Advance Construction Method and Equipment *The procedure for implementing a change order is

module 2 discussed in the general conditions.

ISSUES DURING CONSTRUCTION PHASE
A. SITE LAYOUT Common causes for change orders
Designing a construction site layout is a process that a) During the course of the project, additional features or
entails identifying a location for every temporary facility. options are perceived and requested.
Elements relating to the site layout are addresses within
the framework of job site infrastructure. b) The client or project team discover obstacles or
possible efficiencies that require them to deviate from the
What are the objectives of designing a construction original plan.
layout?
c) The projects work was incorrectly estimated
The objectives are optimizing efficiency and cost
effectiveness and promoting safety and security onsite. *Is there a limit to the number or magnitude of change
orders that can be applied to contract?
What projects aspects influence the job site
infrastructure? No, there are no limits. However, lots of change orders
can disrupt the work and contribute to adverse
1. Size of the project relationships between the owner and the contractor.
2. Type of construction
3. Construction time frame What is the major difference between a change order
4. Weather and environmental factors (minicontract) and original contract bid procedure?
5. Job site topography
6. Availability and type of construction equipment There is no competition between bidders, since the
contractor has already been selected and unit price has
What job site aspects must be analyzed? already been set in the original contract.

1. Site drainage Is contractor justified in increasing the price for

2. The configuration of access roads and transportation performing a change order?
protocols
3. Location of book-ups for water, electricity, waste Yes, he is. Contractor may increase the price due to
water, etc disruption of the work and possible loss of job rhythm.
. 4. Location and type of site buildings and structures
5. Locations of major equipment resources In the early stages of design and construction, should
6. Nature and location of storage and lay-down areas the owner already anticipates and be ready for the
change orders?
B. TIME EXTENTION Yes. The owner should set aside – 18% of all money
All construction contracts allow the construction period to available for the project such unforeseen situation.
be extended where there are delays that are not the
contractor’s fault. D. CHANGED CONDITIONS
Time extensions are added to the original duration.
Where in the contract procedures for dealing with time Changed conditions are the claims of the contractor, in
extension are established? case the site conditions encountered are not what
They are established in the general conditions of the assumed at bid time.
contract.
To claim a changed condition, the contractor must prove
What kind of delays may cause a request for time that:
extension? • Conditions ‘as found’ on site are different from those
reflected in the contract documents
Delays caused by: • An unknown or unusual condition was encountered,
• Owner (land acquisition availability) which was not normally expected
• Acts of god (adverse weather condition)
• Strikes Common cause of changed condition:
a) change in topographical portion in site also affect the
C. CHANGE ORDER building contract
Change orders are modifications to the original contract b) subsurface variation
documentation c) change in underground water table
Soil conditions and presence of underground water.
These conditions are common causes because they are Retainage is an amount of money that owner holds back
subsurface. Subsurface conditions are always hard as an incentive for the contractor to properly complete the
to establish with certainty. Moreover, inadequate project.
and insufficient subsurface investigations may lead
to faulty representation of the conditions. Why the owner decides to do not pay the entire bid
price to the contractor?
If the owner does not accept a changed condition
claimed by contractor, how should this dispute be Why retainage is such a strong incentive for contractor
resolved? to complete a project?

The validity of the contractor’s claim must be established “Until you have completed the project to mu satisfaction,
either by arbitration or litigation. I will not release the retainage”

If the owner accepts the changed condition, how this The philosophy of retainage is that if the project is
condition is added to the original contract? nearing completion virtually the entire bid price has been
paid out, the contractor will not be motivated to do the
The extended scope of work due to the changed condition small closing out tasks that inevitably are required to
will be included in the contract as a change order. complete the project.

