Procurement & Contracts: Analysis of Construction Agreements

This report provides a detailed overview of construction contracts and procurement processes. It examines various types of construction contracts, including lump sum, unit price, cost-plus, incentive, and time-based contracts, highlighting their advantages and disadvantages. The report also explains the construction contracting process, from concept to acceptance, and identifies key elements such as legal purpose, mutual agreement, acceptance, and consideration. Furthermore, it discusses remedies for breach of contract, including injunction, restitution, rescission, reformation, and specific performance, along with their limitations. The procurement management process is outlined, from conception to final acceptance, considering factors like order size, timeline, quality assurance, and contractor capabilities. Finally, the report explores different methods for selecting contractors and various contractual relationships, including traditional design-build and design-build approaches, and provides insights into essential information and documents included in construction contracts. The report concludes with an example of a contract agreement for painting works, detailing scope, equipment, liquidated damages, insurance, arbitration, defects liability, and payment terms. This document is available on Desklib, a platform offering a wide range of study resources for students.

Procurement and contracts
Name of the Student
Name of the Professor
City/Date
Date/Month/ Year
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Procurement and contracts
QUESTION 1
Provide an example for each type of construction contracts
Types of construction contracts include;
a) Lump sum contract. It needs the contractor to agree to provide for a specified service
over a period of time.
b) Unit price contract. This is where the task to be carried out is broken down into numerous
parts, normally by construction trade.
c) Cost plus contract. Is an agreement which involves the buyers' consent to pay the
complete cost for materials as well as labor in addition to the amount for contractor profit
and overhead (Piper, 2017, p. 201).
d) Incentive contracts. Cost reimbursement in which a target cost, profit or price is measure
as a point of difference for various monetary-incentive.
e) Time Based contracts. The contractors are paid by the owner for the time taken by the
subcontractor and the builder.
Differences among various types of construction contracts
Differentiation point Cost plus contract Unit price contract Lump sum contract
Advantage to the
contractor
No risk Risk is low Incentives are allowed
for early completion
Disadvantage to the
contractor.
There is no incentive for
early completion
There is no incentive
for early completion
Risks are high
Advantage to the
owner.
The project can
commence without the
The risk is shared
with the contractor.
The overall cost is
articulated in timely
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Procurement and contracts
design completion stages
Disadvantage to the
owner.
The overall cost is
uncertain at early stages
The overall cost is
uncertain at early
stages.
Decreasing cost by the
contractor may lead to
detriment of quality.
Flexibility of design
change
More flexible to changes
in design.
Is flexible to changes
in design.
Flexibility is limited
Provide examples of each type of construction contract
a) Unit price contract-price as per hourly and quantities
b) Lump sum-A definite total lump sum price.
c) Time and material- Workers involvement in building of a house based on clock and clock
timing.
d) Cost plus-Designing and building a house costing 54m.
QUESTION 2
Explain the process of construction contracting
 Concept-Organizing and designing.
 Procurement-Bidding document.
 Bidding-Awarding of contract.
 Acceptance- contract coming to an end
What are the key important elements of construction contract?
 Legal purpose whereby the offer and acceptance of the contract must be provided under
legal conditions.
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Procurement and contracts
 Mutual Agreement whereby a contract must be accepted fully by the two parties.
 Acceptance where each party to the contract must accept it freely.
 Consideration, whereby all those involved must agree having value as well as the
counterpart. (Pinnells, 2008, p. 77).
What are the key important elements of the construction contract
 Offer. A party agreed to or not to carry out certain activities in future.
 Consideration. Promising certain values in exchange of specified action.
 Acceptance. The offer was accepted by both parties.
 Mutuality. Both parties involved came to agreement after the discussion.
QUESTION 3
Various remedies of Breach of contract
There are five remedies for breach of contract which include money damages, rescission,
specific performance, reformation, and restitution.
 Injunction- A court order compelling a party to do or refrain from a specific task.
 Restitution- Is a remedy establishing for restoring the party injured to the state the party
was before the agreement was formed (Piga, 2013, p. 154).
 Rescission- Is the name for the remedy where all the duties of the two parties are
terminated.
 Reformation-Is the type of remedy that allows the court to alter the constituent of a
contract to correct inequalities that were suffered.
 Specific performance- Is an equitable remedy that compels one party from or to perform
his/her duties as articulated in the agreement.
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Procurement and contracts
Limitations of contract remedies
Some of the limitations include;
 Foreseeability
There will be recoverable and no loss compensation to the non-breaching party in case the
damage lacks foreseeability.
 Mitigation of damages
It important to void loss with all means as encouraged by the contract law thus is known as
extenuation of indemnities.
 Certainty of damages
A party is in a position of recovering only that sum of destruction that can be proved with
sensible conviction (Mosey, 2010, p. 98).
 Loss of power of avoidance
There are numerous situations when a contract can be avoided by a person; duplicitous, careless
or fault.
 Delay
The right will be lost and the remedy will be restricted to harms in tort unless she acts promptly
to rescind common law.
 Third Parties rights
The prevailing rights of the third party may dismiss the power to dodge.
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Procurement and contracts
QUESTION 4
Steps in procurement management of organization from construction requirement to final
acceptance.
 Phase 1-Conception whereby the project feasibility is identified.
 Phase 2-Planning and this entails developing project plan and sketching drawings.
