Republic of the Philippines

NUEVA VIZCAYA STATE UNIVERSITY

Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022

COLLEGE OF ENGINEERING
Bayombong Campus

DEGREE BSCE COURSE NO. PC-CEM 2

PROGRAM
SPECIALIZATION CONSTRUCTION COURSE TITLE ADVANCED CONSTRUCTION METHOD
ENGINEERING AND EQUIPMENT
MANAGEMENT
YEAR LEVEL 4 TIME FRAME 12HRS WK NO. 3-4 IM NO. 2

I. UNIT TITLE/CHAPTER TITLE

A. Issues during Construction Phase
B. Contracts and Specification
C. Construction Contracts

II. LESSON TITLE

A. Issues during Construction Phase
B. Contracts and Specification
C. Construction Contracts

III. LESSON OVERVIEW

In this chapter we discuss about the Issues during Construction Phase, Contracts and
Specifications and Construction Contracts

IV. DESIRED LEARNING OUTCOMES

1. Discuss and explain the issues during construction phase
2. Identify and classify the contacts and specifications and construction contracts

V. LESSON CONTENT

ISSUES DURING CONSTRUCTION PHASE

A. SITE LAYOUT
Designing a construction site layout is a process that entails identifying a location for every
temporary facility.
Elements relating to the site layout are addresses within the framework of job site infrstructure.

What are the oubjectives of designing a construction layout?

The objectives are optimizing efficiency and cost effectiveness and promoting safety and security
on site.

What projects aspects influence the job site infrastructure?

1. Size of the project
2. Type of construction
3. Construction time frame
4. Weather and environmental factors
5. Job site topography
6. Availability and type of construction equipment

What job site aspects must be analyzed?

1. Site drainage
2. The configuration of access roads and transportation protocols
3. Location of book-ups for water, electricity, waste water, etc.
4. Location and type of site buildings and structures
5. Locations of major equipment resources
6. Nature and location of storage and lay-down areas

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 1 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022

B. TIME EXTENTION
All construction contracts allow the construction period to be extended where there are delays
that are not the contractor’s fault.
Time extensions are added to the original duration.

Where in the contract procedures for dealing with time extension are established?
They are established in the general conditions of the contract.

What kind of delays may cause a request for time extension?

Delays caused by:
• Owner (land acquisition availability)
• Acts of god (adverse weather condition)
• Strikes

C. CHANGE ORDER
Change orders are modifications to the original contract documentation
The procedure for implementing a change order is discussed in the general conditions.

Common causes for change orders

a) During the course of the project, additional features or options are perceived and requested.
b) The client or project team discover obstacles or possible efficiencies that require them to
deviate from the original plan.
c) The projects work was incorrectly estimated.

Is there a limit to the number or magnitude of change orders that can be applied to contract?
No, there are no limits. However, lots of change orders can disrupt the work and contribute to
adverse relationships between the owner and the contractor.

What is the major difference between a change order (minicontract) and original contract bid
procedure?
There is no competition between bidders, since the contractor has already been selected and unit
price has already been set in the original contract.

Is contractor justified in increasing the price for performing a change order?

Yes, he is. Contractor may increase the price due to disruption of the work and possible loss of
job rhythm.

In the early stages of design and construction, should the owner already anticipate and be ready
for the change orders?
Yes. The owner should set aside – 18% of all money available for the project such unforeseen
situation.

D. CHANGED CONDITIONS
Changed conditions are the claims of the contractor, in case the site conditions encountered are
not what assumed at bid time.

To claim a changed condition, the contractor must prove that:

• Conditions ‘as found’ on site are different from those reflected in the contract documents
• An unknown or unusual condition was encountered, which was not normally expected

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 2 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022
Common cause of changed condition:
a)change in topographical portion in site also affect the building contract
b) subsurface variation
c) change in underground water table

Soil conditions and presence of underground water. These conditions are common causes because they
are subsurface. Subsurface conditions are always hard to establish with certainty. Moreover, inadequate
and insufficient subsurface investigations may lead to faulty representation of the conditions.

If the owner does not accept a changed condition claimed by contractor, how should this dispute be
resolved?

The validity of the contractor’s claim must be established either by arbitration or litigation.

If the owner accepts the changed condition, how this condition is added to the original contract?

The extended scope of work due to the changed condition will be included in the contract as a change
order.

E. VALUE ENGINEERING

Value Engineering procedure is a monetary incentive for a construction contractor to innovate.

The contractor may propose value engineering change, which will result in a lower cost, but same
functionality. For the VECP, he is rewarded by share of the net savings, rate of which is specified in the
contract.

What is the idea behind Value Engineering?

