Engineering Contracts And Procurement Contract review Summary PDF

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Reason of doing business by contracts: Gain additional resource base; Gain a commercially competitive price; Define clear accountabilities, with legal consequences Tendering approaches: Public • Selected • Negotiated • Pre-Qualified Tendering The Tender Process: It is the time for both sides to “get it right”, From the Tenderer’s point of view • Tender team • Risk and opportunity • Develop a tender plan • Align the proposal with the Principal’s evaluation process • Schedule the process • Base the tender on the Principal’s perspective and requirements • Streamline the tender by the use of Appendices • Place the content interest in the body of the tender • Review the process

Defect period commences after practical completion date. 5%+5% of the contract security was given to the principle the 5% is to ensure the contractor does not leave the work half behind, when the project reaches practical completion, it is returned (usually along with the 2.5% of the other 5%) Final claim: claim after the practical completion to have their project completed signed off and get the remaining deposits/ bank guarantee back Usually contractor still goes back to fix defects after the final claim (with no deposit with principle) to keep a good relationship. Negotiation will be made if the cost is too high Find your way engineering risks rather than relay on insurance etc. or have disputes on court. If the matter goes off from your hand, you have no control, less chance the result will favour you. AS4000: Procure only contract (same as AS2124, but a new version) EOT should include work cost of an activity + time associated cost

Formation of the contract -Offer and Acceptance: Requires the making of an offer and acceptance of that offer. An offer is more than a mere “invitation to treat”. An offer may be to a particular person or to the public at large, and “acceptance” may be constituted by acting in the manner required by the offeror. -Consideration Consideration means something of value passing from each party to the other: a promise to give one’s car to a person will not be enforced, in contract, by a court. In contrast, a promise to sell one’s car to another person for an agreed amount would be enforced by the courts. -Intention to create legal relations -Certainty Terms needs to be sufficiently identified (certain) to be enforced by the courts -Some Contracts Must Be In Writing Contracts need not generally be in writing. It is only where a contract is expressly required by legislation to be in writing if they are to be enforced that this requirement occurs.

Contract Remedies -Damages: in contract, the injured party is entitled to recover damages equal to the benefit of the bargain which he have received had the contract been properly completed.

-Rectification: important to establish the exact agreement that was subsequently not incorporated into the contract -Specific Performance (ordered by court under certain circumstances) -Injunction -Termination/ Rescission (end of operation, failure by the defaulting party to complete the contract) -Frustration (a party may be able to get out of the contract on the basis that the contract is “frustrated”)

Non-Contract Remedies -Negligence (elements: duty of care, failure to meet the requisite standard of care; damage) -Misleading & Deceptive conduct -Restitution (arise due to no genuine agreement between the parties, termination of the contract by repudiation/ frustration, an unenforceable contract, work done outside the contract) -Promissory Estoppel: a promise is enforceable by law when the promisor makes a promise to the promise who relies on it to the detriment

Forms of Contract Choice of a particular style of project depends on: ease of design (building vs complex engineering projects); desire for design flexibility; availability of suitable contractors/ project managers; political considerations; budget constraints vs performance -Fixed price contracts: rare, contractor takes the risk as to the ultimate price, and that the parties agree to pay the contract sum (as adjusted) -Cost plus: no risk borne by the contractor. Principle pays for the works done by contractor plus an agreed fee (usually a percentage of that sum) -D&C: tender not only for the construction of the work but also for the completion of the detailed design. It has the potential to reduce the overall cost of construction to the principle. Principle is able to enjoy the advantages of design efficiencies which contractors, through their contracting experience, may be able to incorporate into the design of the works-have the effect reducing construction cost. -project management agreement/ construction management agreement/ managing contractor contract/ warranted maximum price contract -PPP (public/ private participation) project: Contractor agrees with the principle not only to build the project but to arrange finance for the project, and then, using that finance, to build the project, to own the project for a limited period, to operate the project throughout that period, and then, at the end of that period, to transfer the project to the principle. (Employed in public infrastructure projects) -Choice of project delivery system: -DBO: for the contractor to design, construct, operate, manage and maintain the facility from commercial operation and to provide the services till end of the contract term; for the principle to obtain control and ownership of the facility on achieving commercial operation

Contractor’s obligation: completion of the Design and Construction works; Execution of the work; operation of the facility Principle’s obligation: payment; access to and possession of site; site information; contract price Concepts: Commercial Operation: that stage when practical/substantial completion of the Construction Works has been achieved, and the Operational Commissioning Tests have been passed. Date for Commercial Operation: the date by which Commercial Operation of the Facility is to be achieved (as extended). Milestone: the dates of completion of phases of the construction works, the operational commissioning tests and commercial operation Latent condition: physical conditions on the site and its near surrounds excluding weather conditions Liquidated damage: damages made to the principle every day after the date for practical completion to and including the earliest of the date of practical completion or termination of the Contract or the Principal taking WUC outof the hands of the Contractor. (Excluding EOT) Practical completion: stage when works are completed except for minor omissions and defects which do not prevent the work from fitting the original purpose with reasonable grounds for not promptly rectifying them. All tests required under the contract have been completed. Insurance: contractor arrange from the commencement date, for the relevant periods, and amounts: construction all risk insurance policy; public liability policy; professional indemnity; worker’s compensation; other insurance (eg. Motor vehicle, marine…) Bill of Quantities: document issued to the contractor stating estimated quantities of work to be carried out Priced bill of quantities: bill of quantities priced and lodged by the contractor with the superintendent and corrected where necessary from time to time Schedule of Rates: any schedule included in the contract shows the rate or respective rates of payment for the execution of that work and which may also include lump sums, provisional sums, quantities and prices -Alliance: parties agree to work cooperatively on an open book basis, with commercial incentives (pain share/gain share) based on project outcomes, controlled by a joint project alliance board and alliance management team, and on a “no dispute” basis. Improved performance through commercial joint risk. Reward incentives; avoids draconian contract terms/ lack of trust/ lack of co-operation; parties focus on project outcome (“win-win”), rather than individual claim entitlements

