CEM-3201

Arellano, Mark Joven B.

Clor, Windell A.
Diaz, Dennisse S.
Simara, Kyle Maurry Knett A.

CEM-3202

Bernardo, Norrine Grace

Contreras, Mary Ann G.
Endozo, Ma. Antonette O.
Masangya, Ron Railey R.
DEFINITION OF CONTRACT
A contract is a legally binding agreement between two or more parties that creates
specific obligations, rights, and duties that can be enforced by law. When you enter into a
contract, you are agreeing to do—or not do—something in exchange for something
A construction contract is an agreement between the owner and the contractor and is
enforceable by law. Generally, the contractor agrees to perform a service for some
consideration or payment.
Construction is a product-oriented activity that has many dimensions. One of these
dimensions is the business side of construction. The business world is structured by
contractual relationships, and the business aspects of construction require the establishment
of contractual relationships with a wide range of parties. The central role played by contracts
is reflected by the fact that construction firms are referred to as ‘‘contractors.’’

IMPORTANCE OF CONTRACT
1.​ Plays an important role in society which outlines the rights and obligations of parties
involved in a transaction or relationship.
2.​ Understanding the importance of contracts is crucial for safeguarding your interests
and protecting from potential risks.
3.​ Establish clear terms and conditions for the parties involved.
4.​ Shows respect for the work, time, and resources involved and provides a clear,
agreed-upon framework for the business relationship.

TYPES OF CONTRACT
Just as the owner makes the decision regarding the type of project delivery to be
employed, the owner also determines which contract will be utilized for the project. There are
various types of construction contracts and they differ in two fundamental ways:
●​ How the contractor’s price is quoted to the owner
●​ How risk is allocated to each of the parties
1.​ Lump-Sum Contracts
-​ Lump-sum contracts are the most common type of contract, especially for building
construction. Under this arrangement, the contractor agrees to complete the work
specified in the plans and specs for a single fixed amount of money.
2.​ Cost-Plus-Fee Contracts
-​ Under a cost-plus-fee contract (also referred to as time and materials), the owner
reimburses the contractor for all actual costs associated with the work plus a fixed fee
or percentage of the cost. This type of contract is often utilized in situations where it is
 difficult to define the scope of the project accurately or when time is of the essence
and construction needs to start before the full plans and specs are complete.
3.​ Guaranteed Maximum Price Contracts
-​ The guaranteed maximum price (GMP) contract is a variation of the cost plus-fee
contract and has become very popular, particularly with owners using design-build
project delivery. The guaranteed maximum price offers a firm cap on the overall
contract price and at the same time stipulates that the owner is obligated to pay only
actual costs plus a fee.
4.​ Unit-Price Contracts
-​ Unit-price contracts are used when the work to be performed cannot accurately be
measured ahead of time. Unit pricing is common for heavy civil and highway type
projects. Even though engineered site plans and specs are prepared for this type of
work, it is very difficult to make exact quantity estimates because the material you are
working with is not something you can physically count off like bricks or steel beams.
5.​ Web-Based Contracts
-​ Web-based contracting provides an environment supporting scheduling, controlling,
regulating, analyzing, and auditing the procurement and delivery of materials and
services for construction in an electronic format. By enabling online competitive
bidding and improving the record - keeping associated with the purchasing process,
buyers will be able to quickly and easily compare product offerings from different
manufacturers, as well as solicit pricing and availability. This puts buyers in a position
to make optimal price-and time-of delivery decisions.
6.​ Negotiated Contracts
-​ The second most widely used contract format is the negotiated contract. This form of
contract is also referred to as a cost-plus contract, although this refers to the method
of payment rather than the nature of the selection process. The contractor is
reimbursed for the cost of doing the work plus a fee. In this type of contract, the
contractor risk is greatly reduced because the requirement of completing the work at
a fixed price is not present. The owner has the flexibility to select the contractor based
on considerations other than lowest price quotation.
CONTRACT DOCUMENTS (OVERVIEW OF CONTENTS)

