Part 12 - Do You Know the Entire Contract
| Critical Components in Special Conditions/Supplemental Terms and Conditions - Part B In most contracts, the Contract Terms and Conditions may be amplified using sections for Special Conditions (SC) or Supplemental Terms and Conditions (STC). This is the 12th in a series of discussions that is intended to prompt Project Teams to be aware of the entire contract document, including Information For Bidders (IFB), General Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] In the rail transit domain, there may be unique requirements that are created by work conditions, from implementation of alternative delivery methods, for multiple milestones with liquidated damages and for incentives to beat performance milestones. By exception, these requirements are expressed in SC and STC. INSURANCE : Typically, insurance requirements cover General Liability, Workmen’s Compensation, automotive, and professional liability. The scope and insured amounts are established by the Buyer’s legal and risk management groups. In a railroad environment, the requirements are supplemented to include: Railroad Protective: This coverage applies to a contract work zone that requires the contractor to work under hazards such as moving passenger trains and on-track vehicles, high voltage third rail and overhead catenary systems. Environmental: This coverage applies to a contract work zone where there is known materials and risks of hazardous materials, such as contaminated soil, asbestos containing materials and cables, lead in paint and cable insulation, and hazardous materials in soils such as PCBs and mercury. WARRANTY: Generally, the standard contract form specifies the requirements for warranty of the products, including the period based on a defined date typically a contract milestones, such as Substantial Completion. However depending on the complexity of systems, first time applications of technology or unique execution means and methods in an operations environment, trade standard warranty requirements may not be adequate. In these cases, Buyer’s will supplement requirements with processes and metrics. The SC and STC Warranty requirements such as:
TIP: Warranty commercial requirements in the SC/STC should be coordinated with requirements that are identified in technical specifications. MATERIALS PROVIDED BY BUYER: Division of work on contract uniformly specify the contractor responsibilities for labor, materials, equipment and supervisory services to complete the work. In unusual circumstances, the contract requirements stipulate the Buyer provides the Seller with materials for installation as part of the contract scope. As a result, the contract will incorporate technical information in the Div 1 specifications, and commercial conditions for transfer of materials between Buyer and Seller and the responsibilities for accepting and storing materials for installation when required. This may include warehousing requirements, bonding, insurance and processes for accepting materials. TIP: Ensure the project risk management plan and the contract management plan includes the required resources and processes for executing and managing the work under this project requirement. TIP: Ensure a cost benefit justification is documented to support the decision for the division of work on the contract. |
Part 11 - Do You Know the Entire Contract
| Critical Components in Special Conditions/Supplemental Terms and Conditions - Part A In most contracts, the Contract Terms and Conditions may be amplified using sections for Special Conditions (SC) or Supplemental Terms and Conditions (STC). This is the 11th in a series of discussions that is intended to prompt Project Teams to be aware of the entire contract document, including Information For Bidders (IFB), General Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] In the rail transit domain, there may be unique requirements that are created by work conditions, from implementation of alternative delivery methods, for multiple milestones with liquidated damages and for incentives to beat performance milestones. By exception, these requirements are expressed in SC and STC. LIQUIDATED DAMAGES (LDs): As discussed in Part 8 of this series, most contracts with liquidated damages are based solely on a performance milestone for substantial completion. However, the Buyer can incorporate more milestones and different LD amounts depending on the contract delivery method and interdependencies with predecessor or successor contracts. Contracts where these requirements may be applicable include design-build construction contracts, design-build system contracts, and bid-build construction contracts with Buyer furnished materials. These contracts may incorporate milestones for delivery of major equipment, completion of design submittals, completion of construction submittals, and completion of construction corresponding to access constraints and work restrictions. INCENTIVES: Incentive requirements are the exception to 99% of contracts. For Buyer’s with a defined benefit for early completion of milestones, the opportunity to utilize the contract provision may off-set the premium cost for accelerated work. In these cases, the contract may incorporate incentives for Seller payments tied to performance schedule milestones. Incentives are intended to encourage contractor creativity to accelerate completion of milestones while achieving the form, fit and function of products. Similar to decisions on LDs, Buyer incorporation of incentives needs to be carefully considered. Schedule benefits should be tabulated and quantified in the Buyer’s business case that justifies the incentives in a contract. While LDs reduce a contract amount for delays, incentives can increase the contract amount for completion of milestones ahead of the contracted dates. As a result the Buyer’s project finances need to ear-marked funding to cover the liability for Seller’s success. The contract language is likely to be more extensive and include specific criteria for the Buyer confirming entitlement for the Seller achieving early completion of defined milestones. The contract will also amplify the claims, remedy and resolution requirements regarding variances between Buyer and Seller interpretation of entitlement. TIP: LDs and Incentives should be carefully balanced with the administrative effort to monitor, manage, document and enforce. TIP: Contract language should define the coordination between LD and incentive requirements to ensure Buyer and Seller clearly understand enforcement, conflict resolution and remedies. TIP: The Buyer’s procurement/contractor acquisition should select either the LD or Incentive requirements to avoid conflicts in focus by the contractor during contract execution. LDs and Incentives in a single contract will create distractions as the contractor makes internal decisions to capitalize on milestones tied to incentives while accepting delays and cost liabilities on milestones tied to LDs. TIP: Incentive estimate should be vetted thoroughly to ensure the document can be defended by the Buyer in response to a claim from the Seller or subsequent litigation action by the Seller. |
Part 10 - Do You Know the Entire Contract
| Critical Components in Division 1 Specifications - Part B This is the 10th in a series of discussions that is intended to prompt Project Teams to be aware of the entire contract document, including Information For Bidders (IFB), General Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] In the rail transit domain, construction contracts may include items that are executed under unique conditions. The conditions include sharing property by multiple prime contractors, work progress while maintaining Buyer’s use of surrounding assets, restoring asset use after each work period, scheduling work within defined outages and service plan changes. Div 1 Railroad Operations: This section contains the requirements for executing work in a work zone while the Buyer maintains full service for train operations. The topics may include roadway worker protection, service changes, track/power outages, on-track vehicles, railroad provide services, work during operational emergencies, operating vehicles and vehicles on Right-Of-Way (ROW). Div 1 Temporary Construction: This section contains the requirements for constructing and removing temporary work to support work execution, and protecting railroad assets throughout the contract. The topics may include supervision and employee facilities, parking and storage areas, facilities for railroad personnel, and customer flow through work areas. Div 1 Site Conditions Monitoring: This section contains the requirements for monitoring site conditions and railroad assets, and implementing corrective actions that may result from influences of passing vehicles on or adjacent to tracks, bridges, buildings, utility poles and equipment rooms and enclosures. The topics may include soil grade and density, track bed and right of way slope, erosion at abutments and retaining walls. Div 1 Pre-Construction Planning and Controls: This section contains the requirements for the startup, protection and maintenance of work site conditions throughout the contract. The topics may include relating the Safe Work Plan with the use of labor and equipment at site specific locations, and utility mapping, excavation monitoring, and mark-out of known subsurface utilities and infrastructure. Div 1 Code Enforcement Coordination: This section contains the requirements for coordination of progress on inspections and validation of compliance with the code requirements throughout the contract. The topics may include a summary of the products in the contract requiring inspection, and the processes, procedures and records that are required for the Buyer to use the work completed under the contract. TIP: Div 1 requirements should be correlated and consistent with the other Division specifications. TIP: Depending on circumstances and management requirements, additional Div 1 specifications can be created and incorporated into the contract. However, more specifications mean more prescriptive requirements. In turn, it means allocating more management resources to monitor and document compliance, and increase risk threats to progress and critical schedule dates. |
