ACH 231 Lecture 07 (Contract Documents) Part 3


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ACH 231 Lecture 07 (Contract Documents) Part 3

  1. 1. Contract Documents Parts of Construction Documents The Bidding Process & Requirements Construction Contracts AIA Family of Documents
  2. 2. PART 3 Construction Contracts
  3. 3. Construction Contracts Construction Agreements Owner-Contractor Agreements & Compensation Types AIA Family of Documents Articles of the AIA Documents A101 Owner-Contractor Agreement A201 General Conditions of the Contract
  4. 4. Before we get started……. <ul><li>Grab your textbook out and earmark the following pages: </li></ul><ul><ul><li>Page 222 </li></ul></ul><ul><ul><li>Page 225 </li></ul></ul>
  5. 5. Construction Agreements <ul><li>Contract: a mutual agreement, which requires two or more parties and a matter or consideration to which the parties must agree upon </li></ul><ul><li>Due to their magnitude and requirements, </li></ul><ul><li>ALL CONSTRUCTION PROJECTS REQUIRE A CONTRACT </li></ul><ul><li>Most owners look to their architects for creation and administration of the agreement and its conditions. </li></ul><ul><li>Architects use the AIA Family of Documents </li></ul>
  6. 6. Construction Agreements <ul><li>The Construction Contract includes </li></ul><ul><ul><li>Owner-Contractor Agreement (A101) </li></ul></ul><ul><ul><li>General Conditions of Contract (A201) </li></ul></ul><ul><ul><li>Supplementary Conditions (A511) </li></ul></ul><ul><ul><li>Special Conditions </li></ul></ul><ul><ul><li>Drawings </li></ul></ul><ul><ul><li>Specifications </li></ul></ul><ul><ul><li>Addenda </li></ul></ul><ul><ul><li>Modifications </li></ul></ul>
  7. 7. Construction Agreements <ul><li>Structure of the Contract </li></ul><ul><ul><li>Type of contract used depends on the project delivery method </li></ul></ul><ul><ul><ul><li>D-B-B </li></ul></ul></ul><ul><ul><ul><li>Design-Build </li></ul></ul></ul><ul><ul><ul><li>Construction Management at Risk or Advisor </li></ul></ul></ul><ul><ul><ul><li>Fast Track </li></ul></ul></ul><ul><ul><li>Certain documents are used to cover provisions of the project delivery as well as: </li></ul></ul><ul><ul><ul><li>Competitive bid or negotiated contract </li></ul></ul></ul><ul><ul><ul><li>Method of contractor compensation </li></ul></ul></ul>
  8. 8. Construction Agreements <ul><li>Contractor Compensation </li></ul><ul><ul><li>Lump Sum or Stipulated Sum contracts </li></ul></ul><ul><ul><li>Cost + Fee contracts </li></ul></ul><ul><ul><li>GMP (Guaranteed Maximum Price) contract </li></ul></ul><ul><ul><li>Unit-Price contracts </li></ul></ul><ul><ul><li>Turnkey contract </li></ul></ul>
  9. 9. Types of Contract Compensation LUMP SUM <ul><li>Contractor agrees to complete Work for one fixed price </li></ul><ul><ul><li>Contractor enters a bid that would encompass: </li></ul></ul><ul><ul><ul><li>All material and labor required to complete the WORK </li></ul></ul></ul><ul><ul><ul><li>Sales tax </li></ul></ul></ul><ul><ul><ul><li>Overhead and profit </li></ul></ul></ul><ul><li>Most used type of contract-work with Traditional Delivery </li></ul><ul><li>ADVANTAGE: Owner knows costs upfront, no hidden issues later on </li></ul><ul><li>DISADVANTAGE: The contract is only as good as the contract documents. Could result in change orders </li></ul>
