Construction Engineering Exam 1

Infrastructure

The basic equipment and structures that are needed for a country, region, or organization to function properly

General Conditions

A standard set of stipulations that establishes contractual procedures and applies to all construction contracts

Special Conditions

Aspects of the contractual relationship that are peculiar or unique to a given project

Addenda

Modifications to the scope of a project that occurs before bid opening and before contracts are signed; incluses changes in detail, additions, and corrections

Incorporated into the bid package

Potential bidders must be notified of all changes

Responsive Bidder

Matches all instructions, terms, and technical requirements of the project and turns in the bid on time

Responsible Bidder

The bidder has the equipment, staff, facilities, and finances to complete the project and are capable of performing the work

Intangible Benefits

Cannot be defined in dollar amounts and are qualitative

Tangible Benefits

Definable in dollar amounts and are quantifiable

Construction Technology

Relates to methods and techniques utilized in construction

Construction Management

Addresses how available resources will be applied

Construction

The step in which the plans, specifications, materials, and equipment are transformed by a constructor, usually a contracter, into a finished facility

Public Works Projects

Federal, state, and local governments; projects usually awarded to lowest responsible and responsive bidder

Uses taxes and has to be bid

Private Works Projects

Company, personal, and business; owner selects contractor based on prce, past performance, and value

Does not use taxes and does not require a bid

Lien

A legal claim placed on a property by an unpaid contractor or subcontractor to secure payment for work or services they provided

Specifications

A written description of work to be accomplished and the quality of the end product; QUALITY

Indirect Costs

Can not be attributed to a single task of construction work but would not be incurred if the project is not performed; office costs, superint salary, operating utility costs

Direct Costs

Incurred in the production of some good or service; easily assciated with a specific item of work or production; labor, equipment, materials

Drawings

A set of plans indicating the work to be accomplished and quantity of materials; QUANTITY

What is it about the construction industry that makes it so different than the manufacturing industry?

Construction is unique

Construction is a _______ producing industry not a service industry.

goods or product

Construction vs Manufacturing: Construction

Focuses on the production of a single unique end product; customer is known before; need based

Construction vs Manufacturing: Manufacturing

Products either mass produced or batch produced; customer is generally unknown; profit based

The Construction Project Players

Project Owner

Designer (A/E)

Contractor

Vendors / Suppliers

Permitting Agencies

Public (End User)

Industry Organizations

Types of Contractors

CM - Construction Manager

PC - Prime Contractor

GC - General Contractor

SC - Subcontractor

Project Hierarchy

1. Project Manager - in charge of the overall project

2. Project Superintendent - coordinate fieldwork and supervise trade foreman

3. Project Engineer - assigned daily reports, progress reports, inspections, RFIs, and shopdrawings

4. Foreman - supervisor of crews such as electricians, carpenters or concrete pourers

Public Works

Federal, state, and local governments; project usually awarded to lowest responsible and responsive bidder

Use of taxes; has to be bid

Private Construction

Company, personal, and businesses; owner selects contractor base on price, past performance, and value

No tax usage; does not require a bid

For any construction project, there are five (5) important elements:

Scope, Budget, Schedule, Quality, Safety

Project development ALWAYS starts with…

identifying a need

Types of Construction: Residential

Single family homes, apartments, condos; private financing; low start-up capital necessary; labor intensive

Owner = Developer

Architect = Designer

Types of Construction: Heavy / Civil

Highways, airports, bridges; long duration projects; equipment intensive; high contractor expertise

Types of Construction: Commercial Building

Government buildings, schools, hospitals, retail, warehouse; private and public financing; labor and material intensive; contractor expertise nescessary

Types of Construction: Industrial

Manufacturing, plants, refineries, steel mills; privately funded; very large engineering and construction operations; high initial start-up costs

Vertical Civil Construction

Designed by both architects and engineers; building/skyscraper

Horizontal Civil Construction

Designed by an engineer; heavy highway projects including bridges

Main Resources of Construction

Manpower, Machines, Material, and Money

Management Levels of Construction

Organizational - all projects and communication levels

Project - a single project: bridge, road, building

Operation and Process - a work breakdown structure and method of construction

Task - activity specific assignments

Determining Project Need

First step in any project: owner establishes a need (scope)

Economic Considerations: projection of demand, timeframe, location, resources, available labor, feasibility study

Initial Planning Stage - Formal Need Evaluation

1. Cost Benefit Analysis

2. General Scope

3. Cost Estimate (parametric)

Cost Benefit Analysis

Feasibility Study

Compare estimated cost versus revenues

Two types of benefits: Tangible and Intangible

Parametric Estimates

Examining the cost of a similar facility using measurable characteristics and historical data to predict the cost of a new building

Modifiers

Used to refine parametric estimates based on several factors

Time (year), Location (city), Capacity (square footage), Quantity, Inflation (price rising)

