Faculty of Engineering and Technology

Specifications, Contracts and Quantity

Surveying/ Lecture Notes
Dr. Jamil Hamadneh

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 Section 1:
Contracts

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Construction Project Life Cycle

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 Activities in engineering
projects
• 1-Engineering: issues related to process,
finalization, structural analysis & design,
technical issues related to equipment design
& selection.
• 2-Procurement: Procurement of materials,
also includes identification of suitable
vendors.
• 3-Construction: This covers construction,
installation & test run of a constructed
facility before handed to owner

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Remark!
• Importance of language writing

“A woman without her man is nothing”

• Punctuate the sentence?

"A woman, without her man, is nothing.“

"A woman: without her, man is nothing."

9/18/2023 Dr. Jamil Hamadneh, Lecture notes 5

Contracts
❑Engineering contracts are legally binding agreements
between two parties, typically an engineering firm and a client.
❑Engineering contracts are written or spoken agreement,
especially one concerning employment, sales, or tenancy, that
is intended to be enforceable by law.
❑Engineering contracts agreements which are enforceable
as such having been made by free consent of the parties, by
persons competent to contract for a lawful consideration
and lawful object and which are not expressly declared to
be void by any statute.’

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Contracts
• Purpose of a contract:
Engineering contracts are essential for protecting
the interests of both parties and ensuring that the
project is completed on time and within budget,
and that the client receives the desired product or
service.

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Benefits of Engineering Contract
Clarity and certainty: Engineering contracts clearly define the scope of work, the
deliverables, the payment terms, and the responsibilities of each party. This helps to
avoid misunderstandings and disputes down the road.

Risk mitigation: Engineering contracts can help to mitigate risk for both the client and
the contractor. For example, fixed-price contracts protect the client from cost overruns,
while cost-plus contracts protect the contractor from financial losses.

Efficiency and effectiveness: Engineering contracts can help to promote efficiency and
effectiveness by providing a clear framework for the project. This can help to ensure that
the project is completed on time and within budget.

Fairness: Engineering contracts should be fair to both the client and the contractor. This
means that the contract should reflect the value of the work being performed and the
risks being assumed by each party.
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Benefits of Engineering Contract …
Improved communication: Engineering contracts can help to improve
communication between the client and the contractor. This is because the contract
forces both parties to clearly define their expectations and to agree on a plan for
completing the project.

Reduced likelihood of disputes: Engineering contracts can help to reduce the

likelihood of disputes between the client and the contractor. This is because the
contract provides a clear framework for resolving any disagreements that may arise.

Increased confidence: By having a well-written contract in place, both the client

and the contractor can have increased confidence that the project will be completed
successfully. This is because the contract provides a clear roadmap for the project
and protects the interests of both parties.
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A well-written
engineering contract
should:

• Clearly define the scope of work

to be performed by the contractor.
• Specify the deliverables, timeline,
and budget for the project.
• Outline the responsibilities of each
party.
• Establish a payment schedule.
• Include a dispute resolution
process.

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Typical • Agreement: This is the main document of the
contract, and it sets out the terms and
Content of conditions under which the project will be
undertaken. It includes the scope of work, the
Engineering deliverables, the timeline, the budget, the
payment terms, and the responsibilities of each
Contract party.
• General conditions: This document contains
standard terms and conditions that apply to
most engineering contracts. It covers topics
such as risk allocation, dispute resolution, and
termination.
• Special conditions: This document contains
any terms and conditions that are specific to the
project at hand. It may include items such as
the specific materials to be used, the testing
requirements, and the warranty period.

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Typical • Drawings and specifications: These
documents provide detailed information about
Content of the work to be performed. The drawings show
the physical layout of the project, while the
specifications describe the materials and
Engineering methods to be used.
• Bill of quantities: This document lists the
Contract quantities of materials and labor required to
complete the project. It is used to calculate the
contract price..
• Entrance bond: an entrance bond is a type of
surety bond that is required by some
government agencies and private organizations
before allowing a landowner to construct a new
entrance to a public road or right-of-way.
• Permits and licenses: These documents show
that the contractor has the necessary permits
and licenses to perform the work.

