a) Current ongoing work b) Mechanic's Lien c) Level of Technical Experience
Who are the three basic parties involved in any construction bonding arrangement?
1) Surety 2) Owner 3) Contractor
In what major section of the contract is the time duration of the project normally specified?
What type of bond guarantees that if an owner goes broke on a project the surety will pay the necessary amount to complete the job?
Explain the difference between insurance and bonding in the context to project success/risk?
Insurance companies expect losses while bonding companies work to prevent losses.
Insurance companies only repay what is lost while bonding companies work to ensure that a project is completed
Why are most construction bids based on a lump sum? Give 4 distinct reasons
1) Encourages competitive bidding 2) Project Scope in well designed beforehand 3) Little financial risk to owner 4) Used mostly in public projects so the public/taxpayer can know exactly what their money is being used for
Define the term "direct costs" in one sentence and give 3 examples
Direct costs are costs that are specific to the given project
Examples: Labour, equipment, materials
What causes contractor Failure? (Select all that apply)
Poor Planning Changes in line of work and scope of business Poor accounting and financing Poor Project management Rapid over extension
What is the purpose of the General conditions in a construction contract?
Covers all the stipulations regarding how a contract is to be administered and the relationships between the parties involved
What is the purpose of the technical conditions in a construction contract?
To provide a written description of the technical requirements of the work to be performed
What is the purpose of the addenda in a construction contract?
To incorporate in a bid package changes in detail, additions, corrections, and contract conditions that arise before bids are opened and that arise before bids are opened and that are also basis for bidding
What is the purpose of the special conditions in a construction contract?
To specify those aspects of the contractual relationships that are peculiar or unique given to a unique project (duration of the project, instructions on commencement of work, owner-procured materials, format to report progress, etc.)
What are the major parameters to be considered in the prequalification assessment of a contractor (also known as "3 C's"? Explain why they are important
1) Capacity - shows whether the contractor is capable of handling the project 2) Character - Reputation, shows if a contractor is reputable and respectful and a good choice 3) Capital - whether contractor is financially able to take on a project
Why is the contractor normally required to submit a bid bond when making a proposal to an owner on a competitively bid contract?
To ensure that he sticks to the agreement if he is awarded the contract
Make sure he doesn't run away
True or False? Mediators are always subject matter experts
True or False? Arbitration is generally binding
List three distinct methods to pre-qualify a bidder
a) Look for defaults on previous contracts b) Look at bonding capacity c) Look at technical Expertise
Bonding in construction usually costs between.........of the total project
The best dispute resolution method is
What are liquidated damages?
costs that occur when you are late on a project
Name three ways a construction contract can be terminated
Owner default Contractor Default Mutual Agreement
What accident rate is tolerable on a typical construction job?
Zero accidents, 0
Define what a "change order" is and explain if the owner is always responsible for added cost?
A change order is any changes made to the project AFTER the contract has been signed that the contractor now has to make adjustments to accommodate
The owner is GENERALLY responsible because the contractor will have to now make adjustments beyond what was agreed upon
Explain the term "Construction Management @ Risk". Draw a contractual flowchart and explain it briefly
CM @ Risk is similar to DBB. However, CM is more involved in the design and is allowed the opportunity to be more creative with it. The RISK involved is that if the design that is built goes over budget or does not fit specifications, the M is responsible and has to pay out of pocket
Diagram: Owner,A/E ----> CM @ Risk----> Subcontractor-----> Supply Vendor
In what situation can the federal government award contract(s) without competitive bidding? Give one example.
Situations where work must start immediately (war, natural disasters, man-made disasters)
What is the purpose of retainage?
Insurance for the Owner
During what period can a contractor withdraw a bid without penalty?
before the contract is awarded and signed
Would the department of transportation (DOT) select open or closed bidding? Chose one and explain why.
Open because it's a government agency, i.e. it is public. All federal projects are open bids
The terms "union shop" and "open shop" are used in regards to......
Hiring union/non-union workforce
Good and successful construction managers need to...(5 things)
be organized and deliver on time Respect others and communicate efficiently Integrate design knowledge into an execution plan Manage construction resources: labor, materials, equipment, money and time Work ethically
Before you sign a contract, you MUST....
READ IT AND UNDERSTAND IT
What is the difference between an RFI and a submittal?
RFI is used for clarification on drawings. Used to ask questions on a project.
Submittals are used for fabrication. They are used to clarify designs, etc.
Advantage/Disadvantage of a LUMP sum contract
Advantage: Scope of work is well defined before-hand Disadvantage: It is hard to make any adjustments to the project once contract is signed
Advantage/Disadvantage of UNIT PRICE contract
Advantage: Can be used when project/project scope is not well defined because it deals with specific units/items
Disadvantage: It can be used to estimate specific units accurately at the time of signing the contract
Which type of contract (lump sum or unit price) would be most likely used for building the piers to support a large suspension bridge in a mountainous area with limited soil boring data? Why?
Unit price because it deals with specific units (piers) as opposed to a large overall project
Fast track in construction means...?
Using separate contracts to start with construction before the design is totally complete
"Tort is a civil wrong." Tort risks have generally nothing to do with....?
Budgets and schedules ahead or below of plan
Define and provide an example for a "mechanic's lien."
This is when a party has the legal possession of the property of the owner until the owner fulfills some legal duty/obligation to the party who has it. e.g. Mortgage
True or false? Construction engineers are always protected from misinterpretation
The "Incorporation Clause" is necessary in construction contracts to make sure...
subcontractors acknowledge they are obligated to and familiar with the prime contract
Why is cost plus a percentage of cost type of contract not used to a great extent?
Because it puts the owner at a great risk. The contractor does not have any incentives to give good work, be economic efficiently, and the owner will still have to pay because the contractor gets a fee based on project cost.
Under what circumstances is a cost-plus contract favorable to both owner and contractor?
Cost plus fee- the owner pays a fixed fee at the end of the project that is not directly based on the project. Thus the contractor is inspired to work more efficiently to get his project, without putting the owner at risk.
Complete the figure. Use the following: Binding Resolution, negotiation, non-binding resolution, prevention, litigation, standing neutral, cost and time. Give an example to each dispute resolution technique
From bottom to top of stairs: Prevention--> Negotiation ---> Standing neutral---> Non-binding Resolution--->Binding Resolution--->Litigation --------------------------------------------------------Escalating cost, time, and less of control-------------------------------> Example: Court Orders, Arbitration, Mediation, Discussion of discrepancies to avoid further disagreement, agreement by parties involved
What is meant by the term foreign corporation?
One that works outside the state in which it is instated
State the liability limits of the owners in the three principle forms of business ownership in construction. Which of the three is most difficult to establish?
Proprietorship - High liability risk because owner assumes responsibility for all assets and thus it is his personal assets at risk
Partnership - Lower risk than proprietorship but still somewhat high because again it involves personal assets at risk - those of the partners
Corporation - Personal assets NOT at risk, only those of company (stocks, etc.) least risky of the three
A corporation is most difficult because of legal procedures that are involved in establishing it
An architect and a general contractor join forces and win a design-build project contract. What risks could this arrangement have, from owners perspective? What advantages could this ad-hoc enterprise have, again from the owner's point of view?
Risks: Disagreements between contractor and architect that can arise and cause discrepancies and/or problems
Benefits: Design and construction phases overlap and as project duration is shortened and adjustments can be made easily
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