Construction Contract Administration

206 Pages·1999·7.33 MB·English

by  Phillips, Charles S

Construction Contract Administration
Charles S. Phillips, P.E.
Published by the
Society for Mining, Metallurgy, and Exploration
8307 Shaffer Parkway
Littleton, CO 80127
Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.
For my wife
Mary Christian Vest Phillips
Society for Mining, Metallurgy, and Exploration, Inc. (SME)
8307 Shaffer Parkway
Littleton, CO, USA 80127
[phone]
www.smenet.org
SME advances the worldwide minerals community through information exchange and
professional development. With more than 16,000 members in 50 countries, SME is the
world’s largest professional association of mineral professionals.
Copyright © 1999 Society for Mining, Metallurgy, and Exploration, Inc.
Electronic edition published 2009.
All Rights Reserved. Printed in the United States of America.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in
any form or by any means, electronic, mechanical, photocopying, recording, or otherwise,
without the prior written permission of the publisher.
ISBN: 0-87335-191-6
ISBN-13: 978-0-87335-191-1
Ebook: 978-0-87335-314-4
Library of Congress Cataloging-in-Publication Data
Phillips, Charles S., 1924–
Construction contract administration/ Charles S. Phillips.
p. cm.
Includes bibliographical references and index.
ISBN 0-87335-191-6 (pbk.)
1. Construction contracts. 2. Construction industry--Management. I. Title.
TH425.P49 1999
692'.8 21--dc21 99-043494
CIP
Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.
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Contents
LIST OF FIGURES vii
PREFACE ix
PART 1 CONTRACT PRODUCTION 1
CHAPTER 1 INTRODUCTION 3
Definition of Contracts 3
History 3
Current Construction Spending 4
Considerations for Creating Contracts 4
Requirements for Effective Contracts 4
Construction Industry Organizations 6
CHAPTER 2 PROJECT ORIGIN 7
Concept Proposal 7
Base Design 7
Method of Award 8
Contract Types 8
Bid List 9
Construction Management 9
Bond Requirements 10
Insurance Requirements 10
CHAPTER 3 PLANNING AND CONTROL 11
Master Development Plan 11
Project Planning 12
Bid Package 15
Invitation to Bid 18
Project Documents Register 18
iii
Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.
CHAPTER 4 CONTRACT AWARD 21
Pre-Bid Activities 21
Post-Bid Activities 27
The Construction Contract 31
PART 2 CONTRACT ADMINISTRATION 39
CHAPTER 5 FUNDAMENTALS 41
Organization 41
Pre-Construction Activities 49
CHAPTER 6 IMPLEMENTING THE CONTRACT 53
Site Manager Role 53
Compliance 54
Changes and Extras 58
Delays and Time Extensions 59
Suspension or Termination 59
Disputes 59
Claims 61
Progress Payments 64
Beneficial Occupancy 64
Closure and Start-Up 64
CHAPTER 7 SITE MANAGEMENT DOCUMENTS 67
Construction Schedule and Progress Report 67
Notice to Proceed 69
Site Transmittal Memos 69
Routine Management Reports 69
Construction Contract Amendments 90
Progress Payment Authorization 90
Final Inspection, Test Run, and Acceptance 90
Release and Waiver of Lien 90
PART 3 CASE STUDIES AND INFORMATION SYSTEMS 95
CHAPTER 8 CASE STUDIES 97
Case 1. Defective Work 97
Case 2. Changes, Delays, and Time Extensions 99
Case 3. Suspension of Work 100
Case 4. Contract Termination for Cause 101
iv
Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.
CHAPTER 9 INFORMATION SYSTEMS 103
Background 103
Design 104
Construction Applications 105
Management Systems 105
PART 4 APPENDICES 107
APPENDIX A CHECKLIST FOR PROCESSING FROM START TO START-UP 109
APPENDIX B SAMPLE BID PACKAGE 119
APPENDIX C MAJOR CONSTRUCTION INDUSTRY ASSOCIATIONS 175
GLOSSARY 177
INDEX 189
v
Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.
Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.
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Figures
1.1 Construction contract checklist 5
3.1 Sample CPM schedule 13
3.2 Construction bid package major divisions 15
3.3 Typical list of general conditions 17
3.4 Sample Invitation to Bid letter 19
3.5 Project documents register 20
4.1 Contractor performance evaluation form 23
4.2 Contractor qualification questionnaire form 24
4.3 Bid price comparison form 29