E. VALUE ENGINEERING Retainage amounts are fairly substantial (6-10%) of the

of the estimated payment amount.
Value Engineering procedure is a monetary incentive for a
construction contractor to innovate. The contractor may CONTRACTS AND SPECIFICATION SELECTING A
propose value engineering change, which will result in a BUILDER
lower cost, but same functionality.
For the VECP, he is rewarded by share of the net savings, The owner has three choices on who will do the
rate of which is specified in the contract construction works:

What is the idea behind Value Engineering? 1. He might do the work himself
2. He might select a construction consultant who is also a
Reducing cost by maintaining functionality. builder
A portion of savings (usually 50%) is shared with the 3. He might choose a construction contractor
contractor Architect-Engineer-Constructor – a both designs and
builds a project.
F. LIQUIDATED DAMAGES
*The job itself is sometimes referred as a “turnkey” job.
Liquidated damage is the damage to the owner due to Turnkey – one company prepares the plans and
contractor overrunning the day of the project completion. constructs the project and turns the key over to the owner.
The contractor pays for each day overrunning a sum Advantage:
equal to the sum lost by the owner. There is only one organization responsible for seeing that
everything is done
What is the difference between liquidated damages and Disadvantage:
a penalty for late completion of the contract? An expensive way to get a project built, for very often
there is a little competition.
Liquidated damage is how much the owner lost. A
penalty is an amount of money usually higher than the Competitive Bidding – A construction project is built by a
liquidated damage and estimated without any link to actual contractor who has competed with others for the job. The
damages incurred by the owner. owner choses the contractor by comparing what several
contractors say it would cost them to do the job. The
If owner specifies a penalty, he must also specify a owner makes the contract with the one who has said he
bonus for an earlier project completion. can do the job correctly for the least amount of money.

G. PROGRESS PAYMENT AND RETAINAGE CONTRACT

• An agreement between the owner and the contractor as
Progress payment is a regular payment for the to how much the owner will pay to have that contractor
contractor’s expenditures and fee for markup for the build the project
portion of the work performed.
• Agreement of at least two parties with purpose of contractor has a good reason (Incentive) to keep the cost
creating legal obligation between the parties and capable down
of being enforced by the court of law.
Ex. Suppose the owner and contractor agree that the
CONTRACT = OFFER + ACCEPTANCE + Consideration bungalow house should cost P1,500,000 and the
contractor will get a fee of 120,000 for building it. They
Why Use contract in construction: might also agree that if the bungalow actually costs
• Describe scope of work P1,300,000, the contractor would get half of whatever he
• Establish time frame saved plus his regular fee of P120,000, a total of
• Establish cost and payment provision P220,000. The contract might further state that if it cost
• Set fourth obligations and relationship P1,700,000, the contractor fee would reduce to P50,000
• Minimize disputes
• Improve economic return of investment Content of the Advertised and Negotiated Contract
contract
• Identify the parties The owner places notices in newspaper, magazines and
• Promises and responsibilities Philgeps asking contractor to send in their bids (the
• Scope of work amount for which each could do the job).
• Price and payment terms
• Commercial terms and conditions Public Contracts – are usually advertised because it is
• Project execution plan. thought fair to give every qualified contractor the chance
to bid, since they are also taxpayer.
Kinds of Contracts Private Contracts – are sometimes advertised because
1. Fixed Price the competition created by advertising usually results in
2. Cost plus a fixed fee the lowest cost for the project.
3. Cost plus a percentage of cost Negotiated Contracts – are any contracts in which the
4. Incentive owner and the contractor talks together to reach an
agreement on the terms of the contract.
1. Fixed price contract – the contractor agrees to do all
the building according to the owner’s plans and Benefits of a Negotiated Contract
specification for a set sum of money which is to be paid 1. It limits the bidder to those who are only qualified for
by the owner. Sometimes, especially for buildings, this the project.
amount is stated as a single lump sum. 2. It save time and to begin the work before plan and
specification were completed
Ex. Pintura Ink, a painting contractor, agree to paint MSC
Classroom for P100,000.00 The P100,000 is called a CONTRACTING
single lump sum (fixed price – includes everything) Let us now assume that the plans and specification are
completed. The procedure outlined below is typical of a
2. Cost-plus-a-fixed fee (CPFF) – the owner agrees to fair and honest way to select a construction contractor.
pay the contractor whatever it costs to do the job Advertising
(materials, labor, and use of equipment) plus a fixed sum The first step in selecting a construction contractor is
notify all bidders and this is done by an invitation to bid, a
Ex. ABC Const. Co. agree to build a bungalow house for short notice which states:
what it costs them to build it, plus a fee ofP100,000.00. 1. The type of work
This fee of P100,000.00 is to cover ABC’s overhead 2. The location
(such as the cost of its home office) and profit. 3. The time and place of bid opening
4. Where and how plans and specifications are to be
3. Cost plus a percentage of cost (CPPC) – is one in made available
which the contractor is paid a flat percentage of his cost.
Ex. A contractor is given a contract of to build a bungalow The invitation to bid is mailed by the owner to contractors
house for the amount of whatever it will cost him who might be interested. Sometimes the invitation to bid
(P1,500,000) plus an 8% fee (P1,500,000 x 8% or is actually advertised in newspapers, magazines or in
P120,000) Philgeps Website

