CE 7
Construction Project Cycle
A construction project follows a step-by-step lifecycle:
Initiation
Planning & Design
Procurement
Construction
Commissioning
Closeout
There must be mutual understanding and consent (offer and acceptance) between parties.
Agreement
Each party must receive something of value (e.g., contractor gets paid, owner gets a structure).
Consideration
Parties must be legally able to enter into the contract (e.g., legal age, mental fitness).
Capacity
The contract must not involve illegal activities to be enforceable.
Legality
Fixed price for a completed project. Encourages clear design and planning. Risk of cost overruns falls on the contractor.
Lump-Sum Contract
Payment based on measurable units of work. Suitable when project quantities are uncertain (e.g., excavation). The owner pays for actual quantities used.
Unit Price Contract
Reimbursement of actual project costs plus a fixed fee or percentage. Good for projects with unclear scopes. It transfers cost risk to the owner but gives contractors little reason to cut costs unless incentives are added.
Cost-Plus-Fee Contract
One entity handles both design and construction. Speeds up project delivery but reduces owner control over design specifics.
Design and Build Contract
Refers to the acquisition of goods, consulting services, and the contracting for infrastructure projects by procuring entity. (Sec. 5(aa), IRR, R.A. 9184)
Procurement
Refer to all items, supplies, materials and
general support services, except consulting services and
infrastructure projects, which may be needed in the transaction of
public businesses or in the pursuit of any government undertaking,
project or activity. (Sec. 5(r), IRR, R. A. 9184)
Goods and Services
LCRB stands for
LOWEST
CALCULATED RESPONSIVE BID
BAC
Bids and Awards Committee
ABC
Approved Budget for the Contract
Is a document that explains in detail the objectives, scope, and
implementation methods of a project.
Terms of Reference (ToR)
Functions as a
guideline that helps the projject team or stakeholders understand
the context and scope of the work to be carried out.
Terms of Reference (ToR)
ToR
Terms of Reference
Presidential Decree No. 442
The Labor Code of the Philippines
those with capabilities to construct vertical and
horizontal structures that are general in nature, or are commonly
constructed.
General Contractors
those with special capabilities to construct
highly specialized projects such as roads and bridges, or those that
deals with specific aspects of construction, such as steel works,
plumbing works, electrical, mechanical equipment and systems
installation.
Specialty Contractors
The Bidding Document shall include the following:
a. Approved Budget for the Contract;
b. Invitation to Bid;
c. Minimum eligibility requirements;
d. Instruction to Bidders;
e. Technical Specifications;
Why do disputes arise?
• Delays on a contract.
• Lack of understanding of the contract.
• Failure to administer the contract.
• Unsubstantiated or incomplete claims being made by the parties
involved.
Reduce the possibility of disputes arising:
• Make significant upfront planning before beginning work.
• Carefully read and understand the contract.
• Negotiate clauses that are murky or potentially problematic.
• Deal with problems as they arise, do not postpone them.
• Be diligent when it comes to pre-construction work.
• Make schedules realistic and executable and plan for delays and
disruptions.
• Document any issues and challenges that arise during the execution
and plan for delays and disruptions.
• Identify risks in advance and consult specialists.
includes the agreement that if a cause for
a dispute should arise between a contractor and a project owner, these
parties will attempt to reach a just and satisfactory resolution between
themselves before moving on to other means.
negotiation
A clause suggests the inclusion of a neutral third party in the
dispute situation to help mediate the process of resolving the dispute
mediation
An alternative to mediation is expert determination which is used to
resolve disputes of a specialist nature or in cases where there is a
valuation dispute requiring a specialist's opinion.
Expert Determination
includes a neutral third party but unlike
with the mediation method, the adjudicator will give a decision,
whereas the mediator will assist parties in finding the resolution.
Adjudication
parties agree to the arbitrator who has the relevant
experience to engage in the matter. The arbitrator considers documents
and facts that concern the situation, and can make a decision that favors
one side if the parties fail to achieve consensus.
Arbitration
usually also included in the dispute clause, in case the
parties do not find any other way to resolve the issues that have come
up. Litigation involves a trial and is legally binding and enforceable,
though it can also be appealed.
Litigation