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Typical • Bid bond: A bid bond is submitted by a
contractor as part of the bidding process for a
Content of construction project. It guarantees that the
contractor, if awarded the contract, will enter
into a contract and provide the required
Engineering performance and payment bonds..
• Performance bond: This is a guarantee from a
Contract third party that the contractor will fulfill their
obligations under the contract.
• Insurance certificates: These certificates
show that the contractor has the required
insurance coverage.
• Maintenance bond: warranty bond, covers
defects in workmanship or materials after the
completion of the construction project. It
typically remains in effect for a specified
period (e.g., one year) during which the
contractor is responsible for addressing any
issues at no additional cost to the owner.

9/18/2023 Dr. Jamil Hamadneh, Lecture notes 14

Parts of a contract/Local
❑Bid invitation
❑Instruction to bidders
❑General conditions
❑Special Conditions
❑Additional special conditions
❑Primer minutes of meeting template
❑Agreement template
❑Technical specifications
❑Bill of quantities
❑Drawings
❑Bidding From template and annex
❑Banner template
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 Biding and Tendering
• Bidding is the process of submitting a proposal to provide goods or services at a
certain price. Bids are typically submitted in response to a request for proposals
(RFP) or invitation to bid (ITB).
• Tendering is the process of issuing an RFP or ITB and evaluating the bids that are
received. The entity that is tendering the project is typically looking for the best
deal they can get, considering factors such as price, quality, and experience.
• In other words, bidding is the process of submitting a proposal, while tendering is
the process of issuing a request for proposals and evaluating the bids.

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 Construction Methods /
Types of Project Delivery System
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Construction Contracting Methods/Types of Project Delivery System
❑1. Design-Bid-Build (D-B-B): It is the traditional approach to engineering contracts. It is
a three-stage process in which the project owner first hires an architect or engineer to
design the project. Once the design is complete, the project owner then bids the project out
to multiple contractors, and the contractor with the lowest bid is awarded the contract.
✓Disadvantages:
• Can lead to delays and cost overruns.
• Project owner has less control over the quality of the construction.
• Can be difficult to coordinate the design and construction phases of the project.
• Designers may have limited knowledge of the true cost and scheduling implication of design
decisions
✓Advantages
• Simple and straightforward process.
• Easy to find contractors who are willing to bid on projects.
• Competitive bidding process can help to reduce costs.
• Insurance and bonding are well defined.
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Construction Contracting Methods
❑2. Design-Build: It is a single-source delivery system in which a single entity, the design-
build team, is responsible for both the design and construction of a project. The design-
build team is selected through a competitive bidding process, and the contract with the
design-build team includes both the design and construction phases of the project.
✓Disadvantages:
• Higher upfront cost: The design-build approach can have a higher upfront cost than the
traditional approach, as the design-build team typically charges a premium for their services.
• Less control for the project owner: The the design-build team is responsible for both aspects of
the project.
• Limited competition: There are fewer design-build teams than there are individual architects,
engineers, and contractors.