CONTRACT DOCUMENTS

●​ Collection of documents that describe the scope, schedule, cost and the
responsibilities of each party to the agreement.
●​ The scope delineates the breadth and depth of work, the schedule frames the timeline
for completion, and the cost dictates the financial parameters within which the project
operates.
●​ Contract is much more than a single document or sheet of paper
●​ When people refer to "the contract," they are technically referring to the entire group of
documents that form the agreement.
●​ This signed agreement is more than a handshake -- it is a binding commitment that
holds each party accountable to their promises, ensuring that the project advances
from concept to concrete reality within the agreed-upon framework
●​ The contract documents are the medium through which the architect or engineer
communicates the design intent to the contractor. Therefore, you can certainly
understand just how important it is that the documents be as complete and free from
error as possible.
●​ Contract Document is more than a plan – it’s a commitment to project timing and
serves as a gauge for measuring project health and efficiency.

9 Essential Contract Documents

1. The Construction Agreement

Basically, this is “The Contract”, a foundation that the rest of the project details are
built upon. The most fundamental document in a construction contract bundle. It describes
the work to be performed, the required completion time, contract sum, provisions for progress
payments and final payment, and lists the other documents making up the complete
contract. This document doesn’t just outline what payments are made and when; it sets the
stage for how the project will unfold, influencing every aspect from kickoff to completion.

2. General Conditions

The general conditions contain those contract provisions applicable to most

construction contracts written by the owner. The framework of the construction contract
documents. They provide the “HOWS” of the project. They act as the rulebook for the
execution and management of a construction project. It provides the game plan to proceed
in the event of any issues on the project, often within a group of detailed clauses. It typically
includes project administration, the responsibilities of the owner and contractor, guidelines
for submittals, procedures for change orders, and protocols for payment applications.

3. Special Conditions

It contains any additional contract provisions applicable to the specific project. It describes
the custom-fit elements that cater to a project’s unique aspects – those that require
attention beyond what the general conditions cover”. Ranges from the environmental
sustainability features to specific safety protocols unique to the project’s nature or location. It
is typically an addition or amendment to the general conditions section.

4. Scope of Work

Also known as the Statement of Work, is a crucial element of a construction contract. Will
describe, in detail, the precise tasks and objectives of each contractor. It determines the
amount of work the contractor needs to complete to fulfill their contractual obligations
Contractors and subs need to know what type of work falls outside their scope of work to
avoid performing additional work without additional compensation. Serves as a detailed
narrative describing the work that needs to be performed as part of the project Usually
broken down into smaller chunks. It informs the contractors not only what needs to be
constructed but also how it should be done, including performance criteria and quality of the
end result.

5. Drawings

Defines the quantity of the work – the length, width, the area, volume and so on. Graphical seT
of directives prepared by the architects and engineers in order to communicate the wishes
and desires of the owner. Single most important communication tool employed by the
industry to convey the work of the contract. They are critical to the process, and their quality
is of utmost importance. Serves as a crucial visual representation of the project, offering
essential details and dimensions of the desired end result. It communicates the architect’s
intent for the project. It provides a simple overview of the project as a whole.

6. Specifications

It contains all the technical data and performance requirements. It should detail the
materials and techniques the contractors must use on any given task. They complement the
construction drawings in describing detailed project attributes and ensuring adherence to
industry standards
7. Bill of Quantities

It serves as a predictive tool, providing an itemized forecast of materials, labor and other
costs associated with the project. It allows contractors to prepare accurate bids and
facilitates the client in evaluating these bids more efficiently. Construction Contracts may
contain a Value Engineering (VE) clause. It is the analysis of a design with the objective of
accomplishing the required function at a lower cost.

8. Construction Schedule

A well-formulated construction schedule requires close attention to detail. Any updates

should be readily accessible to everyone on the project. Schedules can be relatively simple
outlines of the project. But detailed construction schedules keep everyone aware and
informed about the project status, which can reduce both conflicts and delays. It serves as
guide to keep the project moving in the right direction, as long as it’s up to date

9. Schedule of Values

It is provided by a contractor and lists all the work items from start to finish. It will allocate the
entire contract sum among the various portions of the work. Useful management tool to form
the basis for submitting and reviewing progress payments. It can help keep the cash flowing
and bills paid on time.

