Contracts & Subcontracts

Contract Types

Engineering contracts fall into a number of major categories.  There are lump-sum, measurement, cost reimbursement, design and construct, and all in / turnkey contracts.

The contract documents adopted in civil engineering construction are usually on a measurement basis. They commonly comprise instructions to tenderers, a form of tender and appendix, a form of agreement, conditions of contract, bond, special conditions of contract, schedule of basic prices, bill of quantities, daywork schedule, contract documents and specifications.

If the contract is on a lump sum, cost reimbursement, design and construct, or turnkey, certain of the above elements will not be required.  A lump-sum contract does not require a bill of quantities or a schedule of rates. A bill of quantities may be prepared to measure valuations for the lump sum.

The cost-reimbursement contract provides for a schedule of rates and does not include a bill of quantities or schedule of rights, There may be an incentive to restrict costs to a target cost. A bill of quantities may be used in this regard.

In a design and build contract, detailed drawings and design are substituted by outline drawings, performance, specification and design criteria. In a turnkey project, the design is undertaken by the contractor.  There are no detailed quantities, drawings or bill of quantities.  The scope of the work is defined in the tender documents to allow the tender’s intentions to be interpreted.

Specifications

The specifications define the scope of the work and the technical requirements.  The schedule of basic price, bill of quantities and day work schedule deal with quantification and pricing of items under the contract.

The contract drawings are referred to in specifications may be updated with drawings approved by the engineer in writing from time to time. It therefore covers new drawings issued in course of the contract.  They may constitute a variation for which reimbursement is required.

The specification should give sufficient information to express the employer’s requirements. The specifications may provide for the design criteria and operational requirement and performance criteria that must be met.

Where mechanical and electrical equipment and installations are to be included in the works, there may be schedules of technical requirements which are to set out the performance and other desired criteria in respect of the same.

Tenders

The instruction to tenders set out requirements on completing tender forms, required documents and information to be furnished, letters evidencing capacity, required numbers of copies of documents, particulars of where the tender is to be furnished.

The evidence as to capacity may require proof of execution of similar projects of a similar scale, qualifications of key personnel, economic or financial capacity, plant resources and legal status.

The tender may provide for the possibility of alternative designs, setting out what consideration if any will be given.  The tender will set out the period for which it is open to acceptance and the nature of the purchasing arrangement.  It was set out special conditions.

The Institute of Civil Engineers publish a form of tender.  It confirms that the tender has examined the conditions of contracts specification, drawings and bills of quantities It conforms that he for the sums specified, the tenderer would undertake the relevant works as specified, in conformity with the documents, that the work will be completed within the relevant time, generally that a bond will be provided that unless and until a formal agreement is executed and prepared that the tender will on acceptance constitute a binding contract.

A form of agreement confirms the contract between the employer and contractor.  It may not be strictly necessary if the tender itself is fully binding.  However, some entities may require the formal agreement to be executed and completed.

A bond is generally required commonly for 10 percent of the tender sum.  It is generally furnished by an insurance company or bank or by two banks or insurance companies.  A performance bond is not invariably required.

The conditions of contract generally incorporate the standard condition such as the Institution of Civil Engineers Ireland conditions of contract.  The form of contract prepared by the  Internation Federation of Consulting Engineers International Condition of contract (FIDIC) may be employed.

Sub-Contracts

Specialist sub-contractors may be required to be employed by the contractor during the contract in which event they become nominated subcontractors under the main contract.  Domestic subcontractors are those employed by the contractor at its own discretion.  Although the subcontractor may be nominated by the engineer (on behalf of the employer), the contractor retains a certain amount of responsibility for it, subject to conditions.

The contractor is liable to the employer under the principal contract.  It is specifically provided that he is liable for the acts of defaults, and neglect of the subcontractor or agent servants or workmen.

A contractor need not enter a contract that would nominate a subcontractor to which he makes a reasonable objection.  He need not enter a contract with a subcontractor who is not prepared to undertake the relevant obligations and liabilities to enable the contractor to perform the main contract.

If the contractor refuses reasonably refuses to enter a contract with a nominated subcontractor, the engineer may vary the works and remit the works concerned, nominate an alternative subcontractor, direct the contractor to enter a subcontract and discharge it from obligations and liabilities to the extent specified by the engineer in relation to the subcontract terms.

Provisional and Prome Costs Sums

Provisional sums are those specified in the contract and so designated for goods materials and works or for contingencies that may apply at the discretion of the engineer.

Prime cost items are items,  costs or sums referable to a particular aspect of the works. Nominated subcontractors may be nominated for a prime cost item d by the engineer.  They may be required to be employed by the contractor.  They may relate to the provision of workers, supply of goods and services.

Bills of quantities will commonly contain a prime cost item or provision sum for subcontract work intended.  Contractors are required to quoting a tender for attendance charges and profits on provisional sums in respect of subcontract works.

Negotiations with the subcontractor follow initial negotiations with the employer and the contractors are instructed to place the order.  Alternatively, the contractor may negotiate with the subcontractor and the engineer effectively ratifies the appointment afterward.

The subcontractor must undertake equivalent obligations to the contractor given the contractor’s primary liability to the employer.

The Institute of Engineers publishes forms of subcontract for use with the principal contract.  The subcontract should cover description of work, method of execution, terms as to payment, date of completion, variations, arbitration, indemnity of subcontractor in respect of non-completion, liquated damages, et cetera.