1 Week 02: AS 4000 (1997) General Conditions of Contract – Application to Site Operations CSM80007 – Week 2 CSM80007 Construction Site Operations Teaching staff: Dr Yogeswaran Kumaru Study Resources CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Reading material Available on the Blackboard website for this unit. References Occupational Health and Safety Act 2004 Occupational Health and Safety Regulations 2007 S.R. No. 54/2007 Version as at 1 July 2007 Ottosson, H, Practical Project Management for building and construction, Taylor & Francis Group Holroyd, T. M., Site management for engineers, Thomas Telford Valentine, R, Effective Contract Administration, ECAT Publications, Melbourne Australia A Guide to the Project Management Body of Knowledge (PMBOK Guide) – Fifth Edition ; Published by Project Management Institute Inc. HB 140—2000 Administration Manual for AS 4000—1997 General conditions of contract2 Procurement of Goods, Services or Works CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Procurement is the act of finding, acquiring, buying goods, services or works from an external source, often via a tendering or competitive bidding process. The process is used to ensure the buyer receives goods, services or works at the best possible price, when aspects such as quality, quantity, time, and location are compared. Corporations and public bodies often define processes intended to promote fair and open competition for their business while minimizing risk, such as exposure to fraud and collusion. Owner sets out to procure the services. Owner is referred to as Employer or Principal or Client. What are the services that are procured by owner ? Project Management Design Services Construction Maintenance Procurement of Goods, Services or Works – PMBOK CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) 1. Plan Procurement Management—The process of documenting project procurement decisions, specifying the approach, and identifying potential sellers. 2. Conduct Procurements—The process of obtaining seller responses, selecting a seller, and awarding a contract. 3. Control Procurements—The process of managing procurement relationships, monitoring contract performance, and making changes and corrections as appropriate. 4. Close Procurements—The process of completing each project procurement.3 Procurement of Goods, Services or Works – PMBOK CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Refer to Section 12 Project Procurement Management (PMBOK) for detail processes. Types of Contracts – PMBOK CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Fixed-price contracts. This category of contracts involves setting a fixed total price for a defined product, service, or result to be provided. Fixed-price contracts may also incorporate financial incentives for achieving or exceeding selected project objectives, such as schedule delivery dates, cost and technical performance, or anything that can be quantified and subsequently measured. Sellers under fixed-price contracts are legally obligated to complete such contracts, with possible financial damages if they do not. Under the fixed-price arrangement, buyers need to precisely specify the product or services being procured. Changes in scope may be accommodated, but generally with an increase in contract price. Firm Fixed Price Contracts (FFP). The most commonly used contract type is the FFP. It is favored by most buying organizations because the price for goods is set at the outset and not subject to change unless the scope of work changes. Any cost increase due to adverse performance is the responsibility of the seller, who is obligated to complete the effort. Under the FFP contract, the buyer should precisely specify the product or services to be procured, and any changes to the procurement specification can increase the costs to the buyer.4 Types of Contracts – PMBOK CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Fixed Price Incentive Fee Contracts (FPIF). This fixed-price arrangement gives the buyer and seller some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed upon metrics. Typically such financial incentives are related to cost, schedule, or technical performance of the seller. Performance targets are established at the outset, and the final contract price is determined after completion of all work based on the seller’s performance. Under FPIF contracts, a price ceiling is set, and all costs above the price ceiling are the responsibility of the seller, who is obligated to complete the work. Fixed Price with Economic Price Adjustment Contracts (FP-EPA). This contract type is used whenever the seller’s performance period spans a considerable period of years, as is desired with many long-term relationships. It is a fixed-price contract, but with a special provision allowing for pre defined final adjustments to the contract price due to changed conditions, such as inflation changes, or cost increases (or decreases) for specific commodities. The EPA clause needs to relate to some reliable financial index, which is used to precisely adjust the final price. The FP-EPA contract is intended to protect both buyer and seller from external conditions beyond their control. Types of Contracts – PMBOK CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Cost-reimbursable contracts. This category of contract involves payments (cost reimbursements) to the seller for all legitimate actual costs incurred for completed work, plus a fee representing seller profit. Cost-reimbursable contracts may also include financial incentive clauses whenever the seller exceeds, or falls below, defined