CONTRACT PROCESS

CONTRACT MANAGEMENT PROCESS IN CONSTRUCTION

The contract management process in construction projects can be divided into 7 main
phases. Each of these stages has its main goals, and it is important to understand them in
order to effectively manage a construction project.

1. Pre-Contract Preparation

The Pre-Contract Preparation phase is the initial step where the groundwork for the
upcoming project is laid out. In this stage, assessments are conducted to evaluate the scope,
feasibility, and specific needs of the project. It sets the stage for what will eventually be
detailed in the Request for Proposals (RFP).

Main Goals:

●​ Assess the scope and scale of the project

●​ Conduct feasibility studies
●​ Estimate preliminary budgets

2. RFP and Bid Evaluation

This phase involves creating and distributing a Request for Proposals and then assessing the
bids received. The focus here is on attracting qualified contractors and evaluating their
proposals based on a set of predetermined criteria. This phase ends with the selection of a
winning bid.

Bidding Process under RA 9184 (Government Procurement Reform Act)

1. Preparation of Bidding Documents

2. Invitation to Bid

3. Issuance of Bidding Documents

4. Pre-Bid Conference

5. Submission, Receipt, and Opening of Bids

6. Evaluation of Bids

7. Post qualification of the Lowest Calculated Bid

Main Goals:

●​ Create and distribute the RFP

●​ Evaluate bids based on criteria
●​ Select the winning bid
3. Contract Drafting and Awarding

This stage is centered around creating and then finalizing the contract that will govern the
project. Here, both parties negotiate terms, conditions, and specifics such as timelines and
payment schedules. Once finalized, the contract is officially awarded to the chosen
contractor.

Main Goals:

●​ Negotiate contract terms and conditions

●​ Finalize payment schedules and other specifics
●​ Officially award the contract

4. Project Initiation

Project Initiation marks the formal beginning of the construction work. During this phase, a
kick-off meeting usually occurs, involving all key stakeholders. The goal is to ensure everyone
understands the contract’s terms, milestones, and deadlines.

Main Goals:

●​ Conduct the kick-off meeting

●​ Review and confirm contract terms
●​ Establish project milestones and deadlines

5. Project Execution and Monitoring

The Project Execution and Monitoring stage is where the actual construction work happens. It
involves closely tracking progress, ensuring quality, and maintaining compliance with
regulations. It is the most labor-intensive and active phase of the contract management
process in construction projects.

Main Goals:

●​ Monitor the construction progress against milestones

●​ Ensure quality and compliance
●​ Make adjustments as needed to stay on course
6. Financial and Change Management

The Financial and Change Management phase deals with the project’s financial aspects and
any changes in scope. This includes monitoring budgets, approving payments, and
managing any changes to the original contract terms. It aims to keep the project within its
financial and temporal constraints.

Main Goals:

●​ Manage budgets and approve payments

●​ Handle scope changes and contract modifications
●​ Approve additional costs if necessary

7. Project Closure and Review

Project Closure and Review is the final stage, marking the construction project’s completion.
This stage involves issuing any completion certificates, making final payments, and
evaluating the project’s success. Lessons learned are often documented for future reference.

Main Goals:

●​ Issue completion certificates

●​ Make final payments
●​ Conduct post-project reviews for lessons learned and future improvements

Samples of Complete Bid Document(BSU):

https://batstate-u.edu.ph/uploads/invitation-to-bid/KIST%20Park%20Site%20Development%2
0in%20Batangas%20State%20University%20%28Phase%20I%29.pdf?boxtype=pdf&g=false&s=f
alse&s2=false&r=wide

file:///C:/Users/Dell/OneDrive/Documents/Renovation%20of%20Food%20Innovation%20Cente
r%20at%20BatStateU%20Alangilan.pdf

