Aurora State College of Technology (ASCOT)

DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

CONSTRUCTION METHODS AND PROJECT MANAGEMENT

Virtually all civil engineering structures are unique. They have to be designed for some
specific purpose at some specific location before they can be constructed and put to use.
Consequently, the completion of any civil engineering project involves five stages of activity
which comprise the following:

1. Defining the location and nature of the proposed works and the quality and
magnitude of the service they are to provide.
2. Obtaining any powers and permissions necessary to construct the works.
3. Designing the works and estimating their probable cost.
4. Constructing the works.
5. Testing the works as constructed and putting them into operation.

There are inherent risks arising in this process because the design, and therefore the
estimated cost of the works, is based on assumptions that may later have to be altered. The cost
can be affected by the weather during construction and the nature of the ground or
groundwater conditions encountered. Also the promoter may need to alter the works design to
include the latest technical developments, or meet the latest changes in his requirements, so
that he does not get works that are already out-of-date when completed. All these risks and
unforeseen requirements that may have to be met can involve additional expenditure; so the
problem that arises is – who is to shoulder such additional costs?

Clearly if the promoter of the project undertakes the design and construction of the
works himself (or uses his own staff) he has to meet any extra cost arising and all the risks
involved. But if, as in most cases, the promoter engages a civil engineering contractor to
construct the works, the contract must set out which party to the contract is to bear the cost of
which type of extra work required. The risks involved must also be identified and allocated to
one or the other party.

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

CONTRACTS AND SPECIFICATIONS

I. CONTRACTS

When two or more persons have a common intention communicated to each other to
create some obligation between them, there is said to be an agreement. An agreement which is
enforceable by law is a “Contract”.

Those agreements are enforceable by law which are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object and are not expressly
declared to be void. This is subject to any special law according to which contract should be in
writing and attested by witnesses. The following are the essential ingredients of a contract:

a. Offer made by one person called the “Promisor”.

b. Acceptance of offer made by the other person called the “Promisee”.
c. Doing of an act or abstinence from doing a particular act by promisor for
promise a called consideration.
d. The offer and acceptance would relate to the something which is not prohibited
by law.
e. Offer and the acceptance constitute an agreement, which, when enforceable by
law, become a contract.
f. In order to make a valid and binding agreement, the party entering into such an
agreement should be competent to make such agreement.

Types of Contracts

Contracts for the execution of civil engineering works are of following types:

A. Lumpsum contract
B. Item rate contract

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

C. Lumpsum and schedule contract

D. Cost plus fixed fee contract
E. Cost plus percentage of cost contract
F. Special contracts

A. Lumpsum Contract

In this type of contract, the contractor offers to do the whole work as shown in drawings and
described by specifications, for a total stipulated sum of money. There are no individual rates
quoted, thus it becomes difficult to make adjustments in the contract value if any changes are to
be made in the work later on. The schedule of 3 different items of work is not provided and the
contractor has to complete the work as per drawings and specifications for the agreed lump
sum amount.

Deposit of 10 % security money and other conditions of the contract are included in the
contract agreement. Upon the completion of work, a fixed lumpsum amount is paid to the
contractor. Detailed measurements of different items are required but the whole work is
compared and checked with drawings and specifications before releasing the payment. In large
projects, part payments are made to the contractor at different stages of work on money agreed
terms. In case the contractor stops the work in between he is not entitled for any further
payment.

Suitability

A lumpsum contract is more suitable for works for which contractors have prior
construction experience. This experience enables the contractors to submit a more realistic
bid. This type of contract is not suitable for difficult foundations, excavations of uncertain
character, and projects susceptible to unpredictable hazards and variations.

Merits

i. The owner can decide whether to start or shelve the project knowing the total
lumpsum price quoted by different contractors.
ii. The contractor can earn more profit by in-depth planning and effective
management site.

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

Demerits

i. Before the contract is awarded, the project has to be studied thoroughly and
the complete contract documents has to be prepared in advance.
ii. In this type of contract, unforeseen details of work are not specified in the
contract document. Many additional items 4 may have to be undertaken as the
work progresses, giving opportunity to the contractor for claiming higher rates
of the extra items not included in the contract agreement.

B. Item Rate Contract

Also called a schedule contract, in this contract, the contractor undertakes the execution of
work on an item rate basis. The amount to be received by the contractor, depends upon the
quantities of various items of work actually executed. The payment to the contractor is made on
the basis of detailed measurements of different items of work actually done by him.

Suitability

The item rate contract is most commonly used for all types of engineering works
financed by public or government bodies. This type of contract is suitable for works which
can be split into various items and quantities under each item can be estimated with
accuracy.

