presentation design & built

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Sunil PadmasekaraBSc(Eng),CPEng,MIE(Aust.),MIESL,MIEE(Japan),MSLEMA

Member of Association of Consulting Engineers Sri Lanka - (National body affiliated to the International Federation of ConsultingEngineers FIDIC)

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Definitions

Construction Contracts Types

Contract Documents - FIDIC

Design Build Contracts

D-B Contractor's Responsibility

Risks

Construction Insurances

Cost Variations

Post Contract Design Management

Sequence of Events

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Definitions:

Employer (=Client or Owner):

The firm who enters into a contract with a contractor forthe construction of the works

Engineer (=Consultant or Principal ):Any independentdesigner advisor or QS employed by a Contractor or

Client.

Contractor:The firm which undertaken the (design and)construction of the works.

Contract:

A legally binding agreement between two or more parties.

OFFER + ACCEPTANCE = AGREEMENT

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Construction Contracts:

What is a construction contract?

A contract can be defined as an agreement which is legally

binding document that describes the obligations, rights

(risks benefits) of the two parties(Privity in a Contract)

How are contracts formed?

Employer (Owner)issues Invitation for Bids (IFB)

Contractor prepares and submits Bid

Engineer (Consultant)reviews and accepts the Bid

A contract document is developed, reviewed, and

agreed upon by the Employer Contactor

The contract is signed by both parties(LegalBinding)

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A number of organizations prepare recommended

standard general conditions and associated forms of

Contracts.

Some of them are:

ENAA (Engineering Advancement Association of

Japan)

FIDIC (International Federation of Consulting

Engineers)

ICE (Institute of Civil Engineers, United Kingdom)

JCT (Joint Contracts Tribunal) United Kingdom

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Types of Construction Contracts:

1. Traditional Contracting (Develop

Construct)

2.

Design Build

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Types of Construction Contracts

Traditional Method- Develop & Construct

(or Design-Bid-Build)Develop the design detail from the Employers

design.

Owners design team will design the building

almost completely including obtaining

authorities' approvals/consent.

The Contractor is responsible only for theconstruction of Works.

Payment Method: Lump Sum or Schedule of

Rates basis. 7


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Design Build Contracts

D-B Contracts ate contractual arrangements whereby the contractor offer to do design and build a

project for a sum inclusive of both design and

construction cost.

Owners Design basically consists of performance,

requirements or design criteria of the MEP systems.

Only difference is level of contractors involvement

in Design Development is more with the TraditionalContracting Method.

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Construction Contracts:

FIDIC CONTRACTS (Standard Forms)

CONSTRUCTION

PLANT AND DESIGN-BUILD

EPC/TURNKEY PROJECTS

SHORT FORM OF CONTRACT

CLIENT/CONSULTANT MODEL SERVICES AGREEMENT

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The Red book(Design by Employer)

for Construction

The Yellow book-1999

Plant and Design-Build

The Silver book

EPC Turnkey Projects

The Green book(


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Design-Build Contracts: PLANT & DESIGN-BUILD

Contractor responsible for design

Engineer, working for the Employer

Provides Employers Requirements to which

contractor designs

Payment on Lump sum basis (against schedule

of payment)

Payments according to progress

Certification of payments by Engineer12


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Electrical & Mechanical Plant May include buildingand engineering

Design & Execution of works

Contractor designs and constructs inaccordance with Employers Requirements

Engineer Administers

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The Employer provides project requirements asdefined under item Employers Requirements (ER)

The ER are the basis for the contractor to designand build the project. Errors within the ER are the

liability of the Employer.

The contract is for a fixed sum and not re-measured.

The contract is administered on behalf of theEmployer by the Engineer,

Provision is made for variations by the Engineer.

The general conditions (clauses 1 to 20), exceptclauses 5 & 12, are principally the same as red book.

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Employers Requirements (ER)

Fully describe the works or lay down theparameters which the contractor shalldesign the remaining parts of the works.

Means the document entitled employersrequirements (specifies the purpose,scope, and/or design and/or othertechnical criteria for the Works), asindicated in the contract, and any

additions and modifications to suchdocument according to the contract.

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Contractors Proposal CP):

Means the document describe the proposal which the

contractor submitted with the Letter of Tender, asincluded in the Contract. Such document may includeContractors preliminary design proposal also.

Fully describe the works or lay down the

Parameters

Design:Includes the drawings and specifications which definethe scope and nature of the works

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Design-Build ContractsFIDIC Condition of Construct The yellow Bookfor Plant and Design Build

Constructor responsible for the design of

the works and the plant. Lump Sum Contract with Payments from

the schedules

Employers Requirement, ContractorsProposal, Schedule of Payment andSchedule of Guarantees are key words.