objectives such as costs, schedule, or technical performance targets. Three of the more common types of cost-reimbursable contracts in use are Cost Plus Fixed Fee (CPFF), Cost Plus Incentive Fee (CPIF), and Cost Plus Award Fee (CPAF). A cost-reimbursable contract provides the project flexibility to redirect a seller whenever the scope of work cannot be precisely defined at the start and needs to be altered, or when high risks may exist in the effort Cost Plus Fixed Fee Contracts (CPFF). The seller is reimbursed for all allowable costs for performing the contract work, and receives a fixed-fee payment calculated as a percentage of the initial estimated project costs. A fee is paid only for completed work and does not change due to seller performance. Fee amounts do not change unless the project scope changes.5 Types of Contracts – PMBOK CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Cost Plus Incentive Fee Contracts (CPIF). The seller is reimbursed for all allowable costs for performing the contract work and receives a predetermined incentive fee based upon achieving certain performance objectives as set forth in the contract. In CPIF contracts, if the final costs are less or greater than the original estimated costs, then both the buyer and seller share costs from the departures based upon a prenegotiated costsharing formula, for example, an 80/20 split over/under target costs based on the actual performance of the seller. Cost Plus Award Fee Contracts (CPAF). The seller is reimbursed for all legitimate costs, but the majority of the fee is earned only based on the satisfaction of certain broad subjective performance criteria defined and incorporated into the contract. The determination of fee is based solely on the subjective determination of seller performance by the buyer, and is generally not subject to appeals. Procurement – Competitive Tendering CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Tendering / Bidding Process Bidder’s considerations Do we meet the basic tender requirements?  Requirement 1  Requirement 2  Requirement 3 etc.  Can we show relevant enough experience?  Are the requirements clearly defined and feasible? Is the proposal and delivery time frame realistic?  Is the work a core competence of our business?  Does contract value exceed 20%-30% turnover?  Have we sufficient trading history?  Is cost a major factor in selecting the winning bid? Are there penalties for not delivering on time/budget?  Are the contract terms and conditions acceptable?6 Procurement – Competitive Tendering CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Tendering / Bidding Process Bidder’s considerations Internal Considerations  Is this opportunity aligned with our business strategy?  Do we have the resources, skills and will to win?  Do we have the resources and ability to deliver?  Can we realistically manage the risks, if we win?  If additional resources are needed, can we get what we need?  How well are we known within this business sector?  Do we have a relationship with this prospect and is it favourable?  Are partners needed, and if so, will they be easy to work with?  Can we demonstrate a previous working relationship?  Do we have differentiators that will improve our chances of winning?  Can we afford the investment needed to pursue this opportunity?  Will winning put any of our existing business at risk?  Can we contractually protect our intellectual property? Procurement – Competitive Tendering CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Tendering / Bidding Process Bidder’s considerations Market / Competitive Information  Do we know who the other bidders are, if any?  Is a competitor an incumbent, and does that pose a threat?  Is a competitor favoured by prospect decision makers or influencers?  Does the solution involve new or unproven technologies?  Will winning enhance our reputation in the market?  Will winning open up new market opportunities?  Will winning give us an advantage over our competitors?7 Procurement of Goods, Services or Works – Selection Criteria CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Possible Source Selection Criteria:  understanding of need. How well does the seller’s proposal address the procurement statement of work?  overall or life-cycle cost. Will the selected seller produce the lowest total cost of ownership (purchase cost plus operating cost)?  technical capability. Does the seller have, or can the seller be reasonably expected to acquire, the technical skills and knowledge needed?  risk. How much risk is embedded in the statement of work, how much risk will be assigned to the selected seller and how does the seller mitigate risk?  Management approach. Does the seller have, or can the seller be reasonably expected to develop, management processes and procedures to ensure a successful project?  technical approach. Do the seller’s proposed technical methodologies, techniques, solutions, and services meet the procurement documents requirements or are they likely to provide more or less than the expected results? Procurement of Goods, Services or Works – Selection Criteria CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Possible Source Selection Criteria:  Warranty. What does the seller propose to warrant for the final product, and through what time period?  Financial capacity. Does the seller have, or can the seller reasonably be expected to obtain, the necessary financial resources?  Production capacity and interest. Does the seller have the capacity and interest to meet potential future requirements?  