4. Incentive Contract – A target estimate is made. If the Qualification of Contractors

contractor should do job for less than the estimated cost, Contractor Ability usually checked by the owner or his
he gets to keep part of the saving. If it should cost more architect-engineer
than the estimated amount, his fee is reduced. Thus, the • Experience • Financial resources • Integrity
• Personnel • Equipment
Prequalification – Contractor ability is determined before Proposal form –is a form usually supplied by the owner
bidding and only those contractors who are considered or architect-engineer, on which the contractor writes in
capable of doing the job are invited or permitted to bid the amount for which he will build the project.
- Lump sum job, contractor submit just one amount.
Post qualification – The qualifications of the low bidder - Unit price job, contractor submit the amount of work,
are determined after the bids are opened but before the unit price and total price for each item.
contract is awarded to the contractor.
Bid bond –is a guarantee on the part of a bonding
Bidding Documents company (usually a large insurance company) that the
contractor will enter into the contract. Bid bond are often
Construction Documents are defined as the written and 20% of the face value of the bid, if the bidder accepts the
graphic documents prepared or assembled by the A/E for contract, the bid bond no longer serves a purpose. If the
communicating the design of the project and low bidder refuses to take the contract, the owner collects
administering the contract for its construction. the difference between the low bid and the next lowest bid,
up to the amount of the bid bond.
2 major groups
Other requirements to be submitted by the Contractor
1. Bidding Requirements 1. A list of the qualifications of the contractor
• Used to attract bidders & explains bidding process 2. A list of subcontractors
2. Contract Documents 3. A list of construction equipment to be used by the
• Legally enforceable requirements that become part of contractors
the contract 4. A list of makes and models of equipment the contractor
• Include all construction documents except bidding will install in the structure
forms
Strict rules on Bid Opening
BIDDING REQUIREMENTS 1. No bid may be submitted or changed after the time set
• Bidding Requirements are used to attract bidders and for the bid opening
explain the procedures to be followed in preparing and 2. Bid must be submitted in sealed envelopes
submitting bids. 3. Each contractor’s proposal is read aloud at public
• Bidding requirements help bidders follow opening
established procedures and submit bids that will
not be disqualified because of technicalities. The Award
They do not become part of the contract documents After the bids are opened, each bid is carefully examined
Bidding documents by the owner or the architect-engineer.
• All of the construction documents issued to
bidders before the signing of an owner contractor The purpose of this examination is to determine the
agreement. lowest responsive bid.

