1. CONS5Q25 Assignment 3 Praveen Premkumar as at 25th
August 2009
Student ID: 1213020
2.0Common Types of Construction Contracts and Standard Conditions of
Contract
The common type of procurement option of construction contract in the building industry
is mainly lump sum contracts. It is described that procurement is a generic term used to
“getting” building. (C. Prigg, personal communication, July 28, 2009)
The common types of construction contracts are as follows:
i) Lump sum contract
ii) Cost plus contract
iii) Re-measured contracts based on schedule of quantities
iv) Management contracts
v) Negotiated contracts
vi) Selective tendering
vii) Serial tendering
viii) Design and Build Contract
The following standard Conditions of Contract used in a medium sized construction
project are:
i) New Zealand Standard (NZS) 3910: 1987 Conditions of Contract for Building and
Civil Engineering Construction (for contractors and engineers)
ii) NZS 3915:2005 Conditions of Contract for Building and Civil Engineering
Construction (Where No Person is Appointed to Act as Engineer to the Contract)
iii) FIDIC Conditions of Contract for Construction, Multilateral Development Bank
(MDB) Harmonised E (duties of the engineer, the role of the architect and the
engineer)
iv) The Joints Contract Tribunal (JCT) Conditions of Contract for Building Works,
used in UK
v) New Zealand Institute of Architects (NZIA) General Conditions of Contract
vi) Registered Master Builders’ Federation General Conditions of Contract
In 1st
April 2003 the Construction Contracts Act 2002 legislative requirements came into
effect “construction work’ allows i.e. process to be followed that ensures owners pay
main contractors on time and main contractors pay subcontractors on time and
subcontractors pay sub subcontractors (identify the contractual chain) relationship with
whom it is dealt and so on.
Est1 Assignment Pt.3 2-2009.xls C: UNITEC Institute of Technology
13/10/2009
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2. CONS5Q25 Assignment 3 Praveen Premkumar as at 25th
August 2009
Student ID: 1213020
All theses types of contracts are based on particular conditions of contract. In NZ, the
standard conditions of contract is mainly we use NZS and SCC SF 2007 4th
edition
produced by architects. The contract document comprises of the drawings, schedule of
quantities (if available), specifications and conditions of contract. In practice, as
contractors we need a building consent and the design team when putting out a tender
will need to occupy a building consent. It is believed without a building consent a
company can be fined or even shutdown.
NZS 3910 is a document issued by New Zealand standards especially designed for
contract administration. This document is comprised with schedules, conditions of
tendering and conditions that assist the main contractors, subcontractors, architect (the
engineer) and the client. By listing a set of conditions that shows the responsibilities and
the contractual obligations of parties involved in the construction, is beneficial for the
proper construction, completion and maintenance of the project because it is clear for
everyone to identify their scope and commitment to the project. As the proposed building
is situated in downtown Auckland, the construction methodology and the excess
restriction become a challenge for the parties involved. As a result of this challenge, there
maybe disputes arising among the parties involved. On such occurrence, the ‘Conditions
of Contract’ illustrate various options to overcome the problem.
In the building industry, most of the construction works are being awarded to contractors
by the process of tendering to obtain a competitive price. In order, to make it fair and
reasonable to all those bidding for a particular tender, there are conditions listed in the
document NZS 3910, enabling them to understand the procedures in submitting a tender.
This is where there are ambiguities in the tender documents, the architect issues
explanatory notices to the bidders.
In the absence of such clarifications, the bidders may not be able to price the document.
These issues are addressed under ‘Conditions of Tendering’ for mutual benefits.
Submission of a tender is an offer for client’s acceptance, which will form a legal
contract. The procedure for submission, acceptation and notification are listed in the
document for the beneficial of all parties.
In the building industry, in a design and build contract the client enters into a contract
with a contractor in which the contractor undertakes the activity to both design and build
a building, within the parameter of the initial design proposed. The contract normally
includes sketch plans and outline specification. However, it can include the brief
(performance based contract). The following steps should be undertaken:
• Feasibility study
• Selection of Design & Build Contractor
• Sketch Plan
• Developed design upon agreement on price
Est1 Assignment Pt.3 2-2009.xls C: UNITEC Institute of Technology
13/10/2009
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3. CONS5Q25 Assignment 3 Praveen Premkumar as at 25th
August 2009
Student ID: 1213020
• Construction drawings
• Construction phase
In relation to the above, the client also assembles team of advisors such as hiring project
manager to conduct process and brief, quantity surveyor for establishment of budget and
lawyer to propose contractual arrangements. Also thus it is important to call for proposals
by sending to short list capable design and build contractors. The responses should
include for statement of capability, sketch plan and pricing structure. The typical process
also mainly depends on the selection of preferred contractor, negotiations regarding
design and price, design and price finalised and contract signed and construction
drawings and construction take place i.e. certification of progress payments by project
manager or QS; certification variations and time extension in accordance with contract by
project manager; certification of practical completion etc. by project manager.
For cost plus job, the contractor gets to prepare and put price on what he prefers.
However, there is an uncertainty, which is a disqualification for this type of contract as
the anticipated final account may be unknown.
The lists of parties involved in a project are:
• Client
• Design team
• Builder
• Subcontractor
• Suppliers of goods and services, etc
•
These people will be required in various contracts to interact information between each
other prior to the project progressing. The background information of people is important
to us in the construction industry. The functional requirements between designer and
client have been identified.
Moreover the above types of contract and the Conditions of Contract suit the type of
construction, which will be more desirable and appropriate for the selection of
construction. Nevertheless, in tradition it is the advisor to the client who will propose the
contract type and the conditions more relevant to the type of construction.
Est1 Assignment Pt.3 2-2009.xls C: UNITEC Institute of Technology
13/10/2009
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