Business size and type. Does the seller’s enterprise meet a specific category of business such as small business (disadvantaged, specific programs, etc.) as defined by the organization or established by governmental agency and set forth as a condition of the agreement award?  Past performance of sellers. What has been the past experience with selected sellers?  references. Can the seller provide references from prior customers verifying the seller’s work experience and compliance with contractual requirements?8 Procurement of Goods, Services or Works – Selection Criteria CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Possible Source Selection Criteria:  Intellectual property rights. Does the seller assert intellectual property rights in the work processes or services they will use or in the products they will produce for the project?  Proprietary rights. Does the seller assert proprietary rights in the work processes or services they will use or in the products they will produce for the project?. Reference : A Guide to the Project Management Body of Knowledge - PMBOK Guide, Fifth Edition, Project Management Institute, 2013 Procurement of Goods, Services or Works- Construction CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Owner who is procuring construction works, procures design and construction services. Domestic House Owner: Procures design and construction. Public Works Sector procures deign services and construction services either as a package or separately depending on the type of contract. For Public Works Projects, AS 4000 is chosen to define the contractual relationship when procuring the construction services.9 Australian Standard – General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) What is General Conditions of Contract ? Terms and conditions that set the rights and obligations of the contracting parties, when a contract is awarded or entered into. These include 'general conditions' which are common to all types of contracts, as well as 'special conditions' which are peculiar to a specific contract (such as, contract change conditions, payment conditions, price variation clauses, penalties). Australian Standard – General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) What is General Conditions of Contract ? General conditions of contract for public construction must provide for:  allocation of risk to the party best able to manage the risk;  prompt and fair entitlement to payment;  requirement that the head contractor must provide the contract principal with proof of payment to subcontractors and suppliers;  co-operative approach to dispute resolution to minimise adversarial action; and  requirement to use standard subcontract conditions compatible with the head contract (where applicable). Under the Victorian Building and Construction Industry Security of Payment Act 2002 contracts recommended or approved for public construction must not include:  'pay when paid' or 'pay if paid' clauses in subcontracts; or  amendment of clauses relating to payment timing in standard subcontracts. http://www.dtf.vic.gov.au/Infrastructure-Delivery/Public-construction-policy-and-resources/Constructioncontracts-and-conditions10 Australian Standard – General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) AS 2124-1992 General conditions of contract This standard is widely used and preferred by government bodies. It may be used for Lump Sum or a Schedule of Rates type of contract. The bill of quantities may or may not form part of the contract or it may form part of the specification. AS 4000- 1997 General Conditions of contract This document updates AS2124-1992 to cater for changes in construction practice and law and the AS4000-1997 series of documents are probably the most widely used in major works. AS 11000 – 2015 (Draft) A new draft has been released AS 11000: General Conditions of Contract It is being proposed to merge AS2124 – 1992 and AS 4000 – 1997 into a new suite of Standards, AS 11000: General conditions of contract. AS 4000 Suite of Contracts CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) The head contracts in the AS 4000 suite of contracts (currently in use)  Construct only contracts  Design and construct contracts  Supply of equipment, etc., contracts  Management contracts  Service and maintenance of assets contract  Minor works contract  Construct only subcontracts  Design and construct subcontracts  Trade contracts11 AS 4000 Suite of Contracts CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) The head contracts in the AS 4000 suite of contracts (currently in use) Construct only contracts  AS 4000–1997 is intended for use as General conditions of contract primarily for construct only projects of a major nature.  AS 4000–1997 can be used when payment is to be made by way of lump sum or by way of a schedule of rates or a combination of both.  AS 4000–1997 has provision for a bill of quantities which may be used as part of the Contract (Alternative 1 of subclause 2.2) or not as part of the Contract (Alternative 2 of subclause 2.2). Alternative 2 of subclause 2.2 also provides that a bill of quantities not forming part of the Contract may nevertheless be priced if that is required.  AS 4000–1997 also provides for selected contractors (see subclauses 9.3 and 9.4) and for novation by the Principal of a prior subcontract to the Contractor (see subclause 9.4).  