4.4 Bid and adjusted price comparison form 30
4.5 Letter of Understanding 32
4.6 Letter of Intent 34
4.7 Notice of Award 35
4.8 Construction Contract Agreement form 36
4.9 Path from bid package to construction contract award 38
5.1 Example of site logbook page 43
5.2 Example of Owner’s site transmittal memo form 45
5.3 Sample schedule and progress report form 46
5.4 Typical Notice to Proceed letter 50
6.1 Typical progress payment request form 65
7.1 Sample construction schedule and progress report 68
7.2 Notice to Proceed letter 70
7.3 Transmit contract documents 72
7.4 Transfer custody of Owner-furnished materials 73
7.5 Return Contractor shop drawings 74
7.6 Missing routine Contractor reports 75
7.7 Proposed changes within scope of work 76
7.8 Proposed changes outside scope of work 77
7.9 Accept Contractor proposal for changes 78
7.10 Proposal for changes unacceptable 79
7.11 Return revised shop drawings 80
7.12 Use time and material basis for changes 81
vii
Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.
7.13 Confirm verbal agreements for changes 82
7.14 Reject defective work 83
7.15 Accept proposal to correct defects 84
7.16 Claims, delays, and time extensions 85
7.17 Concern with lack of progress 86
7.18 Beneficial occupancy 88
7.19 Sample site transmittal memo log sheet 89
7.20 Construction contract amendment form 91
7.21 Contract progress payment request form 92
7.22 Inspection for completion and acceptance form 93
7.23 Release, waiver of lien, and indemnity form 94
D.1 Sample schedule and progress report form 140
D.2 Sample CPM construction schedule 142
G.1 Sample certificate of insurance for bidding purposes 149
viii
Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.
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Preface
A successful construction project is completed safely, on time, and within budget; meets
designed performance; and produces no claims. This book was written to help those
working with privately awarded construction contracts meet these goals.
Students, Contractors, foremen, superintendents and managers, project managers and
engineers, site and contract administrators and managers, Owner’s representatives, and
others associated with the industry will find the book to be current and useful. It is
designed to serve as a guide and general reference for the many subjects that must be
considered in the production and site management of a construction contract.
The author has represented Owners and Contractors for the past 50 years in operations,
maintenance, design, construction, estimating, engineering, management, and claims
resolution in domestic and offshore mining, process, mineral, refinery, smelter, petro-
chemical, and environmental remediation facilities.
The book is divided into three parts. Part 1 deals with the selection, production, and
assembly of the elements required for a construction contract. Part 2 reviews the basics
for a reasonable, fair, practical, logical, and orderly contract administration system,
using the sample bid package included in appendix B to illustrate the various elements
and considerations. Part 3 presents four case studies from construction projects to help
those who manage contracts recognize potential problem areas. Some of the latest
advances in information technology for construction contract management are discussed
in chapter 9.
I hereby acknowledge the many friends and colleagues who have gone out of their way
to help me through the past 50 years in a career spent in mining, engineering and con-
struction: Charles T. Holland, Frank Morris, K.C. Browne, D.C. Tretzel, S.F. Erba, Walter
F. Jones, S.J. Campagna, O.J. Champagne, Robert L. Presson, C.W. McCumsey, W.O.
Hansen, Hans J. Zimmermann, S.V. Distefano, Sheldon Teel, T.D. James, Michael
Killgore, and Roy A. Dardenne, Jr.
In particular, I thank Stephen M. Spohrer, P.E., for taking the time to review each page
of text as the book took shape and for many valuable suggestions and assistance.
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Copyright © 1999 Society for Mining, Metallurgy, and Exploration Inc. Electronic edition published 2009.