CONTRACTS

& SPECIFICATIONS
Definitions:
• INVITATION TO BID – refers to the notice published by the Owner or the
invitation issued to prospective bidders, giving information as to the nature of
the proposed project, conditions for the issuance of Contract documents, date
of bidding, and information that would give the Contractor a general idea of
the extent of the project.
• BID – the tender or proposal or quotation of a bidder to perform the work
described in the Contract in form and substance complies with the Instruction
to Bidders
• BID BOND – refers to any acceptable form of bond accompanying the Bid
submitted by the bidder as a guarantee that the bidder will enter into the
Contract with the Owner for the construction of the work, if the Contract is
awarded to him.
Definitions:
• BID BULLETIN – a document containing additional information on Bid
Documents issued to bidders before the date of bidding
• CHANGE ORDER - a written order to the Contractor issued by the Owner after
the execution of the Contract, authorizing a change or variation in the work or
an adjustment in the Contract Price or Contract time.
• CONTRACT - the term used to describe the Agreement and the Contract
Documents
• CONTRACT DOCUMENTS – are the documents attached to the Agreement
identified therein as Contract Documents, including all additions, deletions
and modifications incorporated therein.
a. Special Provisions or Conditions
b. General Conditions
c. Specifications
d. Drawings
e. Other Bid Documents
Definitions:
• CONTRACT PRICE – is the amount in money or other consideration to be paid
by the Owner to the Contractor for the execution of the work in accordance
with the Contract.
• CONTRACTOR – the person or firm duly registered and licensed by the
Philippine Contractors Accreditation Board whose proposal has been accepted
and to whom was awarded the Contract to execute the Work
• COST – all expenditures properly incurred or to be incurred, whether on or off
the site.
• DRAWINGS – graphical presentations of the Work. They include all
supplementary details and shop drawings.
• OWNER – the person or entity or authorized representative thereof who signed
the Contract as Owner
Definitions:
• OWNER’S REPRESENTATIVE – refers to the person or entity commissioned by
the Owner or authorized in writing by the Owner to act on his behalf
• PERFORMANCE BOND – the approved form of security furnished by the
Contractor and his Surety as a guarantee of good faith on the part of the
Contractor to execute the Work in accordance with the Contract.
• SPECIFICATIONS – are written or printed description of the work to be done
describing qualities of the material to be used, the equipment to be installed
and the mode of construction
• SUB-CONTRACTOR – a contractor duly registered and licensed by the Philippine
Contractors Accreditation Board having a direct contract with the Contractor
and who acts for or in behalf of the Contractor in executing any part of the
Contract.
Definitions:
• WORK – refers to all the Contractor-provided labor or materials or both, as well
as equipment transportation or other facilities necessary to commence and
complete the construction and to fulfill all his obligations which are called for in
the Contract.
Intent of Contract:
The intent of the Contract is to include all labor and materials, equipment and
transportation necessary for the proper execution of the Work

Interpretation of Contract:
A. In case of conflict between the provisions of the Agreement or of any Contract
Document, or in case of discrepancy, defective description, error in the
Contract, the following rules shall be followed:

 Rule 1 : The Agreement and the Contract documents shall be taken as

mutually explanatory of one another.
Interpretation of Contract:
 Rule 2 : The provision of the Civil Code of the Philippines on the
interpretation of contracts and of the Rules of Court on the interpretation
of Documents shall be applied.

 Rule 3 : Where the conflict between or among the provisions of the

Agreement and/or the Contract Documents cannot be resolved by Rules 1
and 2, it shall be understood that:
a. The Detailed Drawings shall prevail over General Drawings
b. words and figures shall prevail over the Drawings
c. words shall prevail over figures in Contract Documents
d. written dimensions shall prevail over measured dimensions
Interpretation of Contract:
 Rule 4 : Where Rule 3 does not apply, the conflict shall be resolved by
giving precedence to the Agreement or to provisions of a Contract
Document higher in order of priority among the various documents which
comprise the Contract. Order of priority shall be as follows:
a. Agreement as modified by Notice of Award of Contract
b. Instruction to Bidders and any amendment
c. Addenda to Bid Documents
d. Specifications
e. Drawings
f. Special Conditions of Contract
g. General Conditions of Contract
h. Other documents forming part of the Contract
Interpretation of Contract:
B. The owner shall resolve the conflict, or interpret or explain such discrepancy,
defective description, error or omission.

