Table Of ContentFundamentalsText2proof2009:•Fundamentals/text 6/5/09 4:10 PM Page i
FUNDAMENTALS
OF BUILDING
CONTRACT
MANAGEMENT
Second Edition
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&
Thomas E Uher Philip Davenport
F U N D A M E N TA L S
O F B U I L D I N G
C O N T R A C T
M A N A G E M E N T
Second Edition
UNSW
PRESS
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AUNSWPressbook
Publishedby
UniversityofNewSouthWalesPressLtd
UniversityofNewSouthWales
UNSWSydneyNSW2052
AUSTRALIA
www.unswpress.com.au
©ThomasEUherandPhilipDavenport2002,2009
Firstpublished2002
Reprinted2006,2007
Thisedition2009
Thisbookiscopyright.Apartfromanyfairdealingfor
thepurposeofprivatestudy,research,criticismor
review,aspermittedundertheCopyrightAct,nopart
maybereproducedbyanyprocesswithoutwrittenper-
mission.Inquiriesshouldbeaddressedtothepublisher.
NationalLibraryofAustralia
Cataloguing-in-Publicationentry:
Author:Uher,ThomasE.(ThomasEdward).
Title:Fundamentalsofbuildingcontractmanagement.
ThomasE.Uher,PhilipDavenport
Edition:2nded.
ISBN:9781742230214(pbk.)
Bibliography.
Notes:Includesindex.
Bibliography.
Subjects:Constructioncontracts—Management.
Constructioncontracts—Australia—
Management.
OtherAuthors/Contributors:Davenport,Philip.
692.8068
PrinterLigare
CoverdesignDiQuick
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CONTENTS
Preface xi
Abbreviations xiii
PART I
PRE-CONSTRUCTION CONTRACT ADMINISTRATION
1 Introduction to contract administration 1
1.1 What is a contract? 1
1.2 Contracts in context 6
1.3 The elements of a contract 8
1.4 General comments on contracts 18
1.5 Acts and regulations 20
1.6 A brief history of building contracts 21
1.7 Fundamentals of contract administration 25
2 Project lifecycle 28
2.1 Introduction 28
2.2 Conceptual stage 29
2.3 Design stage 36
2.4 Tendering stage 45
2.5 Pre-construction stage 46
2.6 Construction stage 46
2.7 Commissioning stage 47
2.8 Post-occupancy evaluation (audit) 48
3 Contract strategy 51
3.1 Introduction 51
3.2 Contract strategy 51
3.3 Project delivery methods 54
4 Options for contract price 60
4.1 Introduction 60
4.2 Fixed-price contracts 60
4.3 Cost-plus contracts 64
5 The traditional method of project delivery 68
5.1 Introduction 68
5.2 Nature of the traditional method 68
5.3 Organisation structure of the traditional method 69
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5.4 Advantages to the principal 72
5.5 Disadvantages to the principal 73
5.6 Traditional contract strategy 73
5.7 Standard forms of general conditions of contract for use with
the traditional method of project delivery 74
6 Non-traditional methods of project delivery 76
6.1 Introduction 76
6.2 Design and construct method 77
6.3 Construction management method 86
6.4 Project management method 101
6.5 In-house development method 113
6.6 Public private partnership 113
6.7 Performance of different methods of project delivery 117
6.8 Impact of non-traditional methods on different contractual
parties 118
6.9 Impact of non-traditional methods on the construction
industry 119
7 Administration of managed methods of project delivery 122
7.1 Introduction 122
7.2 The agency CM method 122
7.3 The non-agency CM method 127
7.4 General comments on managed delivery methods 129
7.5 Construction packages 129
7.6 Cost administration 130
7.7 Time administration 131
7.8 Incentives 131
8 Partnering and strategic alliance 132
8.1 Introduction 132
8.2 Definition of partnering 133
8.3 History of partnering 135
8.4 Essential elements of partnering 136
8.5 Types of partnering 146
8.6 Partnering process 150
8.7 Performance of partnering 155
8.8 Partnering performance indicators 163
8.9 Reward for performance 164
8.10 Legal issues in partnering 167
8.11 Strategic alliance 169
9 Competitive tendering 172