Merits

i. In this type of contract, there is no need for detailed drawings at the time of
allotting contract as in the case of lumpsum contract. The detailed drawings
can be prepared after the contract is awarded.
ii. Changes in drawings and quantities of individual items can be made as per
requirement within agreed limits.
iii. The payment to the contractor is made on the actual work done by his at the
agreed rates.

Demerits

i. The total cost of work can only be known upon completion. As such, the owner
may incur financial difficulty if the final cost increases substantially.

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

ii. Additional staff is required to take detailed measurements of work done for
releasing payments to the contractor.
iii. The Scope for additional saving with the use of interior quality materials may
prompt the contractor to use such materials in the work.

C. Lumpsum and Scheduled Contract

This is similar to the lumpsum contract except the schedule of rates is also included in the
contract agreement. In this type of contract, the contractor offers to do a particular work at a
fixed sum within a specified time as per plans and detailed specifications. The schedule of rates
for various items is provided which regulates the extra amount to be paid or deducted for any
additions or deletions made during the progress of work. Measurements of different items of
original work are not required but extra items are required to be measured for payment. The
original work shall however be checked and compared with the drawings and specifications.

Suitability

This type of contract is more suitable for construction works for which contractors
have prior work experience and can consequently estimate the project cost more realistically.

Merits

i. In this type of contract, additional staff for recording detailed measurements of

original item of work is not required for making payment to the contractor.
ii. The owner can know from tenders as to what the project will cost him. Knowing
the financial implications, the owner can decide to start or defer the project.

Demerits

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

i. Before the contract is awarded the project has to be studied thoroughly and all
the contract documents are required to be completed in every respect. 6 ii.
ii. The non-scheduled extra items arising out of changes made in the drawings and
specifications are often a source of dispute because the contractor presses for
rates higher than the prevailing market rates.

D. Cost Plus Fixed Fee Contract

Cost Plus fixed fee contract is desirable when the scope and nature of the work can
atleast be broadly defined. The amount of fee is determined as a plump sum from a
consideration of the scope of work, its approximate cost, nature of work, estimated time of
construction, manpower and equipment requirements etc. In order to negotiate such a type of
contract, it is essential that the scope and some general details of the work are defined. The
contractor in this type of contract is selected on the basis of merit rather than the fee alone. In
case of cost plus percentage contract, the contractor has a tendency to increase his profit by
increasing the cost of work. But this drawback is overcome in cost plus fixed fee contract
because here the contractor’s fee is fixed and does not fluctuate with actual cost of work. Once
this fee is fixed, the contractor cannot increase the cost of work.

Suitability

i) This type of contract is suitable for works required to be completed expeditiously

and where it is difficult to foretell what difficulties are likely to be encountered. ii)
ii) This contract is also suitable for important structures where the cost of
construction is immaterial.

Merits

i) In this type of contract, actual cost is to be borne by the owner. Therefore, the
contractor performs the work in the best interest of the owner resulting in good
quality work.
ii) The work can be taken in hand even before the detailed drawings and
specifications are finalized.

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

iii) Changes in design and method of construction if needed can be easily carried
out without disputes.
iv) The work can be executed speedily.

Demerits

i) This form of contract cannot be adopted normally in case of public bodies and
Government departments.
ii) The final cost of the work is not known in advance and this may subject the
owner to financial difficulties.

E. Cost Plus Percentage of Cost Contract

In this type of contract, instead of awarding the work on lumpsum or item rate basis, it is
given on certain percentage over the actual cost of construction. The actual cost of construction
is reported by the contractor and is paid to him by the owner together with a certain percentage
as agreed earlier.

The contractor agrees to do the work in accordance with the drawings, specifications
and other conditions of contract. In this type of contract, proper control has to be exercised by
the owner in the purchase of materials and in arranging labour.

The suitability merits and demerits of this type of contract are similar to cost plus fixed
fee contracts. An additional demerit is the tendency of the contractor to increase the cost of
work to earn profit by way of percentage of enhanced actual cost.

F. Special Contracts

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

There are certain contracts which are used at different occasions. Some of these
contracts are listed below:

a. Turn-key Contract
b. Package Contract
c. Negotiated Contract
d. Continuing Contract
e. Running Contract

a. Turn-key Contract

A turn-key contract is an integrated contract in which all works pertaining to various

disciplines such as civil, electrical, mechanical etc. are in the hands of a single contractor
called the main contractor. The main contractor can sublet the contact to subcontractors
who are specialists in their respective fields.

