Contracts, Specifications and Quantity

Surveying
CE-5121
Bereket Bezabih
[email protected]
Hydraulic and Water Resource Engineering Department
2021
 Lecture 1
THE CONSTRUCTION INDUSTRY
 The Construction Industry
• It is the highest employer after agriculture in the
national economy
• It provides large capital wealth in the form of
buildings, highways, railways, dams, utilities etc
• It is multi disciplinary as it involves problems of
economics and management not to mention
engineering and technology
• Each product of the industry is unique in character
and is produced on its place of use
 The Construction Industry
• Construction Works
– Public Works
• Owned by governments at any level
– Private Works
• Owned by individuals, company or corporations
– Architectural Construction
• Building construction with exception of industrial buildings
– Engineering Construction
• All other construction work (highway, bridge, water supply, dams,
sewers, railroads, irrigation canals etc)
 The Construction Industry
• Financing Construction Works
– Private works can be financed through
• capital Expenditure
• Loans
• Floatation of Shares
• Corporate Bonds
– Public Works can be financed through
• Annual operation Budgets derived from tax
• Government Bonds
• Domestic and International Borrowing(Bilateral or Multilateral
sources)
 The Construction Industry
• Professional Relationship in Engineering
• The standard Three Party System
– Irrespective of the construction type construction works
involve the following three parties
• The Owner
• The Engineer/Architect
• The contractor
– The actual working relationship depends on the nature of
the construction method /Contract
– A typical working relation ship looks like ….
– The general duties and responsibilities of each party is
defined in the contract agreement for the works
The Construction Industry
Owner

Engineer/Architect Contractor

Subcontractors

Suppliers

Fabricators
 The Construction Industry
• Methods of construction
– Construction by General Contract
• Employing a contractor
– Construction by Force account
• Day labor method
– Construction by Separate contract
• Employ specialty contractors for various part of the work directly
by the owner
• How can we select the appropriate method of
Construction?
 The Construction Industry
• Methods of construction
• Variations of General Contract
– Traditional Approach (D-B-B):
The most common delivery system is called “the
traditional or standard approach” or “design-bid-build”, in
which the employer assigns the design and construction
phases to two different firms (consultant/designer and
contract
Appointing Appointing Main
Consultant Contractor

Designing Constructing
 Methods of construction
• For many years, DBB has been the most common
method of project delivery for public projects, and
for many private projects as well.
• Design Bid-Build is effective on projects
• where the owner needs both professional design
services and construction services
• where the designer does not require detailed
knowledge of the means and methods of construction.
• DBB provides the owner with a high degree of
control. That’s why it is the preferred project delivery
system for owners who:
 Methods of construction
– The owner defines project goals and objectives, secures
the financing, and specifies the standards and contract
terms.
– The owner may perform planning, conceptual design and
full design, or may engage an outside design professional
(designer) for some or all of these tasks.
– During this planning and preliminary stage, owner and
designer work as a team to obtain required permits and
conduct necessary site investigations.
– The designer prepares the construction bid documents to
reflect the owner’s project goals and objectives, the
project’s site conditions, and sound engineering practices.
 Methods of construction
• Prospective contractors prepare their bids from these
complete and specific bid documents.
• The bidders submit their proposals to the owner,
who determines the most responsive (typically the
lowest) bid meeting project requirements.
• In certain circumstances, owner may be justified in
selecting a contractor outright and negotiating
contract terms directly.
 Methods of construction
• Advantages of DBB
– Applicable to a wide range of projects.
– Well established and easily understood.
– Clearly defined roles for all parties.
– Provides the lowest initial price that competitive bidders
can offer.
– Extensive litigation has resulted in well established legal
precedents.
– Insurance and bonding are well defined.
 Methods of construction
• Disadvantages of DBB
– Least-cost approach requires higher level of inspection.
– Initial low bid might not result in ultimate lowest cost or
final best value.
– Designers may have limited knowledge of the true cost
and scheduling implication of design decisions.
 Methods of construction
• Design Build Approach
– Design Build Approach is a project delivery involving a
single contract between the project employer and a
design-build contractor covering both design and
construction of the project.
Appointing design &
construction
contractor

Tendering Designing Constructing

 Methods of construction
• The owner contracts with a single entity to provide
the design and to construct the project according to
that design.
• The contract might be negotiated with a single
design-builder or result from competitive proposals.
• The selection can be based on low price or on a set
of value criteria (experience, staff, bonding capacity,
etc.).
 Methods of construction
• Design-build provides the owner with a single point
of contact for project responsibilities, eliminating the
need to assist in resolving designer-contractor
disputes.
• With the contractor playing a major role in design,
costs are typically defined and maintained to a
greater degree, and the coordination of fast-track
management to achieve early completion is greatly
simplified.
• The design-builder makes many decisions that owner
would make under DBB, due to delegation of greatly
increased authority.
 Methods of construction
• For many owners, delegation of responsibilities leads
to satisfactory projects. However, if the parties are
inexperienced and do not cooperate, the transfer of
control and risk can be disappointing.
• The owner may need to restructure his/her internal
procedures to accommodate design-build approach.
• Compared to DBB, this involves a significantly
different set of requirements and expectations for
process, timelines and communications.
• A clear understanding and documentation of design-
build processes enhances the quality of design-build
projects
 Methods of construction
• Advantages of design and build Approach
– Innovation and quality improvements through
• Alternative design and construction methods suited to the
contractors capabilities
• Flexible in the selection of design, materials and construction
methods
• Early schedule and cost certainty

• Disadvantages of Design build approach

• Reduced opportunities for smaller, local construction firms.
• Fewer competitors and increased risk may result in higher initial
costs.
• Elimination of traditional checks and balances. Quality may be
subordinated by cost or schedule considerations.
• Less Engineer control over final design.
• Higher procurement costs.
 Methods of construction
• Turn Key Projects
– Turnkey adds to the design-builder’s responsibilities the
operation and/or maintenance of the completed project.
– Turnkey delivery has the potential for bringing a new
project on line more quickly.
– Three forms of turnkey project delivery:
– Design-build-operate-transfer
– Design-build-operate-maintain
– Design-build-own-operate-transfer
 Methods of Construction
• Variations on turnkey add financing as a key
component. While financing arrangements are
unique for each project, developer financed projects
generally resemble one of the turnkey delivery
methods:
• FDBT (Finance, design, build, transfer)
• FDBOT (Finance, design, build, operate, transfer)
• FDBOOT (Finance, design, build ,own, operate, transfer)
• In each case, the transfer of the project occurs only
after the developer’s interests and financial
obligations have been satisfied.
 Construction Cost
• The cost of Construction Works
– The over all cost of construction can be grouped in to the
following categories
• Direct cost
– Construction material
– Direct wages and Salaries
– Small expendable tools
• Overhead Cost
– Plant Charges and Equipment Rentals
– Overhead salaries
– Interest on loans and Other financing Costs
– Taxes, Licenses and Other Assessments
– Other indirect undistributed costs
• Contractors net Profit
 Testing times…..
1. Explain some of the conditions which might make it
advisable for the government to adopt the force account
method for the construction of a large dam during economic
depression in lieu of accomplishing the work by contract.
2. Explain why it is usually to the best interest of the owner to
adopt the general-contract method of construction in lieu of
any other method.
3. Describe the turnkey methods, turnkey variations, and
construction management method, highlighting on
advantage and disadvantage of each one.