AS 4000–1997 requires administration by a Principal-appointed Superintendent who may appoint Superintendent’s Representatives. AS 4000 Suite of Contracts CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Design and construct contracts  AS 4902–2000 General conditions of contract for design and construct is the appropriate Standard. That Standard caters for situations where the Principal provides only a ‘brief’ (in that Standard called the Principal’s project requirements), with or without a preliminary design. Supply of equipment, etc., contracts  If this delivery system is required, Australian Standard AS 4910–2000 General conditions of contract for the supply of equipment with installation should be used  If this delivery system is required, Australian Standard AS 4911–2000 General conditions of contract for the supply of equipment without installation should be used.  Where delivery or supply of equipment or goods is required on a long term basis, AS 4912–2000 General conditions of contract for periodic supply of goods should be used. Management contracts  For project management delivery systems’ AS 4915–2000, Project management—General conditions should be used.  For construction management where a Principal utilises a construction manager, or a managing contractor, to manage a construction project, usually as an agent for a disclosed principal, Australian Standard AS 4916–2000, Construction management—General conditions should be used.12 AS 4000 Suite of Contracts CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Service and maintenance of assets contract  For the service and maintenance of assets, AS 4919–2000 General Conditions of Contract for the Provision of Asset Maintenance and Services (Superintendent’s version) or AS 4920–2000 General Conditions of Contract for the Provision of Asset Maintenance and Services (Principal’s version) should be used. A short form of this contract (AS 4921–2000) has also been developed. Minor works contract  If the project is of low value and does not require a bill of quantities, AS 4905–2000 Minor works— contract conditions (Superintendent’s version) be used especially if the contract value is likely to be less than $250 000.  AS 4906–2000, Minor works—contract conditions (Principal’s version) is a similar document for use where there is no Superintendent appointed to administer the contract Reference Administration manual for AS 4000—1997 General conditions of contract Subcontracts in the AS 4000 suite of contracts CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Construct only subcontracts AS 4000–1997 has a compatible subcontract AS 4901–1998 Subcontract conditions with similar features as for “Construct only Contracts” Design and construct subcontracts  AS 4902–2000 General conditions of contract for design and construct has a compatible subcontract AS 4903–2000 Subcontract conditions for design and construct.  AS 4902–2000 also has compatible Consultant’s—Conditions of engagement being AS 4904–2000. This can be used where the head contract will be AS 4902–2000 and the consultant is either to be engaged by the Principal to effect a preliminary design or where a head contractor wishes to engage a consultant to effect design.  AS 4904–2000 is also suitable for use when a consultant is to be engaged by a subcontractor who is contracted to a head contractor under AS 4903–2000, General conditions of subcontract conditions for design and construct.  Subcontractors who do not have any design responsibility but are to be a subcontractor to a design and construct head contractor, could be engaged by that head contractor under AS 4901–1998 Subcontract Conditions for construct only work. Reference Administration manual for AS 4000—1997 General conditions of contract13 Subcontracts in the AS 4000 suite of contracts CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Trade contracts Standards Australia has published a Trade contract (AS 4917–2003) for use as part of a construction management delivery strategy. Sets out general conditions of contract for a construction management trade contract, to be used for trade works. This practical trade document is part of a suite of conditions of contract based on AS 4000-1997. Reference Administration manual for AS 4000—1997 General conditions of contract AS 4000 1997 Construct only contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Some key features Definitions All definitions in AS 4000–1997 are now contained in clause 1 . Seven italicised definitions continue to be used also with an initial capital letter. They are Item, Principal, Contractor, Superintendent, Superintendent’s Representative, the Works and Contract. All other defined terms always have a lower case initial letter except when used to start a sentence. In order to avoid confusion with the use of italics for defined words ‘work’, ‘work under the Contract’ and ‘the Works’, it was decided to abbreviate the expression ‘work under the Contract’ to WUC. Likewise ‘extension of time’ has been abbreviated to EOT. AS 4000–1997 defines the rights and obligations of each of the contracting parties and the role and functions of the Superintendent appointed by the Principal. Reference Administration manual for AS 4000—1997 General conditions of contract14 AS 4000 1997 Construct only contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Some key features Documents which do not form part of the Contract AS 4000–1997 also refers to other documents which may not form part of the Contract and therefore may not be Contract documents. These documents are  Bill of quantities: if Alternative 2 of subclause 2.2 applies to the Contract, the bill of quantities is specifically agreed not to form part of the Contract  Schedule of prices: AS 4000–1997 does not provide for a schedule of prices to be a Contract document, but a schedule of prices may nevertheless be used to price variations or deemed variations pursuant to subclause 36.4(c).  