In this contract, the main advantage to the owner is that he need not coordinate the
work of different contractors. The main contractor is responsible for all kinds of jobs starting
from planning to commissioning stage. The owner takes over the entire work (which is fully
operational and of proven performance) from the main contractor.

b. Package Contract

In a package contract, two or more related jobs, each of which could form a separate
contract are combined in a single contract. In the field of civil engineering, generally, design
and development are combined with construction and supply or maintenance.

In this type of contract, plan of work and standards are established and the work is
carried out accordingly by the contractor. The main contractor is responsible for
safeguarding the owner’s interest and for this reason, prior approval of design and technical
aspects have to be taken from the owner. Responsibility for correctness of the design lines
with the main contractor.

c. Negotiated Contract

In this type of contract, negotiation across the table takes place between representatives
of the owner and the main contractor for project cost and other conditions of contract. In

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

this type of contract, detailed projects specifications are arrived at by discussions between
the owner and the main contractor and consultant.

A negotiated contract involves extended discussions for finalization as a competitive

contract. Most of the consultancy projects of World Bank are negotiated contracts.

d. Continuing Contract

In this type of contract, new or additional work is awarded to the contractor on the basis
of agreed terms and conditions of an existing contract. Such contracts do not require re-
tendering and hence can save time and money.

e. Running Contract

Such contracts provide goods and services at specified intervals or as and when required
by the owner. The contract price is not fixed and payment is based on goods supplied and
services rendered as specified in the contract documents.

Contract Documents

The contract document consists of the contract agreement (on non-judicial stamp paper
of prescribed value) and the following set of documents, each page of which is signed both by
the owner and the contractor.

a) Cover Title Page: It contains the name of work, name of owner, name of contract,
contract agreement number, contents etc.

b) Contents Page: It contains the contents of the agreement with page references.

c) Notice Inviting Tender (NIT): It contains a brief description of work, estimated cost of
work, date and time of receiving the tender, amount of earnest money, security money,
time of completion etc.,

d) Tender Form: It comprises bill of quantities, contractor’s rates, total cost of work, time
for completion, security money to be deposited and penalty clauses etc.

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

e) Schedule of Issue of Materials: It contains the list of materials to be issued by the

department or owner to the contractor with rates and place of issue.

f) Drawings: These comprise a complete set of fully dimensioned drawings including

plans, elevations, and sections detailed drawings and site plan.

g) Specifications: It is not practicable to include detailed information of each item of work

in the limited space of description in the bill of quantities. As such detailed specifications
form a part of the contract agreement. Specifications should be clear and precise
covering all items of the bill of quantities. Following specifications are normally included
in the contract document.

i. General Specifications: These specify the class and type of work quality of
materials etc, in general for the work as a whole.

ii. Detailed Specification: These give detailed description of each item of work
including material and method to be used along with quality of workmanship
required.

h) Conditions of Contract: The terms and conditions of contract specify the following.

i. Rates of each item of work inclusive of materials, labor, transport,

plant/equipment and other arrangements required for completion work.

ii. Manner of payment of contractor including running payment final payment,

refund of security money etc.

iii. Time of completion of work.

iv. Proportionate progress to be achieved.

v. Penalty for poor quality and unsatisfactory work, lack of proportionate progress
and for delay in completion.

vi. Extension of time for completion of work.

vii. Engaging other agency at contractor’s cost and risk.

viii. Termination of contract.

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

ix. Subletting of the work.

x. Changes in design/drawings etc. and valuation of variations.

xi. Arbitration for settlement of disputes. In addition to the above, performance

Important Conditions of Contracts Connected with Contractual Problems

The members of the construction team should be fully aware of their rights and
obligations under the contract. They should be thoroughly conversant with the precise
provisions and true importance of each clause in the contract agreement. Following are in
important conditions of contract:

a. Time of completion.
b. Delay and extension of time.
c. Penalty
d. Compensation for delay in completion of work.
e. Liquidated damages.
f. Debitable agency
g. Valuation of variations
h. Settlement of disputes
i. Force of nature and natural disasters
j. Price escalation
k. Termination of contract

a. Time of Completion.

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

The Contractor is required to complete the work within the agreed time of
completion which is specified in a suitable unit of time (year, month, week etc)
depending upon the nature and scope of work. The contractor is also required to
maintain a proportionate progress of work.

b. Delay and Extension Time

Delay in completion of work not attributed to the contractor should be brought

to the notice of the owner by the contractor in writing, within the time specified in the
contract, for seeking extension of time. The owner will satisfy himself that the delay is not
on account of a lapse on the part of the contractor before granting suitable extension of
time.

c. Penalty

It is a fine imposed on the contractor for nonfulfillment of his contractual

obligations such as failure to maintain required progress of work, delay in completion,
poor quality or work, bad workmanship etc.

d. Compensation for delay in completion of work

The contractor is liable to pay compensation to the owner for delay attributed to
him in completion of work. The amount of 28 compensations may be stated as a
percentage of the estimated cost of work for each unit of time delay. The maximum limit
of compensation may be 10% of the contract price.

e. Liquidated Damages.

