in the original contract. Contractors try harder to resolve dispute as
soon as possible. They try to resolve them in the field and not in the court.
There are many alternatives of dispute resolutions given as :
– Partnering
– Mediation
– Arbitration
– Mini trials
– Project Neutrals
Dispute Resolution:

• Partnering: Has gained favor as a philosophy of

construction management which is based on trust.
Partnering meetings are held before the project starts in
an effort to develop a level of trust between the owner
and contractor. Common goals and objectives are
identified. A charter in which all parties resolve to operate
in an atmosphere of trust is written and signed. A dispute
resolution framework is put in place to solve dispute in
limited number of days (3 days usually) or elevated to next
level of management.
Dispute Resolution:

• Mediation: It is a system of selecting a neutral third

party to resolve disputes. The mediator serves as a
person to improve communication. There is no
binding on the mediation process. It is undertaken by
mutual agreement of parties to resolve the
disagreement before it becomes a dispute. Often, it
is the last step before litigation.
Dispute Resolution:

• Arbitration: It is slightly closer to litigation in

philosophy than mediation, because, arbitration
imposes a solution. The arbitrator is selected by
mutual agreement to avoid court case or lawsuit, as
it is less expensive than a lawsuit. The arbitrators
are usually construction experts.
Dispute Resolution:

• Mini trials: Mini trials allowed each party to present

its position in the dispute and then a judge renders
a decision. They are formal judicial proceedings.
Dispute Resolution:

• Project Neutrals: It is a new approach to dispute

resolution, that is being used on a very large and
highly technical project. The project neutral is a
person or a team that is hired before the
constriction contract is avoided who participates in
the project throughout the construction period. The
project neutral is a technically knowledgeable
person or a team and is extremely well informed in
matters of construction. The function of project
neutrals depends on the provision of the contract.
Assignment

• Give Examples of projects of each type of

Contracts explained in slide no. 5
• Go on website of Communication & Works
department and search the latest schedule of
rate in any government sector client discussed in
lecture