Construction Contracting

Volume 4, Chapter 1

INTRODUCTION

References:

University policy: "Maintenance and Construction Work."

Construction Contracting Requirements Summary Table

University policy on new construction states in part:

"It is the policy of the University to accomplish new construction of structures and systems by placing such work under contract in the most economical manner to qualified outside firms, carefully supervising the work thus contracted or, in unusual cases approved by the Chancellor, by hiring employees on a temporary basis for periods not in excess of six months."

- University policy: "Maintenance and Construction Work."

This chapter describes required modes of contracting, types of construction contracts, types of University construction documents, and the members of the construction team.

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1.1 REQUIRED MODES OF CONTRACTING

References:

- Public Contract Code, State of California, Section 10503

The Public Contract Code requires the University to use one of the following contracting modes for entering into a construction contract:

  • Complete plans and specifications (also called "lump-sum")
  • Design-and-build (also called "design-build" or "turnkey")
  • Construction manager
  • Cost-plus-fee
  • Other modes (when approved by the Office of the President)

1.1.1 Complete Plans and Specifications Mode

The complete plans and specifications contracting mode (also called the "lump-sum" mode) requires complete plans and specifications setting forth directions in enough detail to enable a contractor to carry them out. The University's Long Form, Brief Form, and Mini Form construction documents(see 1.3) have been written for the complete plans and specifications contracting mode.

1.1.2 Design-and-Build Mode

In the design-and-build contracting mode (also called the "design-build" or "turnkey" mode), the University contracts with a single party that designs and builds the project. Documents for the solicitation of bids under the design-and-build contracting mode include the following:

  • A program setting forth the project scope and the size, type, and desired design character of the building and site.
  • A set of performance specifications covering the quality of materials, equipment, and workmanship.
  • A maximum acceptance cost.
  • A method and grading system for evaluating contractor proposals on the basis of a preliminary design, outline specifications, a price, and the financial condition and relevant experience of the contractor and the contractor's design professional.

The University has successfully constructed housing projects and parking structures using the design-and-build contracting mode. Construction documents developed for this mode are available from the Office of the President.

1.1.3 Construction Manager Mode

In the construction manager contracting mode, the University contracts with a firm that provides management services during design and bidding phases and assumes responsibility for the construction work. The construction manager serves as a member of the construction team (see 1.4). Documents for the solicitation of bids under the construction manager contracting mode include the following:

  • Prequalification standards
  • Outline specifications
  • Schematic drawings

These documents must indicate the general scope of the project. They must also designate those fees and other fixed commitments upon which prequalified contractors will be invited to submit competitive bids that will, in turn, serve as the basis of selection. Construction documents developed for this mode are available from the Office of the President.

1.1.4 Cost-Plus-Fee Mode

In the cost-plus-fee contracting mode, the contractor is reimbursed for the actual cost of labor and materials, plus a fee for overhead and profit. Cost-plus-fee contracts are usually used for emergency work or for projects in which the scope of work is uncertain. Documents for the solicitation of bids under the cost-plus-fee contracting mode include the following:

  • Prequalification standards
  • Outline specifications
  • Schematic drawings

These documents must generally describe the scope of the work and a definition of "reimbursable costs" and "nonreimbursable costs." They must also designate the fees and other fixed costs upon which prequalified contractors will be invited to submit quotations that will, in turn, serve as the basis of selection. Construction documents developed for this mode are available from the Office of the President.

1.1.5 Other Contracting Modes

Bids may be solicited under contracting modes other than complete plans and specifications, design-and-build, construction manager, and cost-plus-fee that the University decides are in the best interest of the University. These other modes of contracting may not be used by Facilities unless approval is first obtained from the Office of the President.

The Public Contract Code requires that documents for the solicitation of bids under other contracting modes allow for uniform bid comparison and that the award be made according to published selection standards.

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1.2 TYPES OF CONSTRUCTION CONTRACTS

There are two primary types of construction contracts: single contracts and multiple prime contracts. Variations of these types of contracts involve the participation of a construction manager or project manager.

1.2.1 The Single Contract and Multiple Prime Contracts

The single contract is the most commonly used contract type. Plans and specifications are prepared by the design professional and become part of the bidding documents. A single contractor is then selected by the University to perform the work. The single contract is usually the easiest to administer because of its centralization of responsibility, namely, one owner (the University), one contractor, and one construction contract. The standard Long Form, Brief Form, and Mini Form construction documents in Part II have been prepared for those cases where a single contract is awarded.