Principal-supplied documents: - some of the principal supplied documents do not form part of the contract  Contractor-supplied documents: These documents, to which subclause 8.3 refers, would usually not be Contract documents. Optional Clauses  AS 4000–1997 provides for options in 2 subclauses both of which are marked with an asterisk. These subclauses are: ■ subclause 8.6, Media; ■ subclause 29.2, Quality Assurance Reference Administration manual for AS 4000—1997 General conditions of contract AS 4000 1997 Construct only contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Some key features Alternative clauses AS 4000–1997 provides for alternatives as follows: ■ subclause 2.2, Bill of quantities ■ clause 16, Insurance of the Works; ■ clause 17, Public liability insurance; ■ Item 10(a) of Annexure Part A is relevant to subclause 2.2; ■ Item 20(a) of Annexure Part A is relevant to clause 16; ■ Item 21(a) of Annexure Part A is relevant to clause 17. Reference Administration manual for AS 4000—1997 General conditions of contract15 AS 4000 1997 Construct only contract- List of Clauses CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Clause Title Page 1 Interpretation and construction of Contract 1 2 Nature of Contract 5 3 Provisional sums 6 4 Separable portions 7 5 Security 7 6 Evidence of Contract 8 7 Service of notices 9 8 Contract documents 9 9 Assignment and subcontracting 10 10 Intellectual property rights 11 AS 4000 1997 Construct only contract- List of Clauses CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Clause Title Page 11 Legislative requirements 12 12 Protection of people and property 12 13 Urgent protection 13 14 Care of the work and reinstatement of damage 13 15 Damage to persons and property other than WUC 14 16 Insurance of the Works 15 17 Public liability insurance 16 18 Insurance of employees 17 19 Inspection and provisions of insurance policies 17 20 Superintendent 1816 AS 4000 1997 Construct only contract- List of Clauses CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Clause Title Page 21 Superintendent’s Representative 19 22 Contractor’s representative 19 23 Contractor’s employees and subcontractors 19 24 Site 20 25 Latent conditions 21 26 Setting out the Works 21 27 Cleaning up 22 28 Materials, labour and construction plant 23 29 Quality 23 30 Examination and testing 24 AS 4000 1997 Construct only contract- List of Clauses CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Clause Title Page 31 Working hours 25 32 Programming 25 33 Suspension 26 34 Time and progress 27 35 Defects liability 29 36 Variations 29 37 Payment 30 38 Payment of workers and subcontractors 32 39 Default or insolvency 33 40 Termination by frustration 3717 AS 4000 1997 Construct only contract- List of Clauses CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Clause Title Page 41 Notification of claims 37 42 Dispute resolution 38 43 Waiver of conditions 39 Annexure Part A 40 Annexure Part B 50 Annexure Part C 51 Construction Contract – Contract Documents CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) The Contract documents incorporating AS 4000–1997 would normally include: a) Formal instrument of agreement b) General conditions of contract AS 4000–1997 c) Special conditions (if any) d) Specification e) Drawings f) Notice of acceptance of tender g) Conditions of tendering (where appropriate) h) Form of tender (if appropriate) i) Other documents which also evidence the parties’ consensus18 Construction Contract – Contract Documents CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) The following additional documents, if they form part of the Contract, should be included in the formal instrument of agreement: ■ Any Special Conditions; ■ Specification (suitably identified); ■ Drawings (suitably identified); ■ Construction program (suitably identified); ■ Bill of quantities (if Alternative 1 of subclause 2.1 applies); ■ Schedule of rates (if applicable); ■ Notice of Acceptance of Tender; ■ Conditions of Tendering (if appropriate); ■ Form of Tender (if appropriate); ■ Any other documents which also evidence the parties’ consensus (e.g. correspondence, minutes of pre-acceptance meetings and the like). In appropriate cases, post-tender correspondence or other documents created post-tender, may be Contract documents. Construction Contract – Contract Documents CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) a) Formal instrument of agreement Agreement made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . day of . . . . . . . . . . . . . . . . . .20 . . . . between (the Contractor) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and (the Principal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iI is agreed that the annexed documents listed as follows: Tender, dated . . . . . . . . . . . . . . . . . . . . . . . Letter of acceptance of tender, dated . . . . . . . . . . . . . . . . . . . . . . . AS 4000–1997 General conditions of contract and annexures Specification no. