Construction Contract Law

Running head: CONSTRUCTION CONTRACT LAW
CONSTRUCTION CONTRACT LAW
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CONSTRUCTION CONTRACT LAW 2
Construction Contract Law
Issue One
Delivery Method
Considering the size and complexity of this project and the needs of the client, the best
delivery model for the project is construction management at risk (CMAR). This is because
Cameron Cadbury, the Managing Director of Truffle Chocolate (TC), wants the project to be
completed within a specified period and budget hence it is very important to engage the general
contractor (construction manager) from a very early stage of the project. In CMAR delivery
method, the owner of the project selects the design team, architect and general contractor early
and involve them starting from the design phase (Farnsworth, Warr, Weidman, & Hutchings, 2016).
This enables the general contractor to thoroughly understand the details and scope of project
works, make his contributions on better alternative designs, and provide better cost feedback to
the design team (Cho, 2016). The entities also develop trust and mutual sense of understanding
even before the start of construction (Gransberg, et al., 2013). This method clearly defines and
separates the responsibilities of the client, architect, design team, general contractor and
subcontractors.
Since Cameron and Ms. Belinda Bucket (the Development Manager of TC) had recently
tendered for and gone through the process of constructing a similar factory in Thorburn, it means
that they have a good understanding of the scope of the project works, the estimated cost of the
project, and the potential risks associated with the project. The previous experience will help in
speeding up the design process, preparing complete contract documents, avoiding design errors,
increasing the accuracy of estimating the cost of the project at early stages, preventing or solving

CONSTRUCTION CONTRACT LAW 3
disputes or conflicts that may arise between different parties, and implementing strategies that
will reduce the cost and completion time. The construction manager will advise Cameron and act
as his representative, provide value-engineering advice that will save money and time, provide
advice and be responsible for project schedule and budget, and ensure that the project is
completed at a guaranteed maximum price (GMP). In this method, the construction manager ill
bear most of the risks especially the risk of cost overruns in case the GMP is exceeded (DBL Law,
2013).
Contract pricing options
Some of the contract pricing options that could be used by TC for this project are:
Fixed price or lump sum: this is the contract pricing option where a client agrees to pay a
contractor a fixed price for the project works. The fixed price is agreed upon between the client
and contractor before official award of the contract to the contractor.
Cost plus: in this option, the client pays the actual costs, expenses and purchases incurred
by the contractor in carrying out the construction works specified in the contract, plus the
contractor’s overhead and profit, which can be a fixed fee or a percentage of the actual cost.
Unit pricing: this option involves dividing the project into several items or components
and determining the cost of each item/component. The total cost of the project is then determined
by finding the sum of each item/component multiplied by its unit price.
Guaranteed maximum price (GMP): this is the option where a contractor agrees to
complete the specified work in the contract without surpassing a specified maximum price.
When the actual cost exceeds the GMP, the contractor bears the extra costs but if the actual cost
is less than the GMP, the savings can go to the contractor, client or be shared.

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The recommended contract pricing option for this project is GMP. This is because
Cameron has previous experience in a similar project and therefore he is certain about the
estimated cost of the project. Belinda is also sure of what she wants to be built, the time it should
take and maximum total cost of the project. This means that the possibility of design variations
and price changes is very low hence the client is certain that the GMP is adequate to complete
the project. This option is best for Cameron because he will have transferred the cost overrun
risks to the contractor and in case of cost underrun, he will retain the savings or decide to share it
with the contractor (Burger, 2018). This option will also see the contractor strive to complete the
project early and to the best quality possible so as to save more and avoid reworks that can make
him loose money.
Issue Two
Risks associated with Appendix A
Some of the risks associated with Cameron accepting the cover note at Appendix A include the
following:
Fixed project timeline: it is very risky for Cameron to expect the project to be completed
by March 28, 2014 for the factory and shop to be operational during Easter period. This is not
practical because the possibility of unforeseen factors, outside the contractor’s control (Raymond,
2011), that may arise and affect completion of the project cannot be overlooked. There is also
need for adequate time for project commissioning and handover. Therefore Cameron’s project
timeline and completion date are not realistic and contractors may be tentative to bid for this
project, do poor quality work or provide expensive bids.