With multiple prime contracts, the University divides a project into two or more parts and then enters into a separate contract for each part. The most frequent use of multiple prime contracts is for phased construction, in which contracts are awarded sequentially for each phase (see 5.4.17). This type of construction is also referred to as the "fast-track" method. Contracts for parts of the project such as site development, site excavation, or foundation work are awarded before the contract for the main structural work is awarded. Multiple prime contracts require careful coordination because several contractors are involved, and no single contractor is responsible for the entire project.

Samples of customized construction documents developed for multiple contracts are available from the Office of the President.

Construction Management. Sometimes, a construction manager (see 1.4.5) is contracted to do limited work on a project or to perform the construction work. Construction management may be used with either single or multiple prime construction contracts, and these contracts may be made with either the University or the construction manager. Contracts involving construction management may also include a guaranteed maximum price, whereby the construction manager guarantees that the construction cost will not exceed a specified amount. The guaranteed maximum price is subject to increase, however, if the project's scope or conditions are changed.

Construction documents developed for construction management projects are available from the Office of the President.

Project Management. Project management extends beyond construction management in that it also may include oversight of the design and, possibly, planning stages of a project. The University has successfully used dedicated project management on large, complicated projects. Projects involving multiple buildings, significant site improvements in high-use areas, or complicated funding require the type of supervision and coordination that a project manager (see 1.4.6) can provide. The added supervision and coordination provided by the project manager should reduce the time required to obtain funds and to design and construct the project.

Construction documents developed for project management are available from the Office of the President.

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1.3 TYPES OF CONSTRUCTION DOCUMENTS

The basic types of standard construction documents used by the University are:

  • Long Form
  • Brief Form
  • Informal Form
  • Mini Form
  • Design-Build Form
  • CM at Risk Form
  • Multiple Prime Form
  • Job Order Contract Form

The types of construction documents are described in greater detail in Chapter 3. Approved construction document models for each type are located in Part II. 

1.3.1 Long Form

The Long Form construction documents must be used by the University for projects with estimated contract sums of over 1 million dollars, and may be used for projects below that threshold.

In general, the Long Form is organized according to the Construction Specifications Institute's Manual of Practice. The Long Form Instructions to Bidders and General Conditions are organized according to recognized construction industry standards and terms.

1.3.2 Brief Form

The Brief Form construction documents may be used by the University for projects with estimated contract sums up to $1 million.

Some Brief Form documents are identical to those in the Long Form; other documents, such as the Brief Form General Conditions, are written specifically for the Brief Form.

1.3.3 Informal Form

The Informal Form construction documents may be used for Competitive Informally Bid Lump Sum Construction Projects that exceed $50,000, but that do not exceed $640,000.

1.3.4 Mini Form

The Mini Form construction documents may be used by the University for projects with estimated contract sums of up to $100,000.

Like the Brief Form, the Mini Form uses some Long Form construction documents, however most of the documents are written specifically for the Mini Form.

1.3.5 Design-Build Form

The Design-Build Form is used by the University for projects constructed under the design-build mode 1.1.2.

1.3.6 CM at Risk Form

The CM at Risk Form is used by the University for projects constructed under the construction manager mode 1.1.3.

1.3.7 Multiple Prime Form

The Multiple Prime Form is used by the University for projects constructed by multiple prime trade contractors.

1.3.8 Job Order Contract (JOC)

The Job Order Contract is used by the University for on-call contractors for efficient delivery of relatively small construction and maintenance projects.

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1.4 CONSTRUCTION TEAM

The construction team for University projects consists of four principal entities:

  • University
  • Contractor
  • University's Representative
  • Design Professional

In certain cases, the University may also choose to contract with the following parties, which then become members of the construction team:

  • Construction Manager
  • Project Manager

1.4.1 University

The term "University" in the construction documents refers to The Regents of the University of California. In the Facilities Manual, the term "University" has been substituted for "The Regents of the University of California" wherever possible. The University initiates the project; secures funding for planning, design, and construction; selects and contracts with the contractor, design professional, and other professionals, as applicable; and operates and maintains the completed project.

1.4.2 Contractor

The term "contractor" refers to the person or firm responsible for performing the work and is identified as such in the Agreement. The contractor may use subcontractors, and the subcontractors may use sub-subcontractors to perform parts of the work. However, the Agreement is between the University and the contractor, and the contractor alone is responsible for completing the project.