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Drawings nos: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other documents: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . shall together comprise the contract between the parties and if the Contractor or the Principal is two or more persons then they shall be bound jointly and severally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signed by or on behalf of the Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signed by or on behalf of the Principal19 Construction Contract – Roles CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Role and functions of the Superintendent under AS 4000–1997  The Superintendent as certifier  The Superintendent as assessor  The Superintendent’s pricing and valuing functions  Summary of functions Functions of the Principal under AS 4000–1997 Functions of the Contractor under AS 4000–1997 Construction Contract – Roles CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Function Clause Required/ Option Notice Required To notify the Superintendent of any inconsistency, ambiguity or discrepancy the Principal discovers in any document prepared for the purpose of carrying out WUC 8.1 Required To give possession of the site or sufficient of the site to enable the Contractor to commence WUC 24.1 Required P58 To have defective work carried out by others if the Contractor fails to do so after due notice from the Superintendent 29.3 Option Yes, by Superintendent Functions of the Principal under AS 4000–1997 Example20 Construction Contract – Roles CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Functions of the Principal under AS 4000–1997 Form P58 Subclause 24.1 Notice Giving Possession of Site Date . . . . . . . . . . . . . . . . . . . . . . . . . . . To Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Project Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contract No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pursuant to subclause 24.1 of the contract conditions, the Principal gives the Contractor possession of the portions of the site as follows: Portion of site (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Date possession is available (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Principal) Instructions Notes……. Construction Contract – Roles CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Function Clause Required/ Option Notice Required To price and extend all items included in a bill of quantities required to be priced 2.3(a) Required, if bill of quantities is to be priced C1 To have recourse to the Principal’s security if the Principal fails to pay moneys due and payable to the Contractor 5.2 Option, if Principal provides security Yes, at least 5 days written notice required To notify the Superintendent, as soon as practicable after due notice from the Superintendent, whether a proposed variation can be effected and if so, the Contractor’s estimate of its effect on the construction program and cost 36.2 Required, if within the scope C120 Functions of the Contractor under AS 4000–1997 Example21 Construction Contract – WUC CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Start of WUC (Work under the Contract)  The site  Working hours and working days  Legislative requirements  Protection  Appointment of representatives  Setting out  Insurances  Forms Construction Contract – WUC CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Duration of WUC (Work under the Contract)  Care of the work and protection of people and property  Directions  The role and functions of the Superintendent  Legislative requirements  Discrepancies in documents  Supply of documents  Setting out the Works  Materials, labour and construction plant  Access by Principal and others  Discovery of minerals, fossils, relics, etc.  Latent conditions  Quality of work  Defective work  Examination and testing  Cleaning up  Insurance claims  Forms22 Construction Contract – WUC CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Progress of WUC (Work under the Contract)  Interpretation and construction  Working hours  Programming  Suspension of WUC  EOT  Liquidated damages  Bonus  Delay damages  Substantial breaches relevant to progress of WUC  Miscellaneous provisions relevant to the progress of WUC  Forms Construction Contract – WUC CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Variations to WUC (Work under the Contract)  Variations generally  Directing variations  Proposed variations  Variations for Contractor’s own convenience  Deemed variations  Pricing of variations  Forms23 Construction Contract – Payment and Certificates CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Payments, claims and certificates  Provisions relevant to payment claims, payments and payment certificates  Assessments and certificates by the Superintendent  Moneys due and moneys due and payable  General obligation as to payment  Calculation of the payment  Unfixed plant and materials  Final payment claim and final certificate  Notification of claims  Miscellaneous payment provisions  Final payment  Forms Reference : HB 140—2000 Administration Manual for AS 4000—1997 General conditions of contract Construction Contract – Security of Payment and Completion CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Security of payment  Specific provisions  Additional provisions relevant to security of payment  Forms Completion  Practical completion  Defects liability  Final payment claim and final certificate  Forms Termination and Dispute Resolution To be discussed in separate lecture24 AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Standards Australia provided the following background in respect of the proposed changes in AS 11000:  Standards Australia (SA) Technical Committee MB-010, General Conditions of Contract, is currently revising the suite of Standards related to general conditions of contract, AS 2124: 1992 and AS 4000: 1997. Under the proposed revision, the two existing Standards are to be merged into a new suite of Standards, AS 11000: General conditions of contract. The proposed AS 11000 is meant to supersede AS 2124:1992 and AS 4000:1997.  