Reducing cost by maintaining functionality.
A portion of savings (usually 50%) is shared with the contractor

F. LIQUIDATED DAMAGES
Liquidated damage is the damage to the owner due to contractor overrunning the day of the
project completion. The contractor pays for each day overrunning a sum equal to the sum lost by the
owner.

What is the difference between liquidated damages and a penalty for late completion of the contract?

Liquidated damage is how much the owner lost. A penalty is an amount of money usually higher than the
liquidated damage and estimated without any link to actual damages incurred by the owner. If owner
specifies a penalty, he must also specify a bonus for an earlier project completion.

G. PROGRESS PAYMENT AND RETAINAGE

Progress payment is a regular payment for the contractor’s expenditures and fee for markup for
the portion of the work performed.
Retainage is an amount of money that owner holds back as an incentive for the contractor to
properly complete the project.

Why the owner decides to do not pay the entire bid price to the contractor?
Why retainage is such a strong incentive for contractor to complete a project?

“Until you have completed the project to mu satisfaction, I will not release the retainage”

The philosophy of retainage is that if the project is nearing completion virtually the entire bid price has
been paid out, the contractor will not be motivated to do the small closing out tasks that inevitably are
required to complete the project.

Retainage amounts are fairly substantial (6-10%) of the of the estimated payment amount.
“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 3 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022

CONTRACTS AND SPECIFICATION

SELECTING A BUILDER

The owner has three choices on who will do the construction works:
1. He might do the work himself
2. He might select a construction consultant who is also a builder
3. He might choose a construction contractor

Architect-Engineer-Constructor – a both designs and builds a project. The job itself is sometimes
referred as a “turnkey” job.

Turnkey – one company prepares the plans and constructs the project and turns the key over to the
owner.

Advantage: There is only one organization responsible for seeing that everything is done
Disadvantage: An expensive way to get a project built, for very often there is a little competition.

Competitive Bidding – A construction project is built by a contractor who has competed with others for
the job. The owner choses the contractor by comparing what several contractors say it would cost them
to do the job. The owner makes the contract with the one who has said he can do the job correctly for
the least amount of money.

CONTRACT
• An agreement between the owner and the contractor as to how much the owner will pay to have that
contractor build the project
• Agreement of at least two parties with purpose of creating legal obligation between the parties and
capable of being enforced by the court of law.
CONTRACT = OFFER + ACCEPTANCE + Consideration
Why Use contract in construction:
• Describe scope of work
• Establish time frame
• Establish cost and payment provision
• Set fourth obligations and relationship
• Minimize disputes
• Improve economic return of investment
Content of the contract
• Identify the parties
• Promises and responsibilities
• Scope of work
• Price and payment terms
• Commercial terms and conditions
• Project execution plan.
Kinds of Contracts
1. Fixed Price
2. Cost plus a fixed fee
“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 4 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022
3. Cost plus a percentage of cost
4. Incentive

1. Fixed price contract – the contractor agrees to do all the building according to the owner’s plans and
specification for a set sum of money which is to be paid by the owner. Sometimes, especially for
buildings, this amount is stated as a single lump sum.

Ex. Pintura Ink, a painting contractor, agree to paint MSC Classroom for P100,000.00 The P100,000 is
called a single lump sum (fixed price – includes everything)

2. Cost-plus-a-fixed fee (CPFF) – the owner agrees to pay the contractor whatever it costs to do the job
(materials, labor, and use of equipment) plus a fixed sum

Ex. ABC Const. Co. agree to build a bungalow house for what it costs them to build it, plus a fee of
P100,000.00. This fee of P100,000.00 is to cover ABC’s overhead (such as the cost of its home office)
and profit.

3. Cost plus a percentage of cost (CPPC) – is one in which the contractor is paid a flat percentage of
his cost.

Ex. A contractor is given a contract of to build a bungalow house for the amount of whatever it will cost
him (P1,500,000) plus an 8% fee (P1,500,000 x 8% or P120,000)

4. Incentive Contract – A target estimate is made. If the contractor should do job for less than the
estimated cost, he gets to keep part of the saving. If it should cost more than the estimated amount, his
fee is reduced. Thus, the contractor has a good reason (Incentive) to keep the cost down.

Ex. Suppose the owner and contractor agree that the bungalow house should cost P1,500,000 and the
contractor will get a fee of 120,000 for building it. They might also agree that if the bungalow actually
costs P1,300,000, the contractor would get half of whatever he saved plus his regular fee of P120,000,
a total of P220,000. The contract might further state that if it cost P1,700,000, the contractor fee would
reduced to P50,000

Advertised and Negotiated Contract

The owner places notices in newspaper, magazines and Philgeps asking contractor to send in
their bids (the amount for which each could do the job).