9.1 Introduction 172
9.2 Formation of building contracts and subcontracts 173
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9.3 Tender documentation 177
9.4 Tender process 183
9.5 Selection of the best tender 186
9.6 A model of effective tender administration 189
9.7 Cost of tendering 194
10 Subcontracting practice 198
10.1 Introduction 198
10.2 History of subcontracting 199
10.3 Subcontracting in the US, UK and Australian construction
industries 201
10.4 Risks in subcontracting in Australia 203
10.5 Subcontract conditions 203
10.6 Subcontracting and the principal 207
10.7 Bid shopping in the construction industry 209
11 Risk allocation: a new approach 216
11.1 Risk allocation theory 216
11.2 Analysing the theory 217
11.3 An alternative approach 219
PART 2
CONSTRUCTION CONTRACT ADMINISTRATION
12 Analysis of general conditions of contract 225
12.1 Introduction 225
12.2 Risk allocation 229
12.3 Flow of information 229
12.4 General contract clauses 237
12.5 Latent conditions 243
12.6 Responsibilities of contractual parties 247
12.7 Assignment and subcontracting 256
12.8 Time 259
12.9 Payment to contractor 266
12.10 Adjustment of contract sum 274
12.11 Contract insurance 281
12.12 Defective work 284
12.13 Termination of contract 284
12.14 Disputes 286
13 A guide to the selection and preparation of contracts 289
13.1 Introduction 289
13.2 Types of contract 290
13.3 Cost risk by type of delivery method 291
13.4 Clauses and conditions of contract 292
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13.5 Risk in specific contract clauses 292
13.6 Special conditions of contract 297
14 Defective work 302
14.1 Introduction 302
14.2 Duties of superintendent 304
14.3 Implications of concurrent tort liability 306
14.4 Estoppel 309
14.5 Agreement to overcome defect 311
14.6 Rectification order 312
14.7 Trifling defect 312
14.8 Progress payments 313
14.9 Electing to accept defective work 314
14.10 Valuing involuntarily accepted defective work 318
14.11 Variations to overcome a defect 320
14.12 Summary 321
15 Legislation and registration 323
15.1 Legislative framework 323
15.2 Contracting entity 323
15.3 Licensing and registration 324
15.4 Unlicensed contracting: offence 326
15.5 Unlicensed contracting: payment 326
15.6 Limits on freedom to contract 328
15.7 Trade Practices Act 330
16 Construction programs 333
16.1 Introduction 333
16.2 Purpose of programs 334
16.3 Interpretation of construction programs 336
PART 3
POST-CONSTRUCTION CONTRACT ADMINISTRATION
17 Contract disputes 341
17.1 Introduction 341
17.2 Contractual notice provisions 342
17.3 Common sources of contractor’s claims 343
17.4 Types of claims 344
17.5 Claims preparation 347
17.6 Quantifying a claim 347
17.7 Damages 350
17.8 Unjust enrichment 356
17.9 Latent defects and economic loss 360
17.10 Hudson formula and prevention principle 363
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17.11 Frustration 368
17.12 Termination 371
18 Dispute resolution 374
18.1 Introduction 374
18.2 Resolution by agreement 374
18.3 Resolution by a binding decision of a third party 376
18.4 Litigation 376
18.5 Arbitration 377
18.6 Expert determination 379
18.7 Differences between experts and arbitrators 380
19 Security of payment 383
19.1 Introduction 383
19.2 Payment culture of the construction industry 385
19.3 Means of securing payment 387
19.4 BuildingandConstructionIndustrySecurityofPaymentAct1999(NSW) 388
19.5 Operational features of the amended NSW Act 392
19.6 Acceptance or otherwise of the NSW Act by courts 398
19.7 Brief overview of different security of payment schemes 408
Appendix A
Partnering evaluation forms 417
Appendix B
Partnering charter 421
Appendix C
Example of a tender form 422
References 423
Index 432
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