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Construction Contracting Methods
❑2. Design-Build:
✓Advantages
• Reduced risk: The design-build team is responsible for all aspects of the project, from design to
construction.
• Improved communication: The design-build team is typically a collaborative team that includes
architects, engineers, and contractors.
• Faster project completion: The design and construction phases of the project can overlap.
• Increased cost certainty: The design-build team typically provides a guaranteed maximum price for the
project.
• Innovation: The design-build approach can encourage innovation, as the design-build team has a vested
interest in finding ways to save time and money on the project.
• Single point of contact: The design-build approach provides the project owner with a single point of
contact for all aspects of the project. This can make it easier for the project owner to manage the project
and to resolve any issues that arise.
• Reduced warranty claims: The design-build approach can lead to a reduction in warranty claims, as the
design-build team is responsible for both the design and construction of the project. This is because the
design-build team has a vested interest in ensuring that the project is completed to a high standard.
•
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Construction Contracting Methods
❑3. Turnkey: It is a type of engineering contract in which the contractor is responsible for
all aspects of the project, from design to construction to commissioning and handover.
• The contractor is typically required to deliver a fully completed and functional project to the
client at a fixed price and by a specified deadline.
✓Advantages
• Reduced risk: The client has less risk with a turnkey contract, as the contractor is responsible
for all aspects of the project.
• Convenience: The client only has to deal with a single entity, the contractor, for the entire
project.
• Certainty: The client has certainty about the cost and schedule of the project, as these are
typically fixed in the turnkey contract.
✓Disadvantages
• Higher cost: the contractor typically charges a premium for their services.
• Less control for the client: The contractor is responsible for both aspects of the project.
• Limited competition
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Construction Contracting Methods
❑4. The direct labor approach: It is a method in which the client uses their own in-house
employees to carry out the construction of a project.
✓Advantages:
• Reduced cost: The direct labor approach can be more cost-effective than other types of
engineering contracts, as the client does not have to pay the contractor's profit margin.
• Greater control: The client has more control over the design and construction process with the
direct labor approach.
• Improved communication: The direct labor approach can lead to improved communication
between the different parties involved in the project.
✓Disadvantages:
• Increased risk: The client assumes more risk with the direct labor approach, as they are
responsible for all aspects of the project, including the design, construction, and
commissioning.
• Reduced flexibility: The direct labor approach can be less flexible than other types of
engineering contracts, as the client is limited to using their own in-house employees.
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Construction Contracting Methods
❑5. Construction Management Contract (CMC): it is a type of engineering contract in
which the client hires a construction manager to oversee the construction of a project. The
construction manager is responsible for managing the project schedule, budget, and
quality. The construction manager also acts as the client's representative in dealing with
the subcontractors who are hired to perform the construction work.
✓Advantages:
• Reduced risk.
• Convenience.
• Expertise.
✓Disadvantages:
• Higher cost
• Less control for the client.

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Construction Contracting Methods
❑6. A Turnkey Variations: it is a type of engineering contract that combines the elements
of a turnkey contract with the flexibility to allow for variations to the scope of work. This
type of contract is often used for complex projects where the full scope of work may not
be known. It involves the client submitting a change request to the contractor, and the
contractor then providing a proposal for the cost and schedule impact of the change.
✓Advantages:
• The client have the certainty of a turnkey contract, but also the flexibility to make changes to
the scope of work if needed.
• The contractor have a single point of contact for the entire project, and they are able to manage
the risk of variations to the scope of work.
✓Disadvantages:
• Complex because of variations process.
• Expensive.

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 Construction Contract Classifications
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 Contract Classifications

• Separated contracts
• Management contracts
• Integrated contracts
• Discretionary contracts

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 Separated contracts

❑Separated contracts are two or more contracts that are related to each other but are legally
distinct. They are often used to divide a complex project into smaller, more manageable parts.
Each separated contract may be with a different contractor, or the same contractor may be
used for multiple separated contracts.
❑Separated contracts can be used for a variety of purposes, including:
• To divide a large project into smaller, more manageable parts.
• To reduce risk by spreading the work among multiple contractors.
• To allow for flexibility in the design and construction process.
• To protect the interests of the client and the contractor.
• Separated contracts can be beneficial for both the client and the contractor. For the client,
separated contracts can help to reduce the risk of delays and cost overruns. For the contractor,
separated contracts can provide them with the opportunity to specialize in a particular area of
work.

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Management contracts
• A management contract is an agreement between two or more parties in which one party
(the manager) agrees to manage or oversee the operations of the other party (the client).
• Management contracts can be a beneficial option for businesses that need access to
expertise, flexibility, or cost savings.
• Purpose:
• Managing the day-to-day operations of a business
• Overseeing the construction of a project
• Managing the marketing and sales of a product or service
• Providing strategic advice and guidance

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Integral contracts
• An integrated contract is a contract that is intended to be the complete and final
expression of the terms of the agreement between the parties. This means that any prior or
contemporaneous agreements, representations, or understandings between the parties are
not admissible as evidence to contradict or vary the terms of the integrated contract.
• There are two types of integrated contracts: complete integration and partial integration. A
complete integration is a contract that is intended to include all of the terms of the
agreement between the parties. A partial integration is a contract that is only intended to
include some of the terms of the agreement between the parties.
• Example: A contract for the sale of a house