Bid Package Responsive Bid – A bid that matches in every detail the
conditions set forth in the bidding documents.
• Documents available to the contractor and on which he Notice of Award – a notice being sent to the qualified
must make a decision to bid or not. contractor who has the lowest responsive bid. The owner
• A set of plans and technical specifications, Proposal also sends along with the notice of award, agreement
form, general conditions, special conditions, forms and blank performance and payment bond.
• Description of the project to be constructed Bonds Performance Bond – is one in which the bonding
company (an insurance company) guarantees that the
Instruction to bidders - It describe the scope of the bid, contractor will build the project according to the owner’s
source of fund (if it is financed from other agency), plan and specifications. If the contractor does not fulfil his
fraudulent and fraud practices, eligible bidders, Eligible duties under the contract, then the insurance company
Materials, Equipment and Services, Clarification of itself will fulfil them. If this should happen, the insurance
Bidding Document, Site Visit, Pre-Bid Meeting, company would probably hire another contractor to
Amendment of Bidding Document complete the work.
Payment Bond – is one in which the bonding company
The Bid Opening - The bids are usually opened about 30 guarantees that the contractor will pay his subcontractors
days after the invitation to bid is issued or advertised. This and suppliers for any amount due them. If the contractor
period, during which the contractors prepare their bids, does not pay a subcontractor for work satisfactorily
may vary from 10 to 90 days. performed, the bonding company must make payment.
The Agreement
 Agreement – is a brief statement of the work to be done 9 Major factors to consider in the selection of Materials
under the contract and the price. It refers to the other and Equipment
parts of the contract, the plans, specifications,
instruction to bidders, general and special conditions, 1. Economy – the cost and appropriateness of the item
and the bond. It is signed by the owner and contractor. 2. Quality – what grade of excellence of the material,
The agreement should contain: fixture, or appliance is wanted?
3. Functionality–will it serve the purpose for which it is
The names of contracting parties intended?
A brief description of the work 4. Ease of Installation – Is the item easy or hard to install.
A list of contract documents, including agreement, Will it require special tools for installation?
general conditions, drawings, and specifications. 5. Appearance – Is it pleasing to the eye?
The contract sum, or amount (lump-sum contract) 6. Codes – Is it with complying with the building codes?
The procedures for payment 7. Service Requirement – Can the equipment be repaired
The contract time, or dates for start and completion easily and quickly
The signatures of contracting parties and witnesses 8.Warranty – Does the equipment carry a guarantee?
9. Size – It must fit a pre-planned space in a structure
Notice to Proceed
Kinds of Specifications
Notice to proceed – a notice which gives the contractor
permission to begin the work. 1. Outline specification – are made up when the
design phase of a project begins and preliminary
WRITING SPECIFICATIONS drawings are made.

Specification – are written instructions conditions and This specification gives only an outline (main facts) about
descriptions which tell the builder about a project to be materials to be used and how they are to be used for the
constructed. job.
Specifications also protect the interests of everyone
involved: the architect, the builder, and the owner. 2. Standard Specification – are those which are made up
by different companies about the use of their own
Three general categories of specification materials. These are usually standard or the same for
each material used.
1. Legal documents section – consist of advertisement
for bids, invitation and instruction to bidders, owner- 3. Guide specification – are kind of check list which can
contractor agreements and bond forms. be used for writing specifications. They tell about things
2. Condition Section – states the rights and which may be needed for a job.
responsibilities of the designer, the owner, the contractor
and any subcontractors. 4. Project Specification – are usually made up of outline
3. Technical description section – lists the materials and specifications, standard specifications, and guide
methods to be used for building the structure. specifications. They are the finished specifications which
have been made for one special construction project.
Division of Technical Description Section
1. Architectural Section Four ways to make specification
2. Civil Section
3. Structural Section 1. Getting an old set of specifications and working it over
4. Plumbing Section for the new job
5. Electrical Section 2. Using several sets of specifications and cutting and
6. Mechanical Section clipping them to get one new set
3. Writing them by the paragraph procedure which
Each section is organized to include: requires the use of a specification file Using guide
1. The scope of work to be done specification.
2. The complete description of materials to be used
3. General requirements or the usual work standards and
practices
4. Special requirements of unusual work standards or
practices