  10. 10. Types of Contract Compensation COST-PLUS-FEE <ul><li>AKA “time and material” contract </li></ul><ul><li>Owner agrees to pay contractor actual cost to complete work PLUS an agreed-upon fee </li></ul><ul><ul><li>Usually percentage of costs (10-15%) </li></ul></ul><ul><li>Owner needs to be very specific with scope of work </li></ul><ul><ul><li>What will be reimbursed and what is covered by the fee </li></ul></ul><ul><li>ADVANTAGE: Works when scope of work is complex or project is fast-track </li></ul><ul><li>DISADVANTAGE: Owner gets “selective memory” when it comes to reimbursing certain items </li></ul><ul><ul><li>MUST DOCUMENT EVERYTHING </li></ul></ul>
  11. 11. <ul><li>Same as Cost + Fee, but with a cap </li></ul><ul><ul><li>Contractor agrees not to exceed targeted costs </li></ul></ul><ul><ul><li>Any overrun of costs is absorbed by contractor </li></ul></ul><ul><li>Incentives are placed in contract stating that if costs come in below GMP, then Contractor and Owner split savings. </li></ul><ul><li>ADVANTAGE: Gives owner assurance that construction costs will not skyrocket </li></ul><ul><li>DISADVANTAGE: Contractor must keep careful watch on costs and Owner may have to sacrifice quality over money. </li></ul>Types of Contract Compensation GMP (GUARANTEED MAXIMUM PRICE)
  12. 12. Types of Contract Compensation UNIT PRICE <ul><li>Owner and Contractor agree on price to be charged per unit for major elements </li></ul><ul><ul><li>Owner or A/E provide estimated quantities for project </li></ul></ul><ul><ul><li>Overhead, profit, labor and material are all included in unit price </li></ul></ul><ul><li>Contractor is paid based on number of units actually installed </li></ul><ul><ul><li>Owner must pay contractor on those units regardless of it is more or less then estimate </li></ul></ul><ul><li>ADVANTAGE: Provides owner with a competitive bid situation that allows for fair price to complete work; eliminates changes </li></ul><ul><li>DISADVANTAGE: Owner is placing huge faith in the A/E for correct estimated quantities </li></ul>
  13. 13. Types of Contract Compensation TURNKEY <ul><li>Same as lump-sum contract, but contractor does not get paid until construction is totally complete </li></ul><ul><ul><li>When the “keys are turned over” </li></ul></ul><ul><ul><li>No monthly requisitions are submitted to Owner, Contractor gets paid at the end </li></ul></ul><ul><li>ADVANTAGE: Owner is not bothered with monthly payouts and A/E does not have to certify payment </li></ul><ul><li>DISADVANTAGE: Contractor is required to finance entire project until it is completed. </li></ul>
  14. 14. Types of Contract Compensation OTHER VARIATIONS <ul><li>JOINT VENTURE: two construction companies come together to complete the Work </li></ul><ul><ul><li>Used in construction where minority participation is required </li></ul></ul><ul><ul><li>Also, where companies want to broaden their market share into other markets </li></ul></ul><ul><li>BOT (Build-Operate-Transfer): one entity is responsible for construction and operation of facility for several years before transfer of ownership </li></ul><ul><ul><li>Project must be revenue generating after completion of construction </li></ul></ul><ul><ul><li>Typical projects include toll roads, bridges and tunnels </li></ul></ul>
  15. 15. AIA Documents <ul><li>A set of documents produced by the American Institute of Architects that are used as a means of contractual guidelines for construction projects </li></ul><ul><li>Benefits of the AIA Documents </li></ul><ul><ul><li>Brings nationwide consistency and predictability to the construction contract process </li></ul></ul><ul><ul><li>Provides a level of fairness and equal basis to all parties involved in the contract a various levels; no one party is biased over another </li></ul></ul><ul><ul><li>Lends a familiarity and standard to expectations found in construction projects </li></ul></ul><ul><ul><li>Brings forth a cost-saving measure since these custom contracts are not required when the AIA docs are used </li></ul></ul>