 Phase 3-Execution and this entails reviewing project design and procuring of materials
plus construction services.
 Phase 4-Transfer and this entails various activities such settlement of accounts, review
and acceptance, and transfer of materials.
Factors to consider in contractual procurement management
 Size of the order.
 The order timeline and schedule.
 Quality assurance.
 The risk associated with the assignment.
 The urgency of the requirement and this include the duration at which the completion of
the project should be done.
 Contractors’ technical capability, for example, concurrent contracts, acquisition cost and
nature of proposed subcontracting.
 Type and complexity of the requirement.
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Procurement and contracts
 Price competition such that the contracting officer should consider selecting and
negotiating the contract.
QUESTION 5
Explain the various ways of selecting contractor for a project.
 Public binding/Tendering-Open or restrict to any firm to submit tender for an advertised
contract in website. Invited or negotiated- Owner engaged and negotiated with a single the former has
relationship with.
Explain the various contractual relationships in construction contracts.
 Traditional contract-This is referred as design-build whereby the owner is engaged after
the finalization of the design.
 Design and build-This is where the contractor is engaged to deliver both the design and
building of the project. Designing and building is left for a single contractor.
QUESTION 6
Explain the various information to be included in a contract document for a construction
project.
 Work to be carried out. The quality of work needed. The terms and condition of the contracts. The cost of completed tasks. The construction program timeline and activities.
Explain various documents normally included in a contract for building projects.
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Procurement and contracts
 Agreement and contracts which is used by the owner or contracting officer.
 Statement of work such that the main activity entailed is important in the bidding process
(Bovis, 2012, p. 56).
 A special condition which is regularly a postponement of the contract and addition to the
universal circumstances.
 Bill of quantities and this document list all materials that will be forming part of the
construction.
 Flowchart construction schedule which will help to know how and when the project will
be completed.
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Procurement and contracts
QUESTION 7
Explain the process of contract and procurement for the painting works
THIS CONTRACT AGREEMENT is drafted on 10th day of December, 2018
BETWEEN
1. ……………………………., with its registered office at……………………...(hereinafter
known as the contractor)
AND
2. SUPER Tech Polytechnic, a government institution located in……………………(known
as the client)
Guidelines
 A contract for the provision of the printing works has been executed by Super
Tech Polytechnic.
 The contract has agreed the clients’ engagement to carry out the works in
accordance with terms and condition.
3. Lump Sum contract
This contract shall be in lump sum.
4. Scope of work
Schedule of painting of the structure made of steel of the open walkway canopy along the
escalator from level 1 to level 2 (building A).
5. Equipment
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Procurement and contracts
Lift that will be used in carry out the painting operations and the cost involved will be catered by
the contractor and does not form of the contract.
6. Liquidated and ascertained Damage.
A damage fee will be imposed for all the damages related to this contract. Failing to complete the
contract within the time stipulated will lead to a fee of $300 per day starting from the day the
contract was to be completed.
7. Insurance
All the insurance policies will be handled by the contractors including;
 Insurance entailing transportation of goods and services.
 Insurance against all workmen compensation claims.
 Comprehensive general liability or public liability insurance against injury.
8. Arbitration
 The parties involved agreed that all disputes will be solved in good faith in case they
arise.
 In case the disputes cannot be resolved between the parties then it shall be resolved by the
arbitration in Singapore in according to arbitration rules of Singapore.
 In case of arbitration proceedings, the contractor shall continue performing its duties.
9. Defects Liability period
The Defects Liability Period shall be 12 months from the completion day and shall involves
faults as of poor workmanship and faulty materials.
10. Payment.
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Procurement and contracts
After the completion of work based on the agreement, the contractor;
 In agreement with imbursement program in Annex A, the contractor shall invoice the
client.
 The payment of the contractor shall take place 30 days after receiving the invoice.
Annex A
S/No Payment Term for Deliveries Payment % Cumulative %
1 Thirty days after signing off the contract 15% 15%
2 Thirty days after delivering the paint on site 30% 45%
3 Thirty days after signing off of installation 20% 65%
4 Thirty days after signing off completion 30% 95%
5 Thirty days from completion of 12 months
warrant sign off
5% 100%
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Procurement and contracts
Bibliography
Arrowsmith, S., 2014. Regulation public procurement. 3 ed. s.l.: Thomson Reuters.
Bovis, C., 2012. EU public procurement law. 2 ed. s.l.:Harper Collins.
Jefferies, M., 2016. New forms of procurement. s.l. Grupo Santillana.
Kenny, I., 2013. Remedies of breach of contract. 3 ed. s.l.: Media Participation.
Lim, P., 2016. Contracts administration and procurement in Singapore. s.l. Hauffe Gruppe.
Mark, P., 2016. Allocation of procurement contracts. 3 ed. s.l.: Readers Digest.
Mosey, D., 2010. Early contracts involvement in buildings procurement. 3 ed. s.l.: Scholastic.
Piga, G., 2013. The applied law and economics of public procurement. 3 ed. s.l.: Hachette Livre.
Pinnells, J., 2008. International procurement contracts. 5 ed. s.l.: Wolters Kluwer.
Piper, C., 2017. Contracts and procurement fraud. 2 ed. s.l.: Adventure Works Press.
Turpin, C., 2012. Government procurements and contracts. 1 ed. s.l.: OLMA Media Group.
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