Ziad Alharthi, PMP® ,(PMI-RMP)®, (PMI-ACP)®’s Post

Type of contracts Construction contracts are legal agreements between two or more parties involved in a construction project. These contracts outline the rights, obligations, and responsibilities of each party during the construction process. Construction contracts typically include provisions regarding project scope, timelines, costs, quality standards, and dispute resolution. 1. Lumpsum Contracts 2. Measure and Value Contract 3. Cost reimbursement Contract A. Cost plus Percentage B. Cost plus Fixed Amount C. Target cost D. Guaranteed maximum price. Lumpsum Contracts Also known as a fixed-price contract, this type of contract establishes a fixed total price for the entire construction project. The contractor agrees to complete the work for the specified amount, regardless of any cost overruns or unforeseen expenses. I.e., The contractor hereby agrees to undertake and accomplish a specific scope of work as outlined in the contract documents within a predetermined timeframe, in exchange for an agreed lump-sum price. The agreed contract sum shall only be subject to modification through Variation to the scope of work or legitimate claims made in accordance with the terms and conditions of the contract. Advantages A. Cost certainty which gives the owner peace of mind knowing that they won't be hit with unexpected costs or overruns B. Clear Scope of Work Lump-sum contracts typically have a well-defined scope of work, outlining the specific tasks, deliverables, and project requirements. This clarity helps minimize potential disputes and ensures that both parties have a shared understanding of the project's objectives. C. Simplified Administration Lump-sum contracts are relatively straightforward and easier to administer compared to other types of contracts. The fixed price and clearly defined scope of work simplify project management, documentation, and payment processes. D. Competitive Bidding Lump-sum contracts often involve a competitive bidding process, where multiple contractors submit their proposals and pricing. This competitive environment can lead to more competitive pricing, potentially resulting in cost savings for the owner. E. Time Efficiency Lump-sum contracts can expedite the procurement process and project commencement. Since the price is agreed upon upfront, there is no need for lengthy negotiations or ongoing price discussions, allowing the project to start promptly. F. Lower financial risk to employer Since the contractor is responsible for delivering the project within the agreed-upon budget and timeline, the owner doesn't have to worry about managing every aspect of the construction process. This can free up valuable time and resources that can be used elsewhere. #Construction #contract #QuantitySurveying #Cost

🔍 Case Study: Managing Delays, Variations, and Liquidated Damages in Construction Contracts 🚧 In the world of construction, delays are inevitable. 🥸But how you manage them can make or break a project—and your bottom line. 🤔Let me share an interesting case that highlights key lessons for : 👉contractors, 👉project managers, and 👉clients alike. 📍 The Project: A lump-sum contract to erect 5 steel-framed buildings for 💶💵💴£528,486,💴💵💶 with a completion deadline of April 27, 1979. 🥵If the 🥵contractor🥵 failed to deliver on time, they’d face 💴💵💶£880💶💵💴 per week in liquidated damages (LDs). 🕒 The Issue: 1️⃣The project experienced significant delays due to labor shortages and material supply issues. 2️⃣By March 1980—nearly 11 months after the original deadline—the client issued a Variation Order (VO) for additional work. 3️⃣The contractor argued this late variation made the contract's timeline unclear, claiming that time had become ⛔️“at large”⛔️, meaning no liquidated damages should apply. 💼 The Client’s View: The client disagreed, stating the delays had already occurred before the VO and were due to the contractor’s slow progress. The VO added only 2 weeks of work, while the project was already over a year late. They sought liquidated damages of £46,640 for 53 weeks of delay. 💡 Key Lessons: 👉Timely Requests for Extensions: Contractors must request extensions of time (EOTs) as soon as delays occur—not just when variations are issued. 👉Clear Communication: Early and clear communication with clients can help resolve potential disputes over delays and variations. 👉The Role of the Superintending Officer (SO): Issuing variations late in the project can lead to disputes, especially if the timeline is not clearly adjusted. 👉Shared Responsibility: In complex projects, delays are often a result of multiple factors. Both contractors and clients must carefully manage their responsibilities to avoid prolonged disputes over penalties. 👉 This case serves as a reminder of the importance of managing changes, variations, and extensions in construction projects. Knowing how to navigate these complexities can help you avoid unnecessary costs and keep your project on track! #Claims #Management #Construction #Projects #constructionmanagement #contractmanagement #liquidateddamages #projectmanagement #constructionclaims #constructionindustry