The employer appoints an Engineer for

the Construct Administration. Provisions for variations

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Contract Documents of D&B Contract: A contract = Offer +Acceptance

Letter of Intent FIDIC contract document including Appendices,

1. Employers Requirements2. Contractors Proposal

3. Contract sum Analysis4. Optional Claims5. Appendices

Preparation of Contract Documents consisting of, Contract Drawings

Specification Time Schedule Schedule of Activities (Contract Bills)

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FIDIC Y ll B k


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FIDIC-Yellow Book

Design-Build Contracts - Priority of Documents

The Contract Agreement

The Letter of Acceptance The Letter of Tender

The Particular Conditions

General Conditions

The Employers Requirements -ER(RB-specs) The Schedules (RB-Drawings)

The Contractors Proposal (CP)and any otherdocuments forming part of the contract

The documents of a tender are to be taken as mutually explanatory ofone another (complementary),but should there be discrepanciesthe contract may say that a stipulated order of superioritydetermines which part governs.

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Traditional(Design Bid

Build)

Design Build

(D-B)

D-B (Two -Stage)

D-B & Manage

Turnkey

Employers/OwnersInput

Contractors

Input

Different types of Contracting

Methods

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Design - Build (Two Stage Tender)

Owners design requirements are limited only

to Building information and usually consist of

accommodation/ usage requirements. No

MEP services drawings are available.

They rarely engage a design team and

contractor has to do complete design

proposal. Owner may, however, engage

consultants to assists in the design check/evaluation of contractors proposal.

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Design-Build & ManageThe owner selects a contractor at the inception stage

of the project by means other than competition, toundertake the complete design and construction ofproject.(At first it may seem strange for an owner to select a contractor withoutcompetition, but in practice many projects undertaken in this way. Owneragrees to pay target cost or a guaranteed maximum price.)

Owner usually adopts this method for one of thefollowing reasons.

1. A follow on contract is similar to earlier one

2. Due to lack of specialist contractors(MEPServices,etc)3. When the contractor has specific design

capabilities/ expertise.

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Turnkey (D&B + Financing)-Package DealsWhere the, Contractor does everything..

The owner has to do is Turn the Key to use hisbuilding

The owner, under a Turn Key contract, usually placesthe responsibility with the contractor for the

1. Complete Design

2. Construction

3. Fit out and T&C

till the contractor fulfill his responsibilities up tocompletion in response to the performance of theworks as a whole.

This form of contract usually applied to major powerplants, industrial plants, etc.

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Comparison of the different work stagesUSA System UK System (RIBA)

1. Concept A. Inception

B. Feasibility

2.Preparation

3.Brief

C. Outline Proposals

4.Design Development D. Scheme Design

E. Detail

F. Production Information

G. BOQ

5.Tender Documents and Tender

Action

H. Tender Action

J. Planning

K. Operation on Site

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Contractors Responsibilities/Risks(Legal Liability of D &B Contractor)

Clause 4.1 of FIDIC Yellow Book

Reasonable skill and care (D&B Contractors design proposal meet theapplicable standards expect from a professional designer)

& Professional negligence (Liable only for the defect which was a non-

negligent error)

Fitness for purpose, when completed the Works shall be fit for thepurposes for which the Works are intended as defined by the Employer's

Requirements. (tougher obligation to meet , some contracts performanceguarantee covers this requirement also)

(If design errors not fall under contractors negligence or beyond his reasonableskill and care , contractor must safeguard his position by pointing outshortcomings of Employers Requirements in the tender documents)

Design to comply with statutory Requirements In traditional contracting specialist contractors are usually nominated or at

least named by the architect. But In D-B contract, MEP Contractor assume fullresponsibility of his specialist subcontractors. Therefore, D_B Contractor mustensure about specialist subcons Design Responsibility requirements duringinitial stage of the project.

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Pricing Risk

In traditional contracting the BOQ is prepared by ownersQS and contractor prepares his costing according to theowners BOQ.

In contrast, the D-B contractor is entirely at risk for the

quantities which he measures. Pricing Risk to be evaluated:

Elimination of Omission and gaps.

Coordination between Elements.

Fees and other DB costs

Fees to the Local Authority Cost of tests

Cost of specialist consultants, Licensed engineers approvals

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Contract Documents by DB contractor (ContractorsProposal)

Basically 4 parts (they should fully describe the scope of works / or laydown parameter for designing remaining parts of the works to thegeneral aspects)

1. Drawings2. Schedules3. Particular specification and Scope of work

4. General specification

Check if the Owners Requirements contains a clause such as willprovide materials, etc of the best standards available or That willbe fir for the purpose intended

The contract sum BOQ in contract document, better to include costdata to be used for valuing variation or/and calculating variation (ifapply) or calculate monthly bill during construction period of theproject.

