procedures for managing subcontracts brown book)

Contract/SubcontractManagement User Guide

Copyright 1999. All Rights Reserved.

TABLE OF CONTENTS Page i of v

1 INTRODUCTION

Purpose

Scope

Related Manuals

2 RESPONSIBILITIES

Assignment of Tasks

3 INITIAL TASKS

Pre-Award Activities

Pre-Construction Meeting

Filing System

Correspondence and Correspondence Control

Insurance and Bonds

Schedule Submittals

4 PERFORMANCE

Changes

Commitment Approvals

Schedule

Requests for Information (RFI'S)

Technical Transmittals

Claims

Backcharges

5 MONITORING/REPORTING

Daily Report

Progress Review and Coordination Meetings

Progress Measurement and Payment

Quality Surveillance

Safety and Health

Environmental

6 CLOSEOUT

TOC TABLE OF CONTENTS *

CONTRACT/SUBCONTRACT MANAGEMENT MANUAL

TABLE OF CONTENTS Page ii of v

6.1 Contract Closeout

6.2 Beneficial Occupancy

6.3 Substantial Completion

6.4 Punch List

6.5 Warranty

7 SPECIAL TOPICS

7.1 Contract Law

7.2 Basis for Claims

7.3 Negotiation

7.4 Interface Coordination

7.5 Labor and Industrial Relations

7.6 Force Accounts

7.7 Liquidated Damages

7.8 Delays and Extension of Time

7.9 Acceleration

7.10 Suspension of Work

7.11 Differing Site Conditions

7.12 Terminations

7.13 Project Environmental Controls

INDEX

FORMS


TABLE OF CONTENTSSECTION 1. INTRODUCTION Page i

Introduction

TABLE OF CONTENTS

1.1 Purpose......................................................................................................................................11.2 Scope.........................................................................................................................................1

SECTION 1. INTRODUCTION Page 1 of 1

1.1 Purpose This Guide establishes standard practices for managing subcontracts.

1.2 Scope This Guide provides procedures for managing subcontracts.

Many of the procedures in this Guide include a work practice Checklist toprovide a quick overview of the key requirements of contract management.

A clear understanding of the terms and conditions of the contract beingmanaged as well as those of the prime contract is required before any actionprescribed by these procedures is taken.

This Guide should be used in conjunction with approved Project proceduresmanuals.

1 INTRODUCTION


TABLE OF CONTENTSSECTION 2. RESPONSIBILITIES Page i

Responsibilities

TABLE OF CONTENTS

2.1 ASSIGNMENT OF TASKS.......................................................................................................12.1.1 Purpose ..................................................................................................................................12.1.2 Background ............................................................................................................................12.1.3 Procedure ...............................................................................................................................12.1.4 Exhibit ...................................................................................................................................1

2.1 ASSIGNMENT OF TASKSSECTION 2. RESPONSIBILITIES Page 1 of 11

2.1 ASSIGNMENT OF TASKS

2.1.1 Purpose The purpose of this section is to provide a comprehensive list of tasks whichshould be performed to manage a contract successfully.

2.1.2 Background Effective management of a contract includes making sure that each of theessential task is assigned and performed. The complexity and size of theindividual contract and available project resources will affect the decision ofwhich tasks are essential for the contract. However, certain tasks should beconsidered essential for all contracts (e.g., daily reports, change controlprocedures, correspondence log and files, insurance and safety/healthrequirements.

Contract management is a team effort. Optimizing a project’s personnelresources requires that administrative responsibilities be delegated through theproject organization, independent of a group’s discipline responsibilities.

2.1.3 Procedure The method of communicating and assigning the functional responsibilities foreach contract is by a Division Of Responsibility (DOR) Matrix (Exhibit2.1.3.).

The generic DOR Matrix in this procedure is a guideline for development of aproject or contract-unique DOR to ensure that each of the identified tasks isassigned to specific project personnel. A small project may have one DORfor the entire job or a large project may have separate DORs for eachcontract.

2.1.4 Exhibit Division of Responsibility (DOR) Matrix (Exhibit 2.1.3)

2 RESPONSIBILTIES


Contract No.

Contractor

DIVISION OF RESPONSIBILITY MATRIX✶ (Exhibit 2.1.3)

ContractFormation -Regional OfficeIssued Contracts

Lead__________

Input to MaterialAssignmentSchedule

Assigned to:__________

Development ofproformadocument anddetermination ofmandatory primecontractflowdowns


Coordinatepackagedevelopment,pre-bid meetingandbidding/award ofcontract


Input to pricingand proposalsection


Prepare MaterialRequisition (MR),technical scope,specifications anddrawings


Identify companyor customerfurnished utilities,facilities andservices


Develop andprovide schedulerequirements andcost estimates forcontract package


Review bids,provide input tobid evaluationcriteria, bidevaluation andbid clarificationmeeting


Pre-bid Meeting

Lead__________

Develop agenda;biddingprocedure;commercialaspects; preparemeeting minutes


Chair andconduct meeting;cover projectscope, workrules, generalconditions; ethicsand code ofconduct


Review changemanagement,insurance,progressreporting andpaymentdocumentation


Review qualitycontrol, fieldengineeringrequirements


Cover siteoperationalrequirements, laborrelations, contractorinterface andcoordination


Describe cost andschedule reportingrequirements


Explain Safetyand Health Plan,and projectrequirements


✶For contracts which the company is managing on behalf of a customer, the DOR should be modified to include customer representative interfaces.