  16. 16. AIA Documents <ul><li>Drafted by the AIA Documents committee and several legal and insurance representatives in conjunction with several industry-related organizations </li></ul>Refer to Page 222 for REFERENCE
  17. 17. AIA Documents-Organization <ul><li>Documents are organized into two parts </li></ul><ul><ul><li>Series (by type of contract) </li></ul></ul><ul><ul><ul><li>Owner-Architect </li></ul></ul></ul><ul><ul><ul><li>Owner-Contractor </li></ul></ul></ul><ul><ul><ul><li>Architect-Consultant </li></ul></ul></ul><ul><ul><li>Families (by type of document) </li></ul></ul><ul><ul><ul><li>General conditions </li></ul></ul></ul><ul><ul><ul><li>Project delivery </li></ul></ul></ul><ul><ul><ul><li>Roles and responsibilities of participants </li></ul></ul></ul><ul><ul><ul><li>Risks and rewards </li></ul></ul></ul>Refer to Page 225 – A201 FAMILY OF DOCUMENTS
  18. 18. AIA Documents-Organization <ul><li>Document Series relation </li></ul><ul><ul><li>A Series </li></ul></ul><ul><ul><ul><li>Owner-Contractor Agreement for construction services </li></ul></ul></ul><ul><ul><li>B Series </li></ul></ul><ul><ul><ul><li>Owner-Architect Agreement for professional services </li></ul></ul></ul><ul><ul><li>C Series </li></ul></ul><ul><ul><ul><li>Architect-Consultant Agreement for professional services </li></ul></ul></ul><ul><ul><li>D Series </li></ul></ul><ul><ul><ul><li>Architect-industry related </li></ul></ul></ul><ul><ul><li>G Series </li></ul></ul><ul><ul><ul><li>Contract and office administration related </li></ul></ul></ul>Refer to Page 225 – AIA DOCUMENT SERIES
  19. 19. Articles of the AIA A101 Owner-Contractor Agreement <ul><li>Several versions of the contract </li></ul><ul><ul><li>A101 Standard Form of Agreement Between Owner & Contractor-Stipulated Sum </li></ul></ul><ul><ul><li>A101/CMa Standard Form of Agreement Between Owner & Contractor-Stipulated Sum, Construction Manager Advisor Edition </li></ul></ul><ul><ul><li>A111 Standard Form of Agreement Between Owner & Contractor-Cost+Fee, GMP </li></ul></ul><ul><ul><li>A121/CMc Standard Form of Agreement Between Owner & Construction Manager Where CM is also Constructor </li></ul></ul><ul><ul><ul><li>This is considered a CM-at Risk contract </li></ul></ul></ul>
  20. 20. Articles of the AIA A101 Owner-Contractor Agreement <ul><li>A101 Agreement document must be used in conjunction with A201 General Conditions of the Contract </li></ul><ul><ul><li>Contract must have conditions/provisions/clauses </li></ul></ul><ul><ul><li>The agreement form is a formality </li></ul></ul><ul><ul><ul><li>Who, what, dates, signatures </li></ul></ul></ul><ul><ul><li>A101-1997 Document has 8 Articles </li></ul></ul>
  21. 21. Articles of the AIA A101 Owner-Contractor Agreement <ul><li>Article 1 </li></ul><ul><ul><li>Gives identification to the parties (owner, contractor) </li></ul></ul><ul><ul><li>Name of Project, location, size and usage </li></ul></ul><ul><ul><li>Identifies architect </li></ul></ul><ul><li>Article 2 </li></ul><ul><ul><li>Identifies the scope of “Work” </li></ul></ul><ul><ul><ul><li>The project is always identified as the “Work” in the AIA Documents </li></ul></ul></ul><ul><li>Article 3 </li></ul><ul><ul><li>Dates for commencement of work and substantial completion </li></ul></ul><ul><ul><ul><li>Dates for execution should be listed separately if it is not the same day as the agreement </li></ul></ul></ul><ul><ul><ul><li>Date for completion can be described in calendar days or actual date </li></ul></ul></ul>