The subcommittees and working group dealt with the following issues: • Risk allocation; • Good faith; • Programming; • Extensions of time; • Payment provisions; • Impact of the various Security of Payment Acts on the General Conditions; and • Dispute resolution. AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) A wide range of stakeholders were identified as having an interest in the revision of the General Conditions. These stakeholders include: • Australasian Procurement and Construction Council • Australian Institute of Architects • Australian Land Development Engineers • Australian Constructors Association • Australian Consulting Architects • Australian Industry Group • Australasian Health Infrastructure Alliance • Australian Institute of Project Managers • Australian Institute of Building • AUSTROADS • Civil Contractors Federation • Construction Industry Engineering Services Group • Consult Australia • Dispute Resolution Board of Australia • Engineers Australia • Housing Industry Association • Master Builders Association • Public Transport Authority, Western Australia25 AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Abrahamson’s Principle "A Principal should not ask a Contractor to price an unquantifiable risk which is within the control of the Principal." Applied to all three Australian Standards. Major Changes to AS 4000 1. Clause 2 contains two basic obligations on the parties. Subclause 2.1 requires each party to act in good faith towards the other and sub clauses 2.2 to 2.5 initiate an early warning procedure whereby events and circumstances, which may become an issue under the Contract, are required to be notified by either party or by the Superintendent to attempt prompt resolution of the issue by the parties and the Superintendent. 2. Coupled with the early warning procedure above, are more flexible dispute resolution procedures in clause 45. Proposed is an option for the parties to choose to resolve disputes either by a conference followed by arbitration, or by a conference followed by expert determination. Other forms of dispute resolution procedures such as Facilitation and Dispute Resolution Board are referred to in clause 45 and a separate Standard, at this stage, anticipated to be numbered AS 11001, is foreshadowed to enable the parties to utilise these alternative forms of dispute resolution procedures if the nature of the project lends itself to either of those more formalised forms of Contract management procedures throughout a project. AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Major Changes to AS 4000 3. Provisions have been included to enable compliance with the various “Security of Payment” Acts of the States and Territories. In particular, time in the proposed Standard is to be calculated in business days. The General Conditions incorporate into the Contract a definition of business day as defined in the relevant Security of Payment Act of the jurisdiction of a State of Territory, and where a Security of Payment Act does not define a business day, (for instance in Western Australia and Northern Territory) the business day definition set out in subclause 1.2(b) of the proposed Standard will apply. 4. Amendments to the payment clause (40) will facilitate the administration of the Contract by giving the Superintendent power to receive and issue documents on behalf of the Principal so as to comply with the relevant SOP Act, where the relevant Act requires such documents to be received or issued by the Principal rather than the Superintendent. 5. Clause 4 deals specifically with Bills of Quantities and requires any Bill submitted, whether or not it is to form part of the Contract, to be priced. A separate clause 5 deals with Schedule of Rates. 6. In respect of “Service of Notices”, service by email is now catered for.26 AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Major Changes to AS 4000 7. In clause 12, it is proposed that the Main Contractor will be required to use AS 11002 subcontract conditions, containing no other amendments or additions to those subcontract conditions except those necessary to reflect the Contract between the Principal and the Contractor. Failure to comply with this requirement is proposed to be a substantial breach by the Contractor. 8. In clause 17, Care of the work and reinstatement of damage, the “excepted risks” have now been retitled as “Principal’s risks”. 9. Substantial proposed changes have been made to the Principal's obligations with respect to the role of the Superintendent. A return to and clarification of the regime of AS 2124 in this regard is proposed in the new Standard, in particular, where the Superintendent is required to certify, assess, price, measure or value work qualities of time, or to act reasonably, the Superintendent must act impartially, otherwise the Superintendent acts as agent for the Principal. 10. In relation to quality in subclause 32.1, the Contractor is now under a specific obligation upon becoming aware of work that does not comply with the Contract to rectify such work without the necessity for the Superintendent to give a direction to do so. AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Major Changes to AS 4000 11. Extensions of time are now measured in working days. A working day is now a defined term in subclause 1.1, whilst with the giving of notices however, time is always calculated in business days. 12. In clause 35, substantial changes have been proposed to strengthen the programming provisions of clause 35 and in addition to the three specific programming requirements in subclause 35.5, the parties can also agree to additional requirements as set out in Annexure Part E. Subclause 35.10 also gives the Superintendent power to accelerate the Works. The existing power to change the sequence and order of work remains in subclause 35.4. 