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CIVL202 Construction Engineering I

CIVL202 Construction Engineering I. Tutorial 5 T1 Mon 11:00 – 11:50 T2 Wed 09:00 – 09:50. Tutorial Outline. Contract Environment Major Construction Contract Types Competitive Bid Contracts Lump-Sum Contracts Unit-Price Contracts Unbalancing the Bid Mobilization Bid Item

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CIVL202 Construction Engineering I

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  1. CIVL202Construction Engineering I Tutorial 5 T1 Mon 11:00 – 11:50 T2 Wed 09:00 – 09:50

  2. Tutorial Outline • Contract Environment • Major Construction Contract Types • Competitive Bid Contracts • Lump-Sum Contracts • Unit-Price Contracts • Unbalancing the Bid • Mobilization Bid Item • Negotiated Contracts

  3. Contract Environment • Contract: an agreement between two or more parties to do something • Courts are called to determine: 1.parties involved 2.responsibilities of different parties 3.other aspects of contract agreement

  4. Major Construction Contract Types • Competitive Bid Contract 1.Lump-sum contract 2.Unit-price contract • Negotiated Contract

  5. Competitive Bid Contracts • Advertisement  invitation of bidders selection of bidders  award of contract • Contractor’s qualifications reviewed in price-ascending order

  6. Lump-sum Contract • Quotes one price for all work and services (direct cost, indirect cost, profit) • The contractor receives monthly progress payments based on the estimated percent of the total job, so estimated percent of project completed is needed

  7. Unit-price Contract • Progress payments are based on precise measurement of field quantities • More flexible, so contingency may be needed • A guide quantity is given to contractor to quote price, based on this guide quantity of work, the contractor quotes a unit price • If guide quantity is low, the contractor will quote a higher unit price to offset mobilization and demobilization costs

  8. Unbalancing the bid • Income curve lags behind expenditure curve; contractor has to borrow money from the bank to finance the difference • To reduce this financing from the bank, the contractor tends to move income curve to the left • Increase the unit price for items to be consumed earlier and decrease the unit price for items to be consumed later on

  9. Mobilization Bid Item • If owner spots the problem that the contractor tends to move the income curve leftward, the owner may ask the contractor to justify the bid • Mobilization payments: the owner finance the contractor at owner’s interest rate (because the i.r. of contractor is usually higher than the owner)

  10. Negotiated Contracts • Based on available documentation, contractor presents its qualifications, required costs and fee to complete the job • Must clearly define reimbursable items and accounting procedures

  11. Negotiated Contracts • Four types of cost + fee structure 1.cost + percent of cost 2.cost + fixed fee 3.cost + fixed fee + profit-sharing 4.cost + sliding fee • Guaranteed maximum price • A price that a contractor guaranteed will not be exceeded

  12. Sliding Fee • Fee = R (2T-A) • Where • T = target price • R = base percent value • A = actual cost of construction

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