Superintendent The superintendent is not a party to the contract; he is a person named in the contract by the two parties. He is paid by the principle and sometimes may be the principle’s original design consultant. Role is principally to decide major issues of potential dispute under the contract between the two parties. Act honestly and fairly, act within time prescribed, at a reasonable manner. Dual role as an independent assessor: assessment of program claims and issue of progress certificates/ claims for extra payment for variations to the contract/ claims for EOT/ quality of materials and work in accordance with the contract document/ claims for extra payment (such as latent conditions provisions)

Agent of the principle-the superintendent owns a duty of care to the principle: notification of successful and unsuccessful tenderers; arrangements for execution of contract document; vetting of contractor’s insurances; vetting of security deposits; advice on rate of progress and expenditure; recommendations on contractual actions to be taken by the principle; management of site staff.

Time under the Contract Delay caused by the principle: delays in providing clear access to the site/ in detailed drawings and specifications/ errors in the drawings and specification/ failure to provide certain matters (water, electricity, gas…) – contractor entitled to an EOT + payment for the costs associated with that delay Delay caused by the contractor: contractor is late in arriving on site/ work performance is too slow to complete the work by the date for practical completion/ work performance in a defective manner, and the work has to be rectified.- not EOT and additional payment of these delays Neutral delays/ force majeure: weather/ industrial stoppages/ civil wars…negotiated at the time of entering into the contract that which party should take the responsibility. When delay occurs, contractor intends to claim an EOT. The party is required to give notice of circumstances which might lead to a delay immediately when the contractor aware of such situations.

Payment The purpose of allowing the deduction of cash retention from the value of works completed, up to the point of Practical Completion, was to enable the Principal, should the need arise, to use those funds to pay others (if necessary) to rectify and/or complete the Contract Works in part or in total as the case required (cash retention security has been substantially replaced by bank guarantee security) Defects liability period: typically, 3 months on a minor and 12 months on a major construction contract. Contractor is obligated to return to the site and rectify defects which become apparent. Final Completion: the end of defects liability period. Contractor will need to submit a final payment claim, the principle/ superintendent will then issue the final certificate and return the balance of any cash retention or security monies (with necessary deduction for uncompleted work) Valuation of progress claims: superintendent comes to value the progress claims based on percentage completion of the works relative to the contract sum, rather than the actual value of work completed. Alternatively, the value of the completed work on a pure valuation basis/ the value of the work still to be completed deducted from the total contract sum.

Security The contractor is required to provide security for the performance of its obligations under the contract to ensure the due and proper performance of the contract. Traditionally, principle deduct usually 5% of the value of the works completed from each progressive progress claim from the commencement of the works up until practical completion. 2.5% will be returned at practical completion. 2.5% of the Contract sum by way of bank guarantee provided at commencement of the works. A second bank guarantee for 2.5% of the Contract sum provided half way through the completion of the works, the first bank guarantee being returned at practical completion, the second bank guarantee being returned at the end of the Defects Liability Period.

Quality Defective material or work, the superintendent may direct the contractor to a. Remove the material from the site b. Demolish the work c. Reconstruct, replace or correct the material or work d. Not to deliver the material or work to the site

Insurance Contractors all risk (to cover damage caused by weather and accidents on sites), public liability, workers compensation, motor vehicle insurance, other insurance relevant to the particular project. Public liability insurance: contractor to insure-shall be in the joint names of the parties; cover the respective rights and interests, and liability to third parties. Principle to insure-before the date of acceptance of tender, the principle shall effect a public liability policy included in the tender document and nominating/ stating the insurer. Insurance of employees: contractor shall insure against statutory and common law liability for death of or injury to persons employed by the contractor.

Default/ Termination Substantial breaches: suspension of work; failing to proceed with due expedition without delay; failure to lodge security; failing to use the material or standards of work required; failing to comply with superintendent’s direction; failing to provide evidence of insurance

Tendering and Pricing The Development of a Contract: • Evaluation Feasibility• Land Planning• Project Planning/Business Case• Project Procurement• Project Delivery• Asset Management Tender Evaluation• Transparent Process• Committee• Criteria for Assessment• Complying and Non Complying Tenders• Check the Rates• Value management• QA• Program• Cashflow Costing• Preliminary Costs (site running costs)• Labour- direct and indirect• Plant• Materials• Contingency• Builders Risk• Off-site overhead• Profit

Capital Base affecting the value of jobs that can be secured during the bidding process ；Investment changes yielding returns, and increasing operating profit through cost reductions; planning to finish a job one period earlier...