References:

https://www.dilg.gov.ph/PDF_File/issuances/republic_acts/RA_9184.PDF

https://www.dpwh.gov.ph/dpwh/business/procurement/goods_services/baprocedures
EXAMPLE OF CONTRACTS (LOCAL/ IN PH)
Sample of Lump-Sum Contract in the PH:
●​ https://www.dpwh.gov.ph/dpwh/sites/default/files/webform/civil_works/contract_of
_agreement/18gm0200%20contract.pdf
●​ https://www.dpwh.gov.ph/dpwh/sites/default/files/webform/civil_works/contract_of
_agreement/22EG0047%20-%20CA.pdf
Sample of Unit-Price Contract in the PH:
●​
●​ https://www.dpwh.gov.ph/dpwh/sites/default/files/webform/pow/POW%2017J00050.p
df
DESCRIPTION OF SPECIFICATIONS
It is a detailed and precise document that outlines the materials, standards,
workmanship, and methods required for a construction project. It serves as a guide to ensure
that the work is completed according to the desired quality, safety, and regulatory
requirements.

IMPORTANCE OF SPECIFICATIONS
It served as a tool in construction management, providing clarity, structure, and
accountability. They help maintain quality, control costs, ensure compliance, and improve
overall project efficiency. Below are key reasons why specifications are important:

●​ Ensure Quality Control – Defines material and workmanship standards.

●​ Improve Communication – Provides clear guidelines to contractors, engineers, and
suppliers.
●​ Legal Protection – Acts as a contractual document in case of disputes.
●​ Cost & Time Efficiency – Reduces errors, rework, and misunderstandings.
●​ Compliance with Regulations – Follow all the regulations preventing legal
compilations

TYPES OF SPECIFICATIONS

1.​ Prescriptive Specifications

-​ Prescriptive specifications provide detailed instructions on the materials to be
used and the installation methods required for a project. They are commonly
used in construction where architects and engineers define specific products,
construction techniques, and quality standards. These specifications ensure
consistency and compliance, giving a clear image of what the final structure
should look like. They are divided into three sections which are general that
covers quality control and handling procedures, products that list required
materials and performance levels, and execution that outlines installation
processes and testing requirements.
2.​ Performance Specifications
-​ Performance specifications focus on the operational requirements of a project
rather than specifying exact materials or construction methods. They describe
what the final structure or system must be capable of doing, allowing
contractors to determine the best way to achieve the desired results. For
example, instead of stating the exact design of a pump, the specification may
 require that the pump should be capable of delivering 300 gallons per minute.
This approach gives contractors flexibility in choosing materials and
construction techniques while ensuring that the final product meets
performance expectations. Extensive testing is usually required to confirm
compliance with performance standards.
3.​ Proprietary Specifications
-​ Proprietary specifications require the use of a specific product, brand, or
material for installation. These specifications are often used when a project
needs to match existing equipment or when a client prefers a particular
manufacturer. While they ensure product consistency and compatibility, they
can limit competition, leading to higher project costs. To avoid favoritism
toward a specific manufacturer, architects and engineers may provide a list of
acceptable suppliers. Proprietary specifications are less common than other
types but are essential for projects where performance depends on a
particular product.
4.​ General Specifications
-​ General specifications provide broad guidelines for construction work without
detailed instructions on materials or methods. They are commonly used for
simple projects where standard labor, materials, and equipment are involved.
These specifications outline basic quality standards and performance
expectations but allow contractors flexibility in how they achieve the desired
outcome. General specifications are often included in contracts for
commercial and residential projects, ensuring compliance with industry norms
without restricting construction methods.
5.​ Detailed Specifications
-​ Detailed specifications provide precise and comprehensive descriptions of
materials, dimensions, installation techniques, and quality requirements. These
specifications leave no room for interpretation, ensuring that every aspect of
construction follows a strict set of guidelines. They are essential for complex
projects, such as high-rise buildings, bridges, and specialized structures, where
precise execution is crucial. Unlike general specifications, which allow flexibility,
detailed specifications dictate every component's exact requirements,
including testing and inspection procedures. They help ensure quality,
durability, and safety while minimizing construction errors and variations.
SPECIFICATIONS CONTENTS