1.4.3 University's Representative

The term "University's Representative" refers to the person or firm administering the construction contract for the University (see 1.4.1). The University must always have a University's Representative, who may be the design professional or a University employee. The University's Representative is selected according to project requirements.

1.4.4 Design Professional

The design professional is an architect or engineer (person or firm) qualified and duly licensed to perform architectural or engineering services under contract to or employed by the University. The design professional prepares and signs the construction documents and is eligible to serve as the University's Representative.

In most instances, the design professional prepares and helps to assemble the bidding documents (see 2.3). The bidding documents consist of standard documents furnished by the University and drawings and specifications developed by the design professional. Each Facility must provide the design professional with Supplemental Requirements for preparing the construction documents. The Supplementary Requirements are incorporated into the Executive Agreement as Exhibit C (see Contract Templates - Design and Other Consultants).

Consultants. The design professional usually engages consultants as needed to provide the University with the services required in the Executive Agreement. Although the University approves the consultants, it does not have any contractual relationship with them.

1.4.5 Construction Manager

The University may contract with a construction manager that provides input during the design phase and oversight and administration of the bidding and construction phases, or one that assumes responsibility for the construction work (see 1.2.1). In both cases, the construction manager becomes another member of the construction team.

The University uses the following two methods for contracting with a construction manager:

  1. When the construction manager is a professional organization and assumes no responsibility for construction work on the project, a contract may be negotiated using the Construction Management Agreement (see Contract Templates - Design and Other Consultants).
  2. When the construction manager is a contractor and assumes responsibility for construction work on the project, the contract must be competitively bid using the construction manager mode of contracting (see 1.1.3).

1.4.6 Project Manager

On large, complicated projects, the University has contracted with a project manager that oversees the design, contract administration, inspection, and some planning phases of a project (see 1.2.1). Project managers may serve as the University's Representative (see 1.4.3) during the construction phase. A member of the construction team, the project manager is a professional organization and does not assume responsibility for the construction work. The project manager's contract is negotiated. Sample contracts are available from the Office of the President.

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1.5 METHODS OF DETERMINING, STATING, AND PAYING THE CONTRACT SUM

The University uses the three methods listed below for determining, stating, and paying the contract sum:

  • Lump sum
  • Cost-plus-fee
  • Unit prices

Although the lump sum, cost-plus-fee, and unit prices methods may be used with all three types of construction documents, the standard documents do not contain provisions for the cost-plus-fee method, and additionally, the standard Brief Form does not accommodate unit prices.

Combinations of these methods may be used on a single project or with a single mode of contracting (see 1.1).

1.5.1 Lump Sum Method

The most common and simplest method of determining and stating the contract sum is the lump sum method, in which a single amount is quoted for all of the work. The contractor is paid the contract sum in one or more installments. With the lump sum method, the initial contract sum is determined during bidding, and may be required for budgetary reasons. Using this method, if the amount bid is within the budget, the project proceeds; if the amount bid is over budget, rebidding or other steps must be taken to either augment the budget or bring the bid amount within the budget. In competitive bidding and informal bidding, lump sums are quoted by the bidders; in negotiated contracting, a lump sum is negotiated between the University and the contractor.

1.5.2 Cost-Plus-Fee Method

When the cost-plus-fee method is used to determine the contract sum, the contractor is reimbursed for the actual cost of labor and materials and is paid a fee for overhead and profit (the fee may be a percentage of the labor and materials costs or a fixed amount). With this method, the contract sum is not fully determined until the work is completed (the initial contract sum is the amount of the fixed fee or the percentage due to contractor which will be converted to a dollar amount after completion of the work). In some cases, the University stipulates a guaranteed maximum sum that cannot be exceeded.

1.5.3 Unit Prices Method

With some projects, the extent of work cannot be fully determined, or the actual quantities of required items cannot be accurately calculated in advance. In these cases, bidders are requested to submit bids based on unit prices.

Unit-price contracts subdivide the work or parts of the work into like items and state approximate quantities for each item. The bidders use these quantities in preparing their bids. A price per unit of measurement (unit price) is quoted for each item. Sums for the extended unit prices are not included in the initial contract sum. As the work is completed, actual quantities are measured, and the contractor is paid according to the contractor's quoted unit prices. The University pays only for the actual quantities of materials used.

Unit prices may or may not be used as a basis of award. Sometimes, unit prices are requested at bid time to add work to a project but are not used as a basis of award.

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Change No. 14-015-C (Revised December 8, 2014)

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