13. There is now a specific obligation in subclause 37.2 on a party to notify delays promptly and in any event within 5 business days by giving the Superintendent and the other party written notice of the cause and estimated delay. The subclause also requires the Contractor to state in its notice of delay whether the Contractor anticipates it will be claiming an extension of time in respect of such cause of delay. 14. The causes of delay have now been clarified further in these Contract Conditions in subclause 37.4. For events beyond the reasonable control of the Contractor which cause delay and which occur before the date for practical completion, the Contractor is entitled to an extension of time if practical completion is or may be delayed, whilst delays occurring after the date of practical completion either by a variation or by a Principal’s act of prevention (which no longer includes a variation as it did in AS4000) are separate grounds for an extensions of time.27 AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Major Changes to AS 4000 15. Subclause 37.6 clarifies overlapping delays in that where a delay occurs which would otherwise enable the Contractor to be entitled to an extension of time, and that delay overlaps a delay for which the Contractor is not entitled to an extension of time, the clause allows the Contractor an extension of time but no delay damages even if another overlapping cause of delay is an act of prevention by the Principal. 16. Substantial proposed changes have been made to the assessment of extensions of time. The Superintendent now has an option in subclause 37.9 either to assess and direct an extension of time within 20 business days or to give a notice within that time notifying the Contractor that the Superintendent requires more information to enable an assessment of extension of time. If the Contractor complies with the written direction to provide such additional information within the stated time, the Superintendent has a further 20 business days to assess the extension of time. Failure by the Superintendent to do so within the time required will entitle the Contractor to an extension of time as claimed as though the Superintendent had assessed the same, provided the early warning procedure has not in the meantime, been invoked by a party or the Superintendent. . AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Major Changes to AS 4000 17. Subclauses 37.22 now allows delay damages only for delay to practical completion by a Principal’s act of prevention whilst delay costs are now payable for delays to practical completion due to a variation. There is now a differentiation between “delay damages” and “delay costs. Delay damages are assessed and certified by the Superintendent under clause 44.5 for every working day which is the subject of an EOT, and a prescribed notice under clause 44. Delay costs are assessed by the Superintendent under clause 39.14 and include overheads but not profit.28 AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Major Changes to AS 4000 18. A substantial change has been proposed to the variation clause 39. In particular subclauses 39.3 and 39.4 introduce a new regime that if the Contractor considers a direction to be a variation, the Contractor, within 5 business days of receipt of the direction, may notify the Superintendent that the effect of the direction constitutes a variation and the Superintendent is then required within 5 business days to respond. If the Superintendent disagrees that it is a variation then the early warning procedure contained in subclauses 2.2 to 2.5 can be invoked. 19. In relation to pricing variations, rates and prices generally are to include allowance for overheads and profit unless otherwise stated, whilst there is a specific right to recover delay costs for delays caused by a variation if not already priced as part of the variation under subclause 39.2. 20. Subclause 40.1 provides, if the relevant SOP act applies, that the Superintendent has the authority to act as the Principal’s agent in receiving payment claims and issuing payment schedules under the relevant SOP act. 21. The dual certificate regime of AS 4000 has been abandoned and the Superintendent now issues only one certificate for the amount payable to a party, thus enabling the certificate to comply with the relevant SOP Act as a payment schedule under that Act. AS 11000 – 2015 (Draft) General Conditions of Contract CSM80007 – Week 2, Semester 1, 2017 (Yogeswaran Kumaru) Major Changes to AS 4000 22. Also, a major change has been proposed to the regime of pre-payment for unfixed items. Subclause 40.10 contains two Alternatives, the first of which provides that the Contractor is not entitled to pre-payment for unfixed items whilst the second Alternative allows pre-payment subject to the conditions set out in subclauses 40.12 and 40.13 being satisfied by the Contractor. 23. Notification of claims clause 44 retains the same procedures and effect as clause 41 of AS 4000, save and accept that the clause dealing with liability of failure to communicate a claim is now placed at the end of the clause rather than the middle of it. 24. An updated Annexure Part A has been included in the document to clarify, where appropriate, the options that are given to the parties in relation to the formation of the Contract. Reference : STANDARD AUSTRALIA , STATEMENT, Embargoed until 23 January 2015