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Discretionary contracts
• Discretionary contracts can be a valuable source of funding for nonprofit organizations,
but they can also be competitive and difficult to obtain.
• Tips for applying for this kind of contract:
• Do your research. Before you apply for a discretionary contract, make sure you
understand the funding agency's priorities and requirements. This information is
typically available on the agency's website or in their grant guidelines.
• Write a strong proposal. Your proposal should clearly explain how your
organization meets the funding agency's priorities and requirements. It should also be
well-written and free of errors.
• Build relationships. Get to know the people who make decisions about discretionary
contracts at the funding agency. Attend their events, volunteer for their programs, and
introduce yourself.
• Be persistent. It may take several years to win your first discretionary contract. Don't
give up if you don't get funded right away.

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 The ways of making a contract discharged

• Performance: When both parties to a contract have fulfilled their obligations,

the contract is discharged by performance. For example, if a contractor builds
a house for a client and the client pays the contractor in full, the contract is
discharged by performance.
• Agreement: The parties to a contract may agree to discharge the contract.
This may be done in writing or orally. For example, a contractor and a client
may agree to terminate a construction contract if the client changes their mind
about the project.
• Breach: If one party to a contract breaches the contract, the other party may
have the right to terminate the contract. For example, if a contractor fails to
complete a construction project on time, the client may have the right to
terminate the contract.

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 The ways of making a contract discharged

• Frustration: If an event occurs that makes it impossible or impractical for the

parties to perform their obligations under the contract, the contract may be
discharged by frustration. For example, if a construction project is delayed for
several months due to a natural disaster, the contract may be discharged by
frustration.
• Operation of law: In certain cases, a contract may be discharged by operation
of law. For example, if one party to a contract dies, the contract may be
discharged.

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Types of Construction Contracts
❑Fixed price contract
Ex. CCC gets a contract to construct a bridge for a tender amount of $5 million. This $5 million is given by the
local authority to CCC over a period of the construction. If the minimum labor wages increase during the
construction period, a reimbursement to that extent is given to CCC.
❑Cost plus contracts
Ex. CCC gets a contract from the government to construct a BRIDGE. Since it is a new technology to be used for
the BRIDGE, the costs thereof are not identifiable at the initial stage. Hence, CCC has quoted a cost plus 5%
pricing to the government. The government has agreed with CCC to execute this construction.

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 Factors Influencing the Choice
of the Type of Contract
➢The appropriateness for providing an adequate
incentive for efficient performance by the
contractor
➢The ability to introduce changes
➢The allocation of risks
➢The start and completion date of the project

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Contract Types

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Major Contract Types (Traditional)

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 Lump Sum Contract/ Drawings
and Specifications Contract
❑In a lump sum contract an owner agrees to pay a contractor a specified
lump sum after the completion of work without a cost breakdown. After
work no detailed measurements is required.
• One price for the whole contract
• Lump sum includes costs plus overheads and profits
• Higher risk to contractor
• Price quoted is a guaranteed price as per contract documents.
• Payment based on a scheduled percentage scheme (monthly progress claims)
• The contractor is free to use means and methods to complete the work and
responsible for proper performance
• Work must be well defined at bid time.
• Fully developed plans and specifications

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 Lump Sum Contract/ Drawings
and Specifications Contract
Advantages
• Low risk on the owner, Higher risk to the contractor
• Cost known at outset
• Contractor will assign best personnel
• Contractor selection is easy.

Disadvantages
• Changes is difficult and costly.
• Contractor is free to use the lowest cost of material
equipment, methods.

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 Unit Price Contract / Bill of
Quantities
❑The contractor is paid a fixed price for each unit of work completed.
This type of contract is often used for projects with a repetitive nature,
such as road construction, paving, and excavation.
• Quote Rates / Prices by units
• No total final price
• Re-negotiate for rates if the quantity or work considerably exceeds the
initial target
• Payment to contractor is based on the measure.
• Unbalanced bids: The allocation of costs for various items or activities
within the bid does not reflect a reasonable distribution of actual project
costs..
• Ideal for work where quantities can not be accurately established before
construction starts

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 Unit Price Contract / Bill of
Quantities
✓ Disadvantages
• The exact final price of the project is not known to the owner until the completion of the
project.
• Higher risk to owner
• Require sufficient design definition to estimate quantities of units
• Contractor's bid based on units of works
• Time & cost risk (shared)
• Owner : at risk for total quantities
• Contractor : at risk for fixed unit price.
• Large quantities changes (>15-25%) can lead to increase or decrease of unit price.