Notes: 1. The Project Manager or Site Manager, in conjunction with the Contracts Manager, is responsible for assignment of the functions listed in this matrix. All tasks must be assigned and the

responsible employee trained and familiar with the task.

2. If the nature of the contract or available project resources dictate that a task will not be assigned and performed, indicate "Not Performed" in the "Assigned To" box.

3. All employees are responsible for providing the necessary support to an employee assigned responsibility for a given task or function.



Division ofResponsibilityMatrix (DOR)

Lead__________

Initialassignments(by name)


Updates


Historical file


ContractPackageTurnover fromRegional Office to Field

Lead:__________

Review turnoverpackage forcompleteness


Composepunchlist ofmissing items inturnover package


Monitor andstatus punchlist


Establishresponsibilityfor resolution ofopen items


Pre-constructionMeeting

Lead__________

Define CompanyAuthorizedRepresentative


Prepare agenda,conduct meeting


Discussconstructionoperationsrequirementssuch as facilities,equipment,coordination


Cover LaborRelationsrequirements


Cover Safety andHealthrequirements


Cover scheduleand progressreportingrequirements


Cover contractadministrativerequirementsincludingsubmittals andinvoicing


Review ethicsand code ofconduct


Pre-constructionMeeting(continued)

Lead________

Prepare meetingminutes andaction/open itemslist


Monitor andstatusaction/openitems




Labor Relations

Lead _______________

AdministerProject LaborAgreement, ifapplicable

Assigned to:

Labor Relations Dept.

Coordinate laborissues withcontractor


Receivecontractor'snotices ofactual/potentiallabor disputes


Record nature,duration andimpact of workstoppages


Correspondenceand Notices

Lead__________

Designaterecipient for allcontractcorrespondence(except as notedbelow)


Logcorrespondenceand maintain files


Assign actions

Assigned to:__ALL_____

Report andfollow up openaction items


Prepare outgoingcorrespondence,log and monitoropen items


Review outgoingcorrespondencefor compliancewith contract andprocedures


Review and signall outgoingcorrespondence


Archiving andpermanentstorage


Requests forInformation(RFI's)

Lead__________

Designaterecipient


Log RFI's,maintain Files


Assign action


Report andfollow-up openaction items


Review and signoutgoing responses


Review RFI's "afterthe fact" forcommercialimpact


File/RouteMiscellaneousDocuments

Lead__________

Contract files


Drawings


Technicaldocuments(other thandrawings)


Schedulesubmittals


Payment files


Expediting reports


Inspection reports


Progressphotos


File/RouteMiscellaneousDocuments(Cont'd)

Safety / Securityfiles




Insurance andBonds

Lead__________

Obtain and re-view InsuranceCertificates andbond commit-ment letters forcontractcompliance


Verify validity ofInsuranceCertificates andletters


Verify insuranceand bondingcompanies areon company'sapproved list


Maintain ticklersystem forpolicyexpirations


ContractorTechnicalSubmittals

Lead__________

Develop list ofcontractorsubmittals


Receive and logcontractorsubmittals


Assign actionitems andmonitor statusof open items


Conduct orcoordinatetechnicalreviews


Conduct orcoordinate cost andschedule reviews oftechnical submittals


Approvecontractorsubmittals


Monitor closureof contractorsubmittalrequirements


ContractSchedule

Lead:__________

Set Milestonedates


Obtain initialcontractorschedule


Verify schedulesubmittal meetscontractrequirements


Coordinate sub-mitted schedulewith projectschedule


Approve schedulesubmittal


Monitor progressagainst approvedcontract schedule


Obtain/reviewperiodic scheduleupdates fromcontractor


Review claimedimpactsaffecting criticalpath/milestones


ContractSchedule(Cont'd)

Processcompany or 3rdPartybackchargesarising from latescheduleperformance


Evaluate whethercontractmilestone datechanges arejustified


Issue ChangeOrder to confirmjustified andagreed uponchangesto contractschedule


Issue notices ifcontractmilestone datesare in jeopardy


Direct accelerationto recover schedule


Directacceleration toadvancemilestone datesrelative to contractdates




ProgressPaymentSchedules

Lead__________

Obtain, review forcompliance withcontract


Establish methodand verifyquantity or workmeasurementmethods


Review,compare tocontractschedule anddevelop cashflow curve


Approvequantityprogresscalculations


Invoices andPayments

Lead__________

Check invoicesfor accuracy andthat pricing isaccording tocontract


Verify billed workagrees withapprovedprogress


Verify contractrequirements aremet beforepayments issued


Verify properdeductionsmade forretention,backcharges orother offsets


Approve payments


TechnicalTransmittalsfrom Engineer

Lead__________

Receive copies oftransmittals,prepare ChangeNotices


Sign ChangeNotices


Assemble andpreparetransmittals tocontractor


ContractChanges

Lead__________

Initiate requestsfor changes


Review requestsfor changes


Prepare ChangeNotices, ChangeOrders andAmendments


Sign ChangeNotices


Issue, control andmonitor ChangeNotices


Track costs for allchanges pendingnegotiated settle-ments


Negotiatechanges




ContractorProposals

Lead__________

Receive and logcontractorproposals


Evaluatetechnical merit


Evaluateschedule merit


Evaluatecommercialmerit


Prepare responsesto contractor


Authorizenegotiation limits


Plan and conductnegotiations


Approve finalsettlements


ContractorProposals(continued)

