CONTRACT PROCEDURES The contract documents comprise:

● The owner-contractor agreement

● The conditions of the contract (including any supplementary details or other conditions)

● The drawings

● The specifications

● Any addenda previously issued, or modifica-tions (i.e., written amendments to the contract, signed by both parties, e.g., change orders, writ-ten interpretations, or minor changes)

● Related documents and agreements

● Performance bond and labor and material pay-ment bond

● Owner’s insurance and contractor’s insurance When the documents are ready, they should be sent to the parties for signing with a cover letter.

Notice to Proceed

This is written authorization from the owner to the contractor establishing a date of commence-ment and completion of the building work. The Notice to Proceed is used if the work is started after (not before) the date of the signing of the contract.

Letter of Intent

Should construction need to be started before the contract documents have been signed (e.g., where time is of the essence), a letter of intent may be sent by the owner, giving the contractor authority to proceed. If used, the letter should be carefully drafted to avoid any conflict with the actual con-tract documents, and legal assistance should be sought. The letter should emphasize that no sub-contracts should be effected, nor should any materials be ordered other than those relevant to the specific work permitted. Insurance should be carefully considered if a letter of intent is used, and it should be made very clear that the letter will cease to have effect upon the signing of the actual contract.

Once the contractual relationship is estab-lished, certain obligations must be met by both parties, including:

● Owner capability (see page 70)

● Contractor’s work schedule

● List of subcontractors

● Schedule of values

● Certification of insurance

● Permits

Contractor’s Work Schedule

As soon as the contract has been awarded, the contractor should provide for the architect’s infor-mation an estimated schedule of progress. This is usually in the form of:

● A bar chart

● Critical path method Bar Chart

A bar chart indicates the work, divided by trades or operations, against which a time scale can be set. The progress of the work can be plotted between the two.

Critical Path Method

Critical path analysis is a project planning device which aims to optimize time and operations on site. The system divides various activities which are sequenced in terms of their interrelationship.

When the time factor is added, a path may be plotted which reveals the most efficient opera-tional procedures which should be followed. The schedule can be monitored by regular assessment of actual achievement on site. This enables con-tinued prioritizing and adjustment throughout the period, to enable maximum efficiency in allotting time for the various stages of the project.

PERT (Project Evaluation Review Technique)

This is a method of scheduling which establishes, in chart form, activities and operations antici-pated in the project layout which can introduce a cost element into the programming. PERT has not been commonly adopted in the construction industry.

List of Subcontractors See page 77.

Schedule of Values

Prior to the first application for payment, the contractor must submit a Schedule of Values to the architect, together with any data supporting its accuracy that the architect may require. This then forms the basis for reviewing future applica-tions for payment, and should indicate the sec-tions of the contract sum provided for the various parts of the work.

Contract formationLaw and Practice for Architects●71

72●Law and Practice for ArchitectsContract formation

AIA Document A310: Bid Bond

Contract formationLaw and Practice for Architects●73

AIA Document G715: Supplemental Attachment

Certification of Insurance

The contractor should file with the owner (or with the architect if requested by the owner) cer-tificates of insurance before starting work (AIA Document A201, Article 11.1.3).

Permits

Under the AIA General Conditions, the contrac-tor is responsible for obtaining the building permit and certain other governmental require-ments, e.g., licenses.

BONDS

Of the various measures often taken in the con-struction industry to minimize risk and potential loss, surety bonds are a common precaution. A surety bond is basically an assurance by one party which provides that specified obligations of another will be met, despite unforeseen or unde-sirable events. In reality, the cost of bonds, although technically borne by the contractor, is transferred to the owner by inclusion in the bid.

Performance Bond

A performance bond ensures that all bids for labor and materials will not revert to the owner in the event of nonpayment by the contractor.

Combination bonds are considered inadvisable by the AIA as they can cause legal complications in the event of a claim. The AIA recommends the two-bond system as a preferable procedure. State laws should be checked regarding the use of bonds, as statutory requirements vary with regard to bond provisions.

If claims are made against bonds during a con-struction project, AIA Document B141, Owner-Architect Agreement, provides for additional payment to the architect for the work involved in making the necessary arrangements for the con-tinuation of the project.

Other Bonds

Other forms of bonds sometimes used include:

● Payment bond

● License or permit bond

● Lien and no-lien bond

● Maintenance bond

● Release of retained percentage bond

● Statutory bond (check each state for require-ments)

● Subcontract bond

● Termite bond AIA Bonds

Although there are no standardized requirements for bonds compatible with all state laws and owner preference, the AIA produces certain forms which are helpful in many cases. These include:

● A310, Bid bond (see page 72)

● A312, Performance Bond and Payment Bond (see pages 75, 76)

In certain states, variations of the basic forms have been developed to comply with individual state laws for use in public and private construc-tion projects.

In all matters relating to bonds and insurance the owner should seek expert advice. The archi-tect should not attempt to provide this informa-tion, as it does not fall within architectural services and may be expressly proscribed by some professional liability insurance policies.

SUBCONTRACTORS AND SUPPLIERS