Public Contracts – are usually advertised because it is thought fair to give every qualified contractor the
chance to bid, since they are also taxpayer.

Private Contracts – are sometimes advertised because the competition created by advertising usually
results in the lowest cost for the project.

Negotiated Contracts – are any contracts in which the owner and the contractor talks together to reach
an agreement on the terms of the contract.

Benefits of a Negotiated Contract

1. It limits the bidder to those who are only qualified for the project.
2. It save time and to begin the work before plan and specification were completed

CONTRACTING

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 5 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022
Let us now assume that the plans and specification are completed. The procedure outlined below
is typical of a fair and honest way to select a construction contractor.

Advertising

Receiving Bids

Opening Bids

Awarding Contract

Bonding

Agreement

Notice to Proceed

Advertising
The first step in selecting a construction contractor is notify all bidders and this is done by an
invitation to bid, a short notice which states:
1. The type of work
2. The location
3. The time and place of bid opening
4. Where and how plans and specifications are to be made available
The invitation to bid is mailed by the owner to contractors who might be interested. Sometimes
the invitation to bid is actually advertised in newpapers, magazines or in Philgeps Website
Qualification of Contractors
Contractor Ability usually checked by the owner or his architect-engineer
• Experience
• Financial resources
• Integrity
• Personnel
• Equipment

Prequalification – Contractor ability is determined before bidding and only those contractors who are
considered capable of doing the job are invited or permitted to bid
Post qualification – The qualifications of the low bidder are determined after the bids are opened but
before the contract is awarded to the contractor.

Bidding Documents

Construction Documents are defined as the written and graphic documents prepared or assembled by
the A/E for communicating the design of the project and administering the contract for its construction.

2 major groups
1. Bidding Requirements
“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 6 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022
• Used to attract bidders & explains bidding process
2. Contract Documents
• Legally enforceable requirements that become part of the contract
• Include all construction documents except bidding forms

BIDDING REQUIREMENTS
• Bidding Requirements are used to attract bidders and explain the procedures to be followed in
preparing and submitting bids.
• Bidding requirements help bidders follow established procedures and submit bids that will not be
disqualified because of technicalities. They do not become part of the contract documents

Bidding documents
• All of the construction documents issued to bidders before the signing of an owner-contractor
agreement.

Bid Package
• Documents available to the contractor and on which he must make a decision to bid or not.
• A set of plans and technical specifications, Proposal form, general conditions, special conditions,
• Description of the project to be constructed

Instruction to bidders

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 7 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022
- It describe the scope of the bid, source of fund (if it is financed from other agency), fraudulent and fraud
practices, eligible bidders, Eligible Materials, Equipment and Services, Clarification of Bidding Document,
Site Visit, Pre-Bid Meeting, Amendment of Bidding Document

The Bid Opening

- The bids are usually opened about 30 days after the invitation to bid is issued or advertised. This
period, during which the contractors prepare their bids, may vary from 10 to 90 days.

Proposal form –is a form usually supplied by the owner or architect-engineer, on which the contractor
writes in the amount for which he will build the project.
- Lump sum job, contractor submit just one amount.
- Unit price job, contractor submit the amount of work, unit price and total price for each item.

Bid bond –is a guarantee on the part of a bonding company (usually a large insurance company) that the
contractor will enter into the contract. Bid bond are often 20% of the face value of the bid, If the bidder
accepts the contract, the bid bond no longer serves a purpose. If the low bidder refuses to take the
contract, the owner collects the difference between the low bid and the next lowest bid, up to the amount
of the bid bond.

Other requirements to be submitted by the Contractor

1. A list of the qualifications of the contractor
2. A list of subcontractors
3. A list of construction equipment to be used by the contractors
4. A list of makes and models of equipment the contractor will install in the structure

Strict rules on Bid Opening

1. No bid may be submitted or changed after the time set for the bid opening
2. Bid must be submitted in sealed envelopes
3. Each contractor’s proposal is read aloud at public opening.

The Award

After the bids are opened, each bid is carefully examined by the owner or the architect-engineer.
The purpose of this examination is to determine the lowest responsive bid.

Responsive Bid – A bid that matches in every detail the conditions set forth in the bidding documents .

Notice of Award – a notice being sent to the qualified contractor who has the lowest responsive bid. The
owner also send along with the notice of award, agreement forms and blank performance and payment
bond.

Bonds

Performance Bond – is one in which the bonding company (an insurance company) guarantees that the
contractor will build the project according to the owner’s plan and specifications. If the contractor does
not fulfil his duties under the contract, then the insurance company itself will fulfil
them. If this should happen, the insurance company would probably hire another contractor to complete
the work.