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Unit Price Contract/ Bill of Quantities

✓Advantages
• Saving the heavy cost of preparing many bills of quantities by the contractors.
• Fair basis for competition.
• In comparing with lump-sum contract,
• Changes in contract documents can be made easily by the owner.
• Lower risk for contractor.

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Unit Price/ Bill of
Quantities
The needs
• Adequate breakdown and definition of work
units
• Good quantity surveying and reporting system.
• Adequate drawings.
• Experience in developing BOQ.
• Payment based on the measurement of the
finished works.
• Quantity sensitive analysis of unit prices to
evaluate total bid price for potential quantity
variation.

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Cost Plus Contract

• Actual cost plus a negotiated reimbursement to cover overheads and profit.

• Different methods of reimbursement:
• Cost + percentage of cost
• Cost + fixed fee
• Cost + fixed fee + profit-sharing clause.
• By using this type of contract, the contractor can start work without a clearly
defined project scope, since all costs will be reimbursed and a profit guaranteed

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Cost Plus Fixed Fee
• The owner pays all costs of construction with a fixed sum of money. The fee is fixed and does not
fluctuate with the actual cost of the project.
• The work must be fairly well defined by the owner.
• Example: cost is 1000$ and the fee is 1%.
✓ Advantages
• There is no incentive for the contractor to inflate costs.
• There is incentive for the contractor to complete the work as quickly as possible since his fee
remains constant.
✓ Disadvantages
• Major variations create problems. The fee must be re-negotiated to take account of such
variations.
• The speed of commencing the work is undermined since before a fee can be agreed a fairly
detailed description of work must be made.

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 Cost plus Percentage of Cost

• The contractor is reimbursed for all his costs with a fixed % of costs to cover his services.
• Project/site overheads may be covered by the %age or computed as one of the costs.
• Example: cost is 1000$ and the fee is 2% of the cost.
✓ Advantages
• Construction can start before design is completed.
• If the contractor is efficient in the utilization of resources then the cost to the client should represent a
fair price for the work undertaken.
✓ Disadvantages
• The project total cost is completely unknown before the project start.
• No incentive for the contractor to be efficient in his use of labors, materials or equipments.
• Minimum efficiency maximizes the profit.
• Owner must exercise tight cost control, which may be difficult and/or costly.

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Cost + Fixed fee + Profit-sharing clause

1. Cost Reimbursement: Under this arrangement, the contractor is reimbursed for the actual
costs incurred in performing the work. These costs can include labor, materials, equipment,
overhead, and other direct project expenses.
2. Fixed Fee: In addition to the cost reimbursement, the contractor receives a predetermined fixed
fee. This fixed fee is typically negotiated and agreed upon in advance and is intended to cover
the contractor's overhead and profit margin.
3. Profit-Sharing Component: The profit-sharing component introduces an incentive for the
contractor to manage costs efficiently and complete the project within or under budget. If the
total project costs are less than the originally estimated budget, the savings are shared between
the contractor and the client based on a predetermined formula.

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 Cost Plus Sliding
Scale

• It is a type of contractual arrangement often used in

construction and service contracts. This arrangement
combines elements of cost reimbursement with a
variable fee structure based on specific performance
criteria or milestones.
• The sliding scale refers to the variation in the fee
based on predetermined factors, such as performance
and budget.

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A construction contract to
be identified separately
unless:
• The group of contracts is negotiated as a single
package. When the construction contract is
part of a larger project.
• When the construction contract is very
simple. For example, a contract for the
construction of a small deck or fence may not
need to be identified separately.
• When the construction contract is between
related parties.

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 Other subcontracts
types
• Revenues from variations: The
initial amount of revenue agreed in
the contract
• Claims: customer caused delays,
errors in specifications or design,
and disputed variations in contract
work
• Incentives: An incentive payment to
the contractor for early completion
of the contract

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