🏗️ Key Agreements in the Construction Field and Their Importance 🏗️ In the construction industry, having the right agreements in place is crucial for ensuring smooth project execution, managing risks, and protecting all parties involved. Here’s a look at some of the most important construction agreements: 🔹 Essential Construction Agreements: Construction Contract: Outlines the scope, timelines, payment terms, and responsibilities between the client and contractor, helping prevent disputes. Subcontractor Agreement: Defines roles and expectations for subcontractors, ensuring work meets required standards. Supply Agreement: Manages the relationship with suppliers to ensure timely delivery of materials and equipment, keeping the project on schedule and within budget. Joint Venture Agreement: Establishes roles and profit-sharing among partners in a collaborative project, aligning interests and managing complexity. Design-Build Agreement: Combines design and construction responsibilities, enhancing collaboration and project efficiency. Consultancy Agreement: Engages consultants like architects and engineers, ensuring professional expertise and regulatory compliance. Non-Disclosure Agreement (NDA): Protects sensitive information shared during the project, safeguarding intellectual property. Construction Management Agreement: Engages a construction manager to oversee the project, ensuring it stays on time, within budget, and meets quality standards. Performance Bond Agreement: Provides a financial guarantee that the contractor will complete the project as agreed, protecting the client from financial loss. Change Order Agreement: Documents any changes in scope, cost, or timelines, ensuring transparency and formal agreement. 🔹 Why These Agreements Matter: Risk Management: Mitigates risks by clearly outlining responsibilities and consequences. Clarity & Transparency: Reduces conflicts by providing clear expectations and timelines. Legal Protection: Safeguards interests by defining terms and conditions. These agreements are essential for the success and smooth execution of construction projects, ensuring that all stakeholders are protected and aligned. #Construction #Agreements #ProjectManagement #LegalProtection #RiskManagement #BuildingIndustry #ConstructionContracts

Common Causes of Construction Claims and How to Mitigate Them. In the construction industry, claims can arise from various factors. Understanding the root causes is key to preventing disputes and keeping projects on track. Here are some of the most common causes of construction claims: 1. Delays:Project delays due to late approvals, weather conditions, labor shortages, or supply chain issues are one of the most frequent causes of claims. Regular schedule monitoring and proactive communication help mitigate delay claims. 2. Changes in Scope: Scope changes can significantly impact timelines and costs. To avoid disputes, ensure that any modifications are documented and agreed upon by all parties involved. 3. Unclear or Ambiguous Contracts: Vague contract language often leads to disagreements over roles, responsibilities, or payment terms. Clear, well-defined contracts are essential for avoiding misinterpretations. 4. Design Errors or Omissions: When design errors or missing information are discovered during construction, it can lead to rework or additional work. Collaboration between designers and contractors during the planning phase can reduce these risks. 5. Unforeseen Site Conditions: Unanticipated conditions such as contaminated soil or hidden utilities can disrupt progress. Thorough site investigations and appropriate risk allocation in the contract can help minimize these claims. 6. Contractor or Subcontractor Default: If a contractor or subcontractor fails to perform as expected, it can lead to delays or additional costs. Strong contract management and vetting processes help mitigate this risk. 7. Payment Disputes: Disagreements over payments can lead to claims. Clear payment schedules, prompt invoicing, and proper documentation of work performed are key to preventing these issues. 8. Weather Delays: Severe weather can disrupt construction activities and lead to time extension claims. Using historical weather data and planning for contingencies can help reduce the impact of weather-related claims. 9. Material Shortages or Defective Materials: Delays or increased costs can arise when materials are unavailable, delivered late, or found to be defective. Close coordination with suppliers and quality checks can help prevent these issues. 10. Failure to Follow Contract Procedures: Failing to follow procedures for change orders, notifications, or approvals can result in disputes. Strict adherence to contract requirements ensures smoother project execution. By recognizing these common causes and taking proactive steps, project teams can avoid costly and time-consuming disputes. What’s your experience with managing claims in construction projects? #ConstructionClaims #ProjectManagement #RiskManagement #PlanningEngineer #ContractManagement #ConstructionIndustry