It is a fixed stipulated sum payable by the contractor on account of penalty for

delays and does not bear any relationship to the real damage to the owner. It is
generally high and fixed per day for excess period over the specified in the contract for
completing the work.

f. Debitable Agency

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

Whenever the contractor fails to fulfil his contractual obligation in respect of

progress or quality of work even after giving due notice by the owner, it becomes
necessary to appoint a debitable agency which works at the cost and risk of the
contractor. This agency is in the form of labour or other contractor to fulfill the
contractual obligations of the main contractor. The expenses incurred are charged from
the bill or security of the original contractor.

g. Valuation of Variations

The valuation of variations is based on change orders issued in writing by the

owner. Generally, the variation in individual items of work should not be more than 25%
and variation in total cost should not exceed 10%.

h. Settlement of Disputes

Efforts should be made to resolve disputes amicably between the owner and the
contractor through mutual discussions and negotiations. Arbitration clause may be
incorporated in the contract to settle disputes not resolved through mutual discussions
and negotiations.

i. Forces of Nature and Natural Disasters

Natural disasters are acts of nature, such as unprecedented floods / rainfall,

earthquake, hurricanes, typhoons, fire etc. These disasters along with occurrence of riots,
civil commotion, revolt etc. are beyond the control of the contractor and may lead to
financial and time loss. The contractor should obtain an insurance policy for such risks as
can be covered by insurance. In the event of financial or time loss, the contractor can
claim financial compensation from the owner for risks which are not insurable and an
extension of time for all such risks.

j. Price Escalation

During execution of the work, labor wages and material prices may increase as a
result of inflation. The contract conditions should therefore, include on appropriate
clause for payment of escalation to the contractor

k. Termination of Contract

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

The owner can terminate the contract in the event of default or bankruptcy of the
contractor and may impose penalty as per the contract agreement. Default on the part of
the contractor includes abandoning the work, failure to maintain required progress, non-
observance of rues / instructions etc. for which the owner may rescind the contract and
impose penalty up to 10% of the estimated cost of work. Due notice must be served on
the contractor before termination of the contract.

II. SPECIFICATIONS

Specifications are statements which describe the nature and class of work, materials to
be used, labour to be employed, method of work, precautions to be taken, quality of
workmanship etc. The cost of the work depends much upon the specifications. The nature of
work can be easily understood from the study of specifications. The drawings of a building or
structure show the arrangement of rooms and dimensions (length, breadth and height) and
include a brief description of the different parts. Drawings do not furnish the details of different
items of work, the quantity of materials, workmanship etc., which are all description in the
specifications. Specifications serve the following purposes:

i. Guide the bidder at the time of tendering for arriving at a fair price for the work involved.
ii. Provide guidance for execution and supervision of work and purchase of materials.
iii. State the acceptance criteria for different items of work.

Types of Specifications

A. Contract Specifications
B. Guide Specifications
C. Standard Specifications

A. Contract Specification
The specifications prepared for a particular job to accompany the working drawings are
contract specifications. These are further clauses at:
 General Specifications

Engr.Jerome M. Galam
Insturctor - I
 Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora

Course: BSCE-5

 Detailed Specification
General Specifications are also called brief specifications. These give a general idea of the
class and type of work giving brief descriptions of materials, quality and workmanship.
Detailed specifications provide a detailed description of each item as per schedule of
quantities, specifying the materials to be used including their proportions, method of work
quality of workmanship required etc. The specifications are written, as far as possible, in the
same sequence or order in which the work is carried out.

B. Guide Specifications
These specifications provide a guideline for preparing contract specifications and give a
broad idea about class and type of construction for a particular purpose.

C. Standard Specifications
These specifications are prepared for various materials or group of materials for the
guidance of all concerned with construction or construction industry. These specifications
include methods of manufacture methods of tests, code of practice etc.,

D. Manufacturer’s Specifications
Manufacturers prepare specifications of their products for the guidance of users. These
specifications also include installation instructions and other guidelines for use and
maintenance of products. These specifications are generally provided in the form of
manuals. Clear understanding of specifications plays a vital role in the successful completion
of a construction project.

Engr.Jerome M. Galam
Insturctor - I