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Design Build Contract Forms:1. FIDIC Yellow Book-19992. BS/JCT 1981

Letter of Intent (LOI) Once an owner and a contractor reached agreement in

principle, the owner will normally issue a letter, to thecontractor, this letter is usually called a Letter of Intent

The contractor should check the contents of the letter ofIntent carefully to satisfy him on the following question.

1. What if the work get delay due to owners / Maincontractors decisions/delays? Will the contract acceptthe penalties?

2.

Does the LOI cover for ordering materials/equipments?3. The contractor will need to check with his specialist sub contractors about back to back design responsibilities.

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What do the FIDIC contract forms cover ?


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The 20 common clauses / sections in all FIDIC contract forms are

1. general provisions, definitions,

2. employers (owners) responsibilities

3. contract administration procedures, day works and changes in law

4. contractors general obligations

5. design obligations and documents

6. staff and labour requirements

7. plant materials workmanship

8. time, program, progress and delays

9. completion tests

10.hand over requirements

11.defects and costs

12.tests after completion

13.Variations

14.payments, certificates and contract sum

15.termination by the owner / employer

16.termination by the contractor

17.risks responsibilities limits of liability

18.insurance requirements

19.force majeure, notices, consequences

20.claims, disputes, arbitration

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CAR

CONTRACTOR ALL RISK

Damages to the

Work

PlantMaterials

(By Negligence Fire,

Whether. etc.)

Against Liability for Injury

(Accident), Death to persons

employed by the

contractor

CLIENT

PUBLIC LIABILITY

Damages to public

not associated with

the work

PROFESSIONAL

INDEMNITY

(For Design party)

Design problems

(BY SUB CONTRACTOR)

Workmen Compensation

(Sub / MEP Contractor)

Damages to sub construction works

Or property (Vehicles, Plant)

CONSTRUCTION INSURANCE

Associated

with the

works

1 2

3

4

1

3

4

Usually by General Contractor2

Design Party (by consultant or D-B contractor)

Sub Contractor

RESPONSIBILITY

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Contractors Works:insurance against damage orloss of the construction works Public Liability: against liability which causes

property damage to others or personal injury tothird party.

Workers Compensation: liability against death orinjury of contractors own employees (on the jobor in transit to or from it).

Professional Indemnity-coverage for Design work Contractors Plants Marine-Sea Freight Equip & Material supply Transit- Coverage for goods and equipment

transported by air or road.

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Bid Bonds: guarantee that the tenderer will carry

out the work ( to cover the cost of tenderingprocedure) Performance Bond: guarantee that the contract

will be completed as per the contract Payment Bond:gurantee that contractors,

suppliers and workers will be paid Warranty Bonds: guarantee that the warranties

will be honoured and that maintenance will becarried out.

Indemnity- Promise , only one party is liable

Bond-Promise ,Both has liability (Collateral) Novation: Risk undertaken by 3 parties.(Risk between Employer & Main Contractor

followed through to the Sub Contractor).

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Contract Doc. Check Items (By D-B Contractor)1. Discrepancies within the document and

Contractors proposal.

2. Element or requirements which may have beenintroduced and not provided for in the contract sum

3. The inclusion of any provisional sums by the owner4. Any additional risk or costs to be covered (as part of

the contract)more than the previous agreementbetween owner and DB contractor.

Once a contract is signed, the DB contractor will have

no redress if he failed to notice anything contained inthe owners requirements that could cause him lossand expense for which he had made no provision inthe contract sum.

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Cost Variation of the DB Contract(One of the greatest drawbacks of the DB system)

Variation may occur due to changes of Employersrequirements-ER (addition or omission to the originally

agreed scope of work).

Some variations are due to new Authority

requirements (Reimbursement of the addition cost tothe contractor depends on term of the contract).

Normally variation will add cost + time to the

programmed.

But some may reduce the cost + time (VE Inputs duringDesign Development stage).

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Issue of

the

Tender

Document

s

Submission

of the

Tender

Issue of the

Letter of

Acceptance

8.1 Com-

mencement

Date

TenderPeriod

8.2 Time For Completion1

28d 28d

4.2 Issue ofthePerformanceSecurity

Base

Date

9.1 Testson2Compltion. . .

Delay attributableto the Contractor

PRACTICAL

HANDING

OVER

10.1 Issue of

Taking-Over

Certificate

Defects Notification Period3

11.9 Issue of

Performance

Certificate


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