Construction contract navigation demands a strategic approach to identify and address key risk-shifting clauses. As such, stakeholders should know contract details, including provisions for claims and disputes as part of risk-management. One way to determine risk-shifting clauses is to identify terms within a contract: while an exhaustive index may be of use, stakeholders may wish to leverage search functions in word processors for more efficient identification of essential terms. By employing these targeted searches, negotiators can efficiently navigate complex contracts and ensure a comprehensive understanding of risk-management terms to safeguard project success and company viability. JTE Claims Consultants Ltd. provides a wide range of services to the Canadian construction industry, including construction claims consulting services and commercial advisory and project control services. Visit https://lnkd.in/g43aR6r to learn more. #ConstructionContracts #RiskManagement #ContractNegotiation #ProjectSuccess https://ow.ly/GCQ450QBfBi

Construction contract navigation demands a strategic approach to identify and address key risk-shifting clauses. As such, stakeholders should know contract details, including provisions for claims and disputes as part of risk-management. One way to determine risk-shifting clauses is to identify terms within a contract: while an exhaustive index may be of use, stakeholders may wish to leverage search functions in word processors for more efficient identification of essential terms. By employing these targeted searches, negotiators can efficiently navigate complex contracts and ensure a comprehensive understanding of risk-management terms to safeguard project success and company viability. JTE Claims Consultants Ltd. provides a wide range of services to the Canadian construction industry, including construction claims consulting services and commercial advisory and project control services. Visit https://lnkd.in/gJW8uR4 to learn more. #ConstructionContracts #RiskManagement #ContractNegotiation #ProjectSuccess https://ow.ly/KtTs50QBfBg

🔄 Variation vs 📝 Claim in Construction: What's the Difference? In construction, Variations and Claims are critical aspects of contract management, but they often get confused. Here's a quick breakdown: 🔄 Variation: Refers to any change or modification to the original scope of work in a contract. Examples include changes in design, materials, quantities, or specifications. Variations can add, omit, or alter work and often impact project cost and timeline. Usually initiated by the client or project manager to adapt to new requirements or conditions. 📝 Claim: A formal request by a contractor for additional payment or time due to unforeseen circumstances or changes during the project. Common types: Extension of Time (EOT), Monetary Claims, and Disruption Claims. Typically arises from delays, variations, or external factors beyond the contractor's control. Claims ensure fair compensation or time adjustments to keep the project on track. 🔑 Key Difference: Variations change the project scope; they can be client-initiated. Claims are contractor-initiated, seeking compensation for unforeseen events. Understanding both is essential for effective project management and maintaining good client-contractor relationships. 💼🔧 #ConstructionManagement #ProjectManagement #QuantitySurveying #Procurement #ConstructionClaims

Ever wondered about the types of contracts used in the built environment? Well, come along as we try to define and look at some of the common contract types used in this industry. 👷🏾♂️🏗️⚠️ First, we'll try to define common terms and key elements of construction contracts before looking at each contract and its use case. 🚧 #BuiltEnvironment #Contracts What is a contract? To some, a contract is a document that describes what should be done or delivered and the total cost of the work done and then some signatures on some long dark lines. Construction contracts play a crucial role in ensuring a successful project delivery -in time and as designed, timelines and responsibilities. Some common elements of these contracts are illustrated below. 🎯 Key elements: 1.      The scope of work 2.      Project timeline 3.      Payment terms 4.      Change orders 5.      Termination clause 6.      Warranties and liabilities and 7.      Dispute resolution methods 🎯 Common terms used. 1. Field order: this is minor adjustments to an original contract and allows the project owner to make changes to the scope of work. This allows for quick amendments to the scope of work which would normally require a more formal change order which involves a lengthy process which may delay the progress. 2. Change order: Unlike field order, this is a more detailed and formal document compiled by the contractor to let the owner know that the scope of work has changed and why it has changed. It also serves to request for these amendments to be carried out. 3. Addenda/addendum: this is a modification or clarification to an agreement, contract or document either made before or after the contract has been executed. 4. Interim payment/Progress payment: these are partial payments made to the contractor at various stages of the project, mainly based on work done. This enables the contractor to pay the subcontractors for the work they have already done 5. Liquidated damages: this is a predetermined amount of compensation that a contractor must pay to the owner/employee due to delays caused or non-performance as outlined in the contract. 6. Contingency fund: an allocated budget for unforeseen or unexpected costs that may arise in the course of the project execution.   💡STAY TUNED FOR THE NEXT SECTION WHERE WE’LL EXPLORE SPECIFIC CONTRACT TYPES AND USE CASES! #Construction #QuantitySurveying #Learn #Build #ConstructionIndustry #ContractManagement #BuiltEnvironmentProfessionals #ConstructionLaw #KnowledgeSharing #ConstructionUpdates