During the Preliminary and Details Design phase of construction…

An architect/engineer is obtained by the owner to produce drawings and specifications

A formal contract is developed between the owner and designer

A completed set of documents are legally binding elements of…

a contract

Preliminary Design

First step in document production for the bid package

Only a portion of the design is completed

Offers time to review plans and specifications

All engineering disciplines involved

Sizing of units are determined

Preliminary estimates are developed based upon preliminary designs

Detail Design

Includes all details required for construction

Owner/Engineer’s Estimate Helps:

Ensure project is within financial resource

Provides a basis for rejecting submitted bids

Once drawings or plans are complete, owner approves/disapproves design

If design is approved, bid process may begin

Notice to Bid / Request for Bids / Requests for Proposal (RFP) contains a minimum:

1. General description of scope

2. Availibility of plans / specs (deposit amount / fee)

3. Time, place, date of bid opening

4. Bonding requirements for bid

5. Required proposal information

Public Bids

Open to qualified contractors

Publically opened with posted results

Longer bidding time

Advertisment: websites, trade journals, construction associations, A/E emailing list

Private Bids

Invitation only

Private opening with owner and designer (A/E) but can be public

Cannot happen on government projects

Advertisement: invitation from owner, A/E, construction association, business contacts

Prequalification for Bid

Varies with project complexity

Owner requests documents establishing firm’s expertise to be considered

Prequalification for Bid: Advantages

Contractor doesn’t have to prepare bid if unqualified

Owner is reassured the contractor with the lowest bid can perform required work

Bid Package Documents

Apply to any build

Description of the project to be constructed

Documents available to contractor: proposal form, general conditions, special conditions, technical specs, and a set of plans

Technical Specifications

Verbal description of the technical requirements

Standards of workmanship

Materials standards

Decision to Bid

Finances: cost associated with estimating a project will only be recovered if awarded the project

Company Goals and Capabilities: potential profit, type of work, competitive market consideration

Bonding Capacity: financial stability, current workload, capabilities, experience

Project Location

Time and Place for Bid

How to obtain plans and specifications

Surety Bonds

An instrument under which one party guarantees to another that a third party will perform a contract

An extension of credit - no anticipated financial loss associated

Not an insurance policy

Concept of Bonds

Serves to protect one party, against the default in a contractual relationship with a second party

A third party, known as the surety, protects the damaged party if a default occurs that results in damages

Surety Bond - Contractural Mechanism

Provides assurance for the faithful performance of its principal

Provides the owner with a form of financial protection

Bonding Relationships: Obligee

The owner

Party who may be damaged or lose some advantage

Bonding Relationships: Principal

The contractor

Party who might default

Bonding Relationships: Surety

The bonding company who protects the damaged party and assumes legal libility

Bonding Risks: Project Owners

Do not want to hire a contractor that can leave them at a loss financially

Bonding Risks: Contractors

Do not want to default on their bond, causing them to have to pay the surety back for all the claims the project owner was reimbursed for

Bonding Risks: Sureties

Do not want the contractor to default as it will often require costly litigation to receive reimbursement from contractor

Typical construction project has three types of bonds:

1. Bid Bond (Bid Security)

2. Performance Bond

3. Payment Bond

The purpose of a bid bond is…

To guarantee the contractor will enter into a contract and provide performance and payment bonds, if awarded the project

A subcontractor can file a ____ against a property even if the owner has paid their bill because the GC might have not.

lien

Once bids are open and bonds are pinned…

contractors cannot pull out

For owners during the bidding process, bid bonds…

Offset “damages” incurred to the owner in the event a contractor:

• withdraws his bid after bid opening

• selected contractor fails to begin the project

Or if owner incurs damages in the difference between the lowest bid and the second lowest bid

Bid Bond Amount

Government Projects: 20% of the bid price

Private Projects: 5% to 10% of the bid price

Before bid opening…

If a bid is withdrawn, the bid security shall be returned to the bidder and no action is taken against bid security

After bid opening…

If a bid is withdrawn, there is a forfeiture of bid bond

Unless a judgemental mistake was made on the bid or the bidder withdraws bid after the acceptance period

All bid bonds are returned ___ bid openings and an award as been made

after

If selected bidder cannot or will not enter into a contract, the bid security is…

forfeited and an award is made to the next lowest bidder

Performance bonds are issued to the contractor from the surety so…

The owner is paid for any remaining costs to complete the project due to contractor’s failure to do so

If default occurs with a performance bond…

The surety must provide for completion of the project at original contracted amount

Performance bonds typically cost…

1% to 3% of the contract cost

Payment Bond

Protects the owner against liens or charges against the project

Surety guanrantees the payment of all legitimate labor and materials bills resulting from performance of contract

Liens/charges are a result of nonpayment to…

Subcontractors for performed work, vendors/suppliers, and encumbers title to the owner’s project