C. The interpretation of or explanation by the Owner shall be issued in the form

of instructions to the Contractor.
Conformity to the Contract:
The Work shall be executed in accordance with the Contract:

a. If there be a variance between the Drawings and the Specifications, the

provisions of the Specifications shall control. In case of conflict between the
General Conditions or any modification thereof and the detailed specification
requirements, the detailed specification requirements shall control.

b. Any discrepancy found between the Drawings and Specifications and site
conditions or any error in the Drawings or Specifications shall be immediately
reported to the Owner who shall promptly correct such error or discrepancy.
Conformity to the Contract:
The Work shall be executed in accordance with the Contract:

c. The Owner shall be fully responsible for adequacy of the design and for
sufficiency of the Drawings and Specifications. The complete requirements of
the Work shall be set forth in Drawings and Specifications to be supplied by
the Owner.
Initial Decisions:
 Site investigations should have revealed ground condition.
 Decisions will have been taken on the way design is to be carried out.
 Decisions will have been taken on the breakdown of construction into different
contract packages to suit capabilities of potential tenders.
 Environmental studies will have been undertaken and requirements assessed.
 Financial planning will have been completed to ensure funds will be available
 Approvals
Types of Contracts:
 Lump Sum Contract
 Unit Price Contract
 Labor Contract
 Materials Supply Contract
1. Lump Sum Contract:

• Sometimes called Drawings and Specifications Contract

• The Contractor agrees to perform a stipulated job of work in
exchange for a fixed sum of money.
• To complete it in all aspects within a specified time for a fixed
amount.
• Payment may be staged at intervals of time on the completion of
milestones
1. Lump Sum Contract:

• The Contractor is responsible for preparing his BOQ (Bill of

Quantities)
• Lower financial risk to Employer/Owner
• Higher financial risk to Contractor
Lump Sum Contract Advantages:

• The final price is known, by the owner, before the work

commences
• The Contractor has more incentive to reduce his cost to increase
the profit
• The Contractor hopes to complete the job as quickly as possible,
to maximize overhead, to maximize profit and to move to the
next job.
Lump Sum Contract Disadvantages:

• Competent contractors may decide not to bid to avoid a high-risk

lump sum contract.
• The contractor carries much of the risks. The tendered price may
include high risk contingency.
2. Unit Price Contract:

• In this type of contract, the schedule of rates is also provided in the

contract agreement.
• No total final price
• Payment to Contractor is based on the measure
• Higher risk to owner
• Ideal for work where quantities cant be accurately established
before construction starts
2. Unit Price Contract:

• The contractor undertakes the execution of a work on the item rate

basis only.
• The payment to the Contractor is made by detailed measurement
of different items of works actually done by the Contractor.
3. Labor Contract:

• All materials for the construction are arranged and supplied at the
site of work by the department or owner.
• The labor contractor engages the labor and gets the work done
according to specifications
• The contract is on item rate basis for labor portion only.
• The contractor uses his own tools for working.
• Plants and machineries are arranged by the owner.
4. Materials Supply Contract:

• In this form of contract, the Contractors have to offer their rates for
supply of the required quantity of materials, inclusive of all local
taxes and delivery charges or materials to the specified site within
the time fixed in the tender.
Ownership of Contract :
The Drawings, Specifications, including all additional instructions and copies
thereof, furnished to the Contractor shall remain the property of the Owner. They
are not to be used by the Contractor on any other work, and, with exception of
the signed Contract inclusive of Contract Documents, they shall be returned to the
Owner upon completion of the Work before Final Payment to the Contractor is
made.
Administrative Responsibilities :
Whenever under the Contract, the Owner is required to exercise his discretion by:

a. Giving his decision, opinion or consent

b. Expressing his satisfaction and approval
c. Determining value
d. Providing drawings
e. Supplying equipment or materials
Construction Documents :
are defined as the written and graphic documents prepared or
assembled by the A/E for communicating the design of the project
and administering the contract for its construction.

2 Major Requirements :

1. Contract Documents
2. Bidding Documents