Do You Know the Entire Contract – Part 13

 

Critical Components in General Conditions  -  Definitions

Originally posted in 2017, https://www.projectmanagement.com/blog-post/48070/Part-12-----Do-You-Know-the-Entire-Contract, Parts 1 -12 were tailored for Project Managers to know the various parts of a contract between a Buyer and Seller.    The information could be applied to contracts for purchased materials and furnished products.    At the time, the articles were focused on topics that were essential for Project Managers to contribute and take a lead role in developing the Contract, and to be best prepared for the post-award execution.     The previous articles covered:

1. Information For Bidders (IFB) – Due Dates
2. IFB – Company Qualifications
3. IFB – Key Personnel
4. iFB – Bid Requirements
5. General Conditions (GC) – Buyer Contacts
6. GC – Performance Schedule
7. GC – Progress and Milestones Payments
8. GC – Liquidated Damages
9. Specifications – Division 1
10. Specifications – Division 1
11. Special Conditions/Supplemental Terms and Conditions – Part A
12. Special Conditions/Supplemental Terms and Conditions – Part B

The Contract is the baseline for Buyers and Sellers to define, execute, manage, and closeout the work as part of a project.   No matter how much effort and time the Buyer uses to create the Contract, it will never be perfect and there will be times when the Buyer and Seller will have questions and uncover conflicts or ambiguity that will need to be resolved fairly.    As a result, the Contract normally includes a section in the General Conditions for Interpretation.   Among other items, this requirement indicates that when a conflict is discovered the more stringent shall apply, and as needed, the Seller shall notify the Buyer in writing of the specifics within a fixed period of days from when the Seller becomes aware of the conflict.

When clarity is required on contract requirements, there are several options available for bidders and   Sellers with the Buyer.

Pre-Bid/Proposal

During the bid/proposal period, bidders are required to present to the Buyer any questions or requests for clarification on the Contract requirements.   This includes identifying conflicts in the Contract Documents, which normally defer to the more stringent requirement. 

Following receipt of bidders’ questions, the Buyer will provide an answer and issue an Addendum to the Contract.   The Addendum becomes part of the Contract and they are distributed to all bidders registered for picking up proposal packages.  

Post-Contract Award

After the Contract is awarded to the Seller, all questions on conflicts in the requirements or on vague requirements will follow the Request For Information (RFI) process.  The Buyer’s RFI process will be presented to the Seller as part of several topics on administration and execution at the Contract Kick-Off Meeting.  

The RFI process follows a Buyer’s specific format and content for asking questions and requesting clarifications.   The duration for response will be established by the Buyer unless specific due date are identified by the Seller in the RFI.  

An often overlooked and under-developed is the General Conditions section for Definition.   This is usually ignored because the presumption is, if its not in the Definitions is because the details are provide in detail in other sections of the Contract.   However, this may not always be the situation.     

Critical Components in General Conditions  -  Definitions

The first action when questions on requirements arise with the Contract is for Buyer and Seller to review the entire Contract including the Definitions.   While this may not resolve the question, it may eliminate an unnecessary RFI. 

The Buyer’s response to the Seller’s RFIs become part of the Contract and they need to be managed, and as determined by the Buyer may result in changes to the Contract documents.   The Seller may also follow within notice of potential change if the Buyer’s RFI response can be substantiated as extra work not originally mutually understood at award of the Contract.

Some definitions are not in the Contract because they are assumed normal practice for executing contracts in a particular industry.  As noted in Part 6, the typical contract milestones are Notice to Proceed, Substantial Completion and Contract Completion.    For construction contracts, particularly in rail transit projects, the may be additional milestones and definitions needed to support the Buyer’s desired execution of the work.   As a result, the following definitions and milestones should be considered:

• Punchlist:    A list of minor touchups and repairs that do not restrict the Buyer’s use of work for its intended purpose.    The work on the list shall not include base scope not yet installed unless otherwise agreed upon by Buyer and Seller. 
• Operational Use:   Prior to Substantial Completion or Construction Completion, the Buyer’s critical business determines the need for use of a portion of the work.   
• Final Acceptance:   This is the condition when the Seller provides all deliverables regarding the work to achieve Final Acceptance such as as-built drawings, spare parts, O&M Manuals, Training, Software, Warranty, and Asset Management Construction Completion, and the Buyer acknowledges Acceptance, and takes responsibility for future operation and maintenance.
• Contract Construction Completion:  This is the contract level condition when the all construction is completed, including punchlist, certifications and demobilization, is completed and verified by Buyer’s final inspection and sign-off, and the Seller is able to demobilize personnel and equipment and no longer requires access to the work site from the Buyer.    The only remaining contract work is the administration of the closeout processes and documentation to achieve Contract Completion.
• Intermediate Construction Completion:    For contract scope that can be separated without interdependence with other scope, all intermediate work scope, including punchlist, certifications and demobilization, is completed and verified by Buyer’s final inspection and sign-off, and the Seller is able to demobilize personnel and equipment and no longer requires access to the intermediate scope work site from the Buyer.      
• Contract Substantial Completion:  This is the contract level condition when the work is completed by the Seller for use by the Buyer as intended.   The only remaining construction is the punchlist work. 
• Intermediate Substantial Completion:   For contract scope that can be separated without interdependence with other scope, the work is completed by the Seller to a condition the intermediate scope is suitable for use by the Buyer as intended. 
• Final Completion/Closeout:     This is the contract level condition when the all contractual, legal and administrative activities and deliverables are provided by the Seller and acknowledged by the Buyer, including the reconciliation of changes, payments and claims; release of liens and other contractual notices are completed; and the Buyer releases retainage withheld on payments.             
• Intermediate Final  Completion:   For contract scope that can be separated without interdependence with other scope, this is the condition the Seller substantiates reconciliation of changes, payments and claims; release of liens and other contractual notices for the intermediate scope are completed; and the Buyer releases retainage withheld on payments equated to work. 
• Delay:  This is a Seller’s formal Notice to Buyer presenting that a condition of the work, including unforeseen site conditions, limited work hours, lack of prescribed support from Buyer or adjustments in pre-award means and methods approved by the Buyer, has changed the Seller’s originals plans, and as a result, the Seller’s ability to achieve the original schedule milestones are impacted.
• Excusable Delay:  This a Buyer’s substantiation of a Seller’s Notice, regarding a delay that impacts original schedule milestones, and determination the Seller demonstrated reasonable and proactive attempts to mitigate the impacts, and it results in a contract modification to adjust the schedule milestones.
• Concurrent Delay:  This is a Buyer’s determination that the Seller’s Notice of delay is parallel to other excusable delays presented by the Seller and already granted by the Buyer during the same period.

TIP:     Definitions apply to the entire contract.   The content for terms and phrases in Definitions should not be repeated in other parts of the Contract.   This will avoid creating conflicts from duplicate but differing language.

TIP:    Definitions are the primary source for information when there is ambiguity in other sections of the Contract.