●​ Scope of Work
-​ Defines the specific tasks, deliverables, and boundaries of the project. It
ensures everyone understands what's included.
●​ Materials
-​ Details the specific materials needed for the project (type, grade,
manufacturer). It ensures quality, durability, and accurate cost estimates.
●​ Timeline and important project milestones
-​ Establishes the project schedule with key deadlines and checkpoints. It
manages expectations, tracks progress, and helps prevent delays.
●​ Installation Methods
-​ Provides detailed instructions on how to install materials and systems
correctly. It ensures safety, functionality, and longevity of the project.
●​ Quality of Workmanship
-​ Defines acceptable standards of workmanship, including tolerances and
finishes. It ensures quality, prevents defects, and saves time & money.
●​ Testing requirements
-​ Specifies tests required to ensure materials and systems meet standards. It
verifies safety, performance, and compliance with specifications.
●​ Safety Standards
-​ Outlines safety regulations and standards to be followed during the project. It
Protects workers, prevents accidents, and ensures legal compliance.

THE CONSTRUCTION SPECIFICATION INSTITUTE

I. Introduction to CSI

●​ Founded in 1948
●​ Serves all major disciplines in building design and construction

II. MasterFormat: An Industry Standard

●​ Most widely used system for project manuals and specifications

●​ Provides a reference for product information, market data, and pricing
●​ Enhances communication and efficiency in construction projects

III. The 1995 MasterFormat (16 Divisions)

 1.​ General Requirements
2.​ Site Construction
3.​ Concrete
4.​ Masonry
5.​ Metals
6.​ Wood and Plastics
7.​ Thermal and Moisture Protection
8.​ Doors and Windows
9.​ Finishes
10.​ Specialties
11.​ Equipment
12.​ Furnishings
13.​ Special Construction
14.​ Conveying Systems
15.​ Mechanical
16.​ Electrical

IV. Need for Revision in 2004

●​ Industry advancements required updates

●​ Electrical and technology systems became more complex
●​ New materials like composites replaced traditional wood
●​ 1995 version lacked focus on:
○​ Facility services and sustainability
○​ Specialized construction (e.g., manufacturing, infrastructure)
●​ Expansion aimed to reflect modern construction needs

V. Conclusion

●​ The 2004 MasterFormat significantly expanded the original 16 divisions

●​ More detailed but necessary for the evolving construction industry

CSI MasterFormat 2004

I. Overview

●​ Standard system for organizing and managing construction work

●​ Used for design data, cost estimation, and project tracking
●​ Expanded from 16 to 49 divisions
II. Five Subgroups and Key Divisions

1.​ General Requirements​

○​ Division 01: Contract procedures, quality control, temporary utilities, security,

project cleanup
2.​ Facility Construction​

○​ Division 02–14: Covers site conditions, concrete, masonry, metals, wood,

finishes, openings, equipment, furnishings, and conveying systems
○​ Divisions 15–19: Reserved
3.​ Facility Services​

○​ Division 20–29: Includes fire suppression, plumbing, HVAC, electrical,

communications, automation, security systems
○​ Some divisions reserved
4.​ Site and Infrastructure​

○​ Division 30–35: Earthwork, utilities, paving, landscaping, transportation, marine

construction
○​ Divisions 36–39: Reserved
5.​ Process Equipment​

○​ Division 40–48: Specialized industrial, pollution control, and power generation

equipment
○​ Division 49: Reserved

III. Purpose, Adoption and Transition

●​ Designed to accommodate future industry changes

●​ Supports efficiency in communication and project management
●​ Ensures consistency in construction documentation and cost tracking
●​ Some industry professionals still use the 16-division format
●​ Construction managers must be familiar with both versions
EXAMPLE OF SPECIFICATIONS (LOCAL SAMPLE)

https://tieza.gov.ph/wp-content/uploads/2022/09/PROJECT-SPECS-TOURIST-SERVICE-REST-A
REA.pdf

https://dpwh.gov.ph/DPWH/sites/default/files/webform/civil_works/advertisement/ts_24fg0
086.pdf