Prepare cost andcommitmentchanges andobtain approvals


Daily Reports

Lead__________

Observe,assemble andreport significantinformation(Prepare DailyReports)


Review DailyReports forcommercialsignificance


Review DailyReports forProjectsignificance


Log and retainDaily Reports


Contractor'sForce, EquipmentUtilization andMaterial UsageReports

Lead__________

Obtain reports


Review andanalyze reports


Log and retainreports


ContractorQuality Program

Lead:__________

Obtain copy ofprogram


Analyze, reviewand approve


Resolve openaction items




QualitySurveillance

Lead__________

Inspect work inprogress andcoordinate withcontractor


Inspect off-site/shopfabrications


Verify inspec-tions complywith contractrequirements


Determineacceptance orrejection of work


Review contractor'sproposedremedial actions


Determine bestremedialaction and directcontractor


Monitor close-outof open qualityissues


Daily Report ofForce Account

Lead__________

Obtain reportsfrom contractor


Summarize dataand report


Approve reports


Retain originalswith contractorinvoices


Backcharges

Lead__________

Identify scope ofbackcharge work;prepare summary


Determine ifwork isbackchargeable


Prepare noticesof backcharge


Obtaincontractorapprovals


Establish uniquecost code forbackcharge workand verify work isproperly coded


Summarize dailydata and reports


Approvebackchargesettlements


Safety and Health

Lead__________

Obtain copy ofContractor'sSafety andHealth Program


Monitorcontractor comp-liance with Safetyand HealthProgram


Obtain name ofdesignatedcontractoremployee forsafety & health


Identify andevaluateviolations


Prepare notices tocontractor


Sign/approveviolation notices


Transmit notices,maintain log andmonitor status ofviolation notices


Verifycontractorcorrectiveactions




Environmental

Lead:__________

Identify projectagencies.environmentalregulations andconstraints


Obtain copy ofcontractor'swrittenEnvironmentalComplianceProgram (ECP),if required andobtain name ofdesignatedcontractoremployee forECP


Prepare apermitting planor matrix

Assigned to:_________

Reviewcontractorpermitrequirementsand monitorcompliance


Identifyenvironmentaldesign criteria andincorporate intodesign basis


Facilitate thepreparation andreview process ofthe EnvironmentalImpactAssessment, ifrequired


Monitor theprogress ofpermit acquisition


Prepare aConstructionEnvironmentalControl Plan(CECP)


Environmental(continued)

Obtain HazardousMaterials andWaste List fromcontractor and, asappropriate,Material SafetyData Sheets(MSDS)

Reviewcontractorproposed use ofhazardous mater-ials and monitorhazardousmaterials andwaste storageand removal

Determinewhethercontractor needsasbestosinspection ifwork includesdemolition orrenovation

Monitor writtennotice to EPA orstatedesignatedagency 10 daysprior todemolition orrenovation asrequired

Develop andimplement anenvironmentaltraining plan

MonthlyProgressReports

Lead__________

Provide data orother information


Summarize andassemble dataand information


Approve andissue monthlyreport


Assigned to:__________Assigned to:__________Assigned to:__________Assigned to:__________Assigned to:__________



ContractProgressReview/CoordinationMeetings

Lead__________

Chair meetings


Prepare agenda,meeting minutesand monitoraction items


Obtain periodicupdates ofcontractor'sworkingschedules


Review mostrecent as-builtschedule data


Evaluate near term(3 week/4 week)look aheadschedules


Coordinatecontractor's planwith othercontractors' plansand Company'sPlan


Resolve scheduleconflicts


Approve update-ed contractorworkingschedules andany changes toworkingschedules


CoordinationMeetings forContractors

Lead__________

Chair meetings


Prepare agenda,meeting minutes,and monitoraction items


Resolvecoordinationconflicts


LiquidatedDamages

Lead__________

Identify triggeringrequirements(e.g. submittals,milestones, etc.)


Monitorperformance


Collect/deductliquidateddamages


Claims orDisputes

Lead__________

Monitor andmitigate potentialclaim situations


Receive and logcontractor claims


Monitor labor,equipment andmaterial usageon a daily basis.


Conduct factfinding


Evaluate technicalmerit


Evaluate schedulemerit


Evaluatecommercial merit


Prepareresponse tocontractor


Claims orDisputes(continued)

Authorizenegotiation andset limits