The concept of nominated subcontractors is a common feature in construction contracts. However, without proper safeguards, it can expose contractors to significant risks. Let’s break it down: If you are a Contractor, you might: ➤ Lose control over key subcontracting decisions ➤ Face delays due to the subcontractor’s incompetence or financial instability ➤ Be liable for their failures, impacting your overall performance But it’s your choice to manage these risks effectively. A well-drafted clause on nominated subcontractors is the key. It ensures you have the right to object to unsuitable nominations and protects your interests. This clause is an excellent tool to minimize risk and maintain project control. In accordance with the 2017 FIDIC Red Book a nominated subcontractor is : ➤ A subcontractor specifically named in the project’s Specification, or ➤ A subcontractor whom the Engineer instructs the Contractor to employ (under Sub-Clause 13.4 [Provisional Sums]). While this arrangement provides flexibility for the Employer and Engineer, it can create significant challenges for the Contractor if not managed properly. To safeguard your position, the contract must address the following critical points: Point #1: Right to Object to a Nomination The Contractor has the right to object to employing a nominated subcontractor if: ➤ The subcontractor lacks competence or financial strength ➤ The subcontract does not ensure that the subcontractor will: - Undertake obligations enabling the Contractor to meet their own obligations - Indemnify the Contractor against liabilities arising from the subcontractor’s failures Factor #2: Timely Notification of Objections To exercise your right to object, you must: ➤ Submit a formal Notice detailing your objections with supporting evidence ➤ Submit the Notice no later than 14 days after receiving the Engineer’s instruction to employ the subcontractor Failure to meet these requirements may result in the loss of your right to object. Nominated subcontractors can either support or disrupt your project—depending on how well the related contractual provisions are managed. Take control. Draft carefully. Protect your interests. #fidic #contracts #constructionclaims #disputeresolution #claimsmanagement #constructionlaw #projectfinance #claims #contractmanagement #construction #epc #construction #infrastructure #contracts

Understanding Delay Claims in Construction Projects In the world of construction, managing timelines is crucial. Delay claims can often lead to conflicts between contractors and clients, especially when it comes to determining responsibility and the associated penalties or extensions. What is a Delay Claim? A delay claim arises when the completion of a project is postponed, leading to disputes over who is to blame and what consequences follow. Common Conflicts: 1. Attribution of Delay: Determining whether the delay is due to client actions (e.g., late delivery of materials) or contractor issues (e.g., inefficient work). 2. Impact on Schedule: Understanding how the delay affects the overall project timeline and critical path. 3. Financial Implications: Discussions about increased costs due to extended timelines. Who is Responsible? Responsibility can vary: -Client: If the delay is due to late provision of materials or design changes. -Contractor: If the delay is due to poor planning, resource allocation, or unforeseen site conditions not covered by the contract. Associated Penalties and Extensions: -Penalties: Contracts may have liquidated damages for late completion, which can impact the contractor financially. -Extensions of Time (EOT): Contractors may request EOT due to delays caused by clients, provided they can demonstrate the impact on the project schedule. Common Scenarios Leading to Delay Claims: - Late arrival of client-supplied materials. - Changes in project scope or design during construction. - Weather-related disruptions. - Unforeseen site conditions (e.g., discovering hazardous materials). Common Defenses Clients Use: -Contractual Clauses: Clients might argue that the contractor failed to adhere to the contract terms regarding timelines. -Mitigation Failure: Clients may claim that the contractor did not take reasonable steps to mitigate the delay. -Force Majeure: Clients could invoke force majeure clauses for unforeseen events impacting project timelines. Understanding the intricacies of delay claims is vital for both parties to navigate potential disputes effectively. Open communication and thorough documentation can help mitigate issues before they escalate. Let’s prioritize proactive management to keep our projects on track! #Construction #ProjectManagement #DelayClaims #QuantitySurveyor #ConstructionLaw #ContractManagement