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What is the nature of construction contract
Nature of construction contract
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The purpose of the construction contract is to distribute the duties between the different parties involved, distinguish and allocate the risk to the different parties, reduce the uncertainty surrounding the project and finally allow the parties to plan for the project and the future (Fortney, 2009). A contract is ultimately an agreement between two or more parties in which they agree to provide a specific task in exchange for something in return. The type of contract is simply the format in which the owner pays the contractor for the services. Selecting the right procurement route can have a direct impact on the level of success to a project. There are various items that must be factored before making a decision including: size of the project, …show more content…
Commonly, the level of control retained by the owner links with the level of risk, and those levels typically have an transposed relationship to the risk and control levels of the contractor (CMAA, 2012). Not all of these delivery methods is suited for every project. For each situation, there will be advantages and disadvantages in the use of any specific method. One needs to carefully assess the specific project requirements, goals, and potential challenges in order to establish the delivery method that offers the best opportunity for success (CMAA, 2012). With a variety of procurement routes to choose from, how can one facilitate the selection of the most appropriate construction contract and avoid situations where the owner insists on using a less appropriate one? How do we begin to focus the conversation on training, and updating efforts to create a reduced number of documents (Construction Canada, 2014)? In the next chapter this dissertation will further analyse the trends and investigate how different procurement routes naturally align themselves in certain asset classes in
Based on the textbook and my understanding, whenever there are negotiations between a procurer and a supplier regarding a competitive bidding, the first thing that might be favored is the scope of the project, meaning both will sit down and discuss the entire project prior the work begins. Meanwhile, during the negotiations, evaluation criteria should be clear, and stated and defined. As the evaluation is based on the criteria stated and the procurer can request or ask the supplier’s opinions on certain specifications and where things can be improved.
Determining a project delivery method to use is one of the most important decisions made by every owner embarking on
Asmar et al. (2013) found that IPD has been gaining recognition due to the various benefits it offers to the architecture/engineering/construction (AEC) industry and that much research has not been done to gauge the performance of IPD projects in contrast with other project delivery systems such as design-bid-build, design-build and construction management at risk systems. The metrics that are used to analyze the performance of IPD according to Mollaoglu-Korkmaz, Swarup and Riley (2011) are cost, quality, schedule performance, and owners perception of post-occupancy performance)
S.KENNEDY & A. AKINTOYE (1995) Quantity Surveyors’ role in design and build procurement method, [online] London : Royal Institute of Chartered Surveyors. Available from :
This paper will focus on the concepts of project procurement management and the impacts it can have on the overall success of a project. The paper contains four sections, which focus on a few major tentacles of project procurement management. Section one, describes in detail all of the components that are involved with project procurement management. Section two, summarizes the major project procurement processes, which the Project Management Institute (PMI) view as appropriate for successful execution of projects. Section three, describes the various benefits of categorizing procurements into generic families. Lastly, Section four, will summaries the importance of project procurement management in the overall project management process.
The definition of a contract is 'a promise or set of promises which the law will enforce. That is to say, the contract can be defined as a legally binding agreement between two parties or exchange of promises whereby one party undertakes to provide something in return for something else from another party. In contract, the rights and obligations are created by the acts of agreement between the parties to the contractual arrangement. Contract conditions are to set out the principal legal relationship between the parties to a construction project, determining the allocation of risk, price and consequently. There is a need of contract in between the parties of construction industry to make sure the construction carry out smoothly and standardized. In the procurement of construction, contracts are including standard form, modified form and bespoke form. Modified form of contract is developed based on standard form of contract
A contract is a legally binding agreement between two or more parties which is enforceable by law. A contract can be defined as a promise or set of promises. A contract is an agreement so, it is not really necessary to be in writing, it could be made orally as well. There should be free consent of parties when they enter into the contract.
This paper will reflect on the different uses of Project Risk Management and ways in which it can benefit organizations to have the ability to identify potential problems prior to the problem occurring. Risk, this is not something to be taken lightly whilst dealing with matters that include high end projects meeting specific details, deadlines and expectations for the end client. Project risk management teaches one to be aggressive early on in the phases of planning and implementing the tools for a project. This is usually easier as costs are less and the turnaround time to solve the issues at that present moment is beneficial rather than later. The result in a successful project for one’s self and other key people involved in the process is also another requirement. Stakeholder satisfaction is important because the
Procurement is a combination of different methods of purchasing construction objects and includes such variables as source of funding, partner selection method, price basis, responsibility for design, responsibility for management, and amount of subcontracting (Murdoch and Hughes, 2008). Before proceeding with a project, the appropriate procurement option has to be selected by the client that provide an effective organization to minimize all the risk that will be occur during the construction process. There are several procurement approaches that have to be taken in the construction industry such as the traditional method, design and build method, and management method. The selections of an appropriate procurement system to be used in a project are important to guarantee the success of the project. Consideration and analysis in selecting the appropriate procurement have to be made and it will include several main criteria such as cost certainty, time certainty, speed, and flexibility. Nowadays, the perspective of choosing the appropriate procurement is based on the past experience.
Abdul Rashid (2002) in his book clearly defined the procurement in the construction context. The procurement in the context of construction refers to the processes
The types of contract requirements can determine the type of contract that will be assigned to the acquisition process. The contracting team will determine what type of contract best suites the requirements from the project manager. This can be Firm-Fixed Price, Previously Acquired Services, Cost Reimbursements, Time and Material/Labor Hour. Each of which have unique aspects that the CO should advise which one to select.
The bidding process of a project is the phase where cost planning and assessment of value for money should be made. This process is critical for a Client, as it is against this output that project performance would be measured. To effectively plan cost during this stage, the recommended best practice is for clients is to applied cost planning at the earliest stages of project planning. This could be during the project definition phases of the project. For instance, consideration can be given to the start and finish dates of the project, particularly if the cost a executing a project during winter months are grossly higher that doing the same scope of work in the warmer months. Cost plann...
Project Procurement Management is defined by the Project Management Institute (PMI) (2013) as a set of defined processes that support the acquisition of products, services, or results. The success or failure of a project is accredited to the project team’s ability to balance scope, schedule, and cost constraints. The need for procurement management increases the project’s level of complexity and likelihood of risks. Moreover, the procurement management processes are a project within a project. This singular knowledge area produces a procurement scope document, contractual agreements, and management plan, which align with the project management plan and objectives. Procurement processes play an essential role in the success of the project. Receipt of procurement deliverables drives the potential for the timely achievement of project objectives and managing costs. Procurement
Procurement is a process that contributes to maintaining quality, cost and time. The procurement system should be planned and built, one component at a time, until a level of reliability is achieved. Procurement planning may combine traditional quality methods, which include contract administration and closeout processes, contractor selection and procurement planning to identify the client’s preferred suppliers. Those involved in procurement management know that suppliers today have electronic capabilities that enable the timely and efficient flow of information, including review and approvals. Agile relies on software and Internet interface, reducing paperwork and creating a team including both client and procurement specialists. Traditional procurement management
The purpose of determining requirements of procurement is that in this stage of the planning we decide on the direction we want the project to take. Important decisions need to be made regarding the resourcing of tasks, using internal capabilities or to procure those resources externally. When we are resourcing we are looking for the best way to get the work ahead completed. Using internal capabilities means that we use the resources that we already have to complete the work ahead and to procure resources externally means that we search for a supplier that will complete the work ahead to a satisfactory quality and schedule for an agreed cost. Key considerations to look at would be that a general rule of thumb is that poor procurement planning