Payment Bond – is one in which the bonding company guarantees that the contractor will pay his
subcontractors and suppliers for any amount due them. If the contractor does not pay a subcontractor for
work satisfactorily performed, the bonding company must make payment.
“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 8 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022

The Agreement

Agreement – is a brief statement of the work to be done under the contract and the price. It refers to the
other parts of the contract, the plans, specifications, instruction to bidders, general and special conditions,
and the bond. It is signed by the owner and contractor.

The agreement should contain:

 The names of contracting parties
 A brief description of the work
 A list of contract documents, including agreement, general conditions, drawings, and specifications.
 The contract sum, or amount (lump-sum contract)
 The procedures for payment
 The contract time, or dates for start and completion
 The signatures of contracting parties and witnesses

Notice to Proceed

Notice to proceed – a notice which gives the contractor permission to begin the work.

WRITING SPECIFICATIONS

Specification – are written instructions conditions and descriptions which tell the builder about a project
to be constructed. Specifications also protect the interests of everyone involved: the architect, the builder,
and the owner.

Three general categories of specification

1. Legal documents section – consist of advertisement for bids, invitation and instruction to bidders,
owner-contractor agreements and bond forms.
2. Condition Section – states the rights and responsibilities of the designer, the owner, the contractor
and any subcontractors.
3. Technical description section – lists the materials and methods to be used for building the structure.

Division of Technical Description Section

1. Architectural Section
2. Civil Section
3. Structural Section
4. Plumbing Section
5. Electrical Section
6. Mechanical Section

Each section is organized to include:

1. The scope of work to be done
2. The complete description of materials to be used
3. General requirements or the usual work standards and practices
4. Special requirements of unusual work standards or practices

9 Major factors to consider in the selection of Materials and Equipment

1. Economy – the cost and appropriateness of the item
2. Quality – what grade of excellence of the material, fixture, or appliance is wanted?
3. Functionality–will it serve the purpose for which it is intended?
4. Ease of Installation – Is the item easy or hard to install. Will it require special tools for installation?
5. Appearance – Is it pleasing to the eye?
6. Codes – Is it with complying with the building codes?
7. Service Requirement – Can the equipment be repaired easily and quickly?
“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 9 of _5_
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:PC-CEM 2 – 1S -2021-2022
8. Warranty – Does the equipment carry a guarantee?
9. Size – It must fit a pre-planned space in a structure

Kinds of Specifications
1. Outline specification – are made up when the design phase of a project begins and preliminary drawings
are made. This specification gives only an outline (main facts) about materials to be used and how they
are to be used for the job.
2. Standard Specification – are those which are made up by different companies about the use of their own
materials. These are usually standard or the same for each material used.
3. Guide specification – are kind of check list which can be used for writing specifications. They tell about
things which may be needed for a job.
4. Project Specification – are usually made up of outline specifications, standard specifications, and guide
specifications. They are the finished specifications which have been made for one special construction
project.

Four ways to make specification

1. Getting an old set of specifications and working it over for the new job
2. Using several sets of specifications and cutting and clipping them to get one new set
3. Writing them by the paragraph procedure which requires the use of a specification file
Using guide specification

VI. LEARNING ACTIVITIES

1. Modules posted in Google Classroom/ Group Chat
2. Research additional videos in You Tube

VII. EVALUATION (Note: Not to be included in the student’s copy of the IM)

VIII. ASSIGNMENT

IX. REFERENCES

A. Book/Printed Resources
1. Sathyanarayanan Rajendran and Mandi Kime; Construction Project Safety Management Best Practices
Handbook
2. Andrew Baldwin and David Bordoli; A Handbook for Construction Planning and Scheduling
3. Garold D. Oberlender, Ph. D., RE. Professor of Civil Engineering Oklahoma State University, Second
Edition; Project Management for Engineering and Construction
4. Robert. L. Peurifoy, P.E.Late Consulting EngineerAustin, Texas, Clifford J. Schexnayder, P.E.,
Ph.D.Eminent Scholar Emeritus Del E. Webb School of ConstructionArizona State University Tempe,
Arizona , A viad Shapira, D.Se. Associate Professor Faculty of Civil and Environmental Engineering
Technion-Israel Institute of; Seventh Edition; Construction Planning,Equipment, and Methods

B. e-Resources:
1. https://www.scribd.com/user/344961011/Geraldine-Galing
2. https://www.scribd.com/presentation/238639000/Preparation-of-Bidding-Documents

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution,”
NVSU-FR-ICD-05-00 (081220) Page 10 of _5_