  22. 22. Articles of the AIA A101 Owner-Contractor Agreement <ul><li>Article 4 </li></ul><ul><ul><li>Contract Sum </li></ul></ul><ul><ul><ul><li>Total cost for construction as stated on bid to owner </li></ul></ul></ul><ul><ul><ul><li>Any alternates accepted by owner at time of bid </li></ul></ul></ul><ul><ul><ul><li>Any allowances, unit prices or contingencies </li></ul></ul></ul><ul><li>Article 5 </li></ul><ul><ul><li>Payments </li></ul></ul><ul><ul><ul><li>Time period for Application for Payment by Contractor </li></ul></ul></ul><ul><ul><ul><ul><li>Schedule as to when contractor should submit payment request </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Due dates </li></ul></ul></ul></ul><ul><ul><ul><li>Retainage (how much percentage) </li></ul></ul></ul><ul><ul><ul><li>Date of final payment to Contractor </li></ul></ul></ul>
  23. 23. Articles of the AIA A101 Owner-Contractor Agreement <ul><li>Article 6 </li></ul><ul><ul><li>Termination and Suspension </li></ul></ul><ul><ul><ul><li>States that the contract can be terminated by either party </li></ul></ul></ul><ul><ul><ul><li>Conditions of termination/suspension outlined A201 </li></ul></ul></ul><ul><li>Article 7 </li></ul><ul><ul><li>Misc. Provisions </li></ul></ul><ul><ul><ul><li>Agreement on interest rate for over-due payments </li></ul></ul></ul><ul><ul><ul><li>Owners and Contractors representatives and contact info </li></ul></ul></ul><ul><ul><ul><li>Other provisions </li></ul></ul></ul><ul><li>Article 8 </li></ul><ul><ul><li>Enumeration of Contract Documents </li></ul></ul><ul><ul><ul><li>States which documents are included and dates of each </li></ul></ul></ul><ul><ul><ul><ul><li>Usually all except bidding requirements and modifications </li></ul></ul></ul></ul>
  24. 24. Articles of the AIA A201-1997 General Conditions of the Contract <ul><li>Article 1-General Provisions </li></ul><ul><ul><li>Definitions of each contract document and scope of work </li></ul></ul><ul><ul><li>Ownership and legal right to the documents </li></ul></ul><ul><li>Article 2-Owner </li></ul><ul><ul><li>Describes owner’s obligations in the contract </li></ul></ul><ul><ul><li>Owner’s rights </li></ul></ul><ul><li>Article 3-Contractor </li></ul><ul><ul><li>Describes contractor’s obligations in the contract </li></ul></ul><ul><ul><ul><li>Document review and understanding </li></ul></ul></ul><ul><ul><ul><li>Supervision and direction of construction </li></ul></ul></ul><ul><ul><li>Provisions that surround requirements of projects </li></ul></ul><ul><ul><ul><li>Labor & materials </li></ul></ul></ul><ul><ul><ul><li>Schedules </li></ul></ul></ul><ul><ul><ul><li>Shop drawings and submittals </li></ul></ul></ul>Largest portion of the A201 document
  25. 25. Articles of the AIA A201-1997 General Conditions of the Contract <ul><li>Article 4-Administration of the Contract </li></ul><ul><ul><li>Architect’s responsibility in contract </li></ul></ul><ul><ul><li>Provisions for claims and disputes </li></ul></ul><ul><ul><ul><li>Includes ADR; mediation, arbitration </li></ul></ul></ul><ul><li>Article 5-Subcontractors </li></ul><ul><ul><li>Provisions surrounding procedures for awarding work to subcontractors and trades </li></ul></ul><ul><li>Article 6-Construction by Owner or Other Contractors </li></ul><ul><ul><li>States the owner has the right to perform work and/or award work to other contractors </li></ul></ul><ul><ul><li>Contractor must accommodate others who will perform work in conjunction with them </li></ul></ul>
  26. 26. Articles of the AIA A201-1997 General Conditions of the Contract <ul><li>Article 7-Changes in Work </li></ul><ul><ul><li>Provisions surrounding change orders and construction change directives </li></ul></ul><ul><li>Article 8-Time </li></ul><ul><ul><li>Defines contract time allotted for construction </li></ul></ul><ul><ul><li>Date of commencement: start date </li></ul></ul><ul><ul><li>Date of Substantial Completion: date the project is completed as certified by the architect </li></ul></ul><ul><ul><li>Provisions surrounding delays and time extensions </li></ul></ul>
  27. 27. Articles of the AIA A201-1997 General Conditions of the Contract <ul><li>Article 9-Payments and Completion </li></ul><ul><ul><li>Requirements for payment </li></ul></ul><ul><ul><ul><li>Architect will require a “Schedule of Values” outlining each portion of work </li></ul></ul></ul><ul><ul><li>Application for Payment </li></ul></ul><ul><ul><ul><li>Contractor must submit outline of work completed as a part of payment request from contractor (usually 10 days before it goes to owner) </li></ul></ul></ul><ul><ul><li>Certification for Payment </li></ul></ul><ul><ul><ul><li>Architect has to certify that work has been completed within 7 days of receiving Application for Payment </li></ul></ul></ul><ul><ul><li>Progress Payments </li></ul></ul><ul><ul><ul><li>List the time requirements for owners to pay contractor for Application for Payment </li></ul></ul></ul><ul><ul><ul><li>Contractors must pay subcontractors as a part of the agreement </li></ul></ul></ul>
  28. 28. Articles of the AIA A201-1997 General Conditions of the Contract <ul><li>Article 9-Payments and Completion </li></ul><ul><ul><li>Provisions for certifying substantial completion </li></ul></ul><ul><ul><li>Provisions for Final Payment </li></ul></ul><ul><ul><ul><li>Should include retainage held back at each progress payment </li></ul></ul></ul><ul><ul><li>Provisions for partial use or occupancy </li></ul></ul><ul><li>Article 10-Protection of Persons and Property </li></ul><ul><ul><li>Provisions that state Contractor must employ protection of laborers and materials </li></ul></ul><ul><li>Article 11-Insurance and Bonds </li></ul><ul><ul><li>Requirements for insurance </li></ul></ul><ul><ul><ul><li>Contractor’s Liability Insurance </li></ul></ul></ul><ul><ul><ul><li>Owner’s Liability Insurance </li></ul></ul></ul><ul><ul><ul><li>Property Insurance </li></ul></ul></ul><ul><ul><li>Requirements for Performance and Payments Bonds </li></ul></ul>
  29. 29. Articles of the AIA A201-1997 General Conditions of the Contract <ul><li>Article 12-Uncovering and Correction of Work </li></ul><ul><ul><li>Provisions surrounding concealed conditions or “changed conditions” from the contract documents </li></ul></ul><ul><li>Article 13-Misc. Provisions </li></ul><ul><ul><li>Governing Law </li></ul></ul><ul><ul><ul><li>Contract is under the law in which the project is located </li></ul></ul></ul><ul><ul><li>Successors and Assigns </li></ul></ul><ul><ul><ul><li>Either party can not “reassign” contract obligations to someone else </li></ul></ul></ul><ul><ul><li>Tests and Inspections </li></ul></ul><ul><ul><ul><li>Listing or credence to performance requirements and standards through testing and inspections </li></ul></ul></ul><ul><li>Article 14-Termination and Suspension of Contract </li></ul><ul><ul><li>Provisions surrounding rights of owner and contractor to terminate or delay work </li></ul></ul>
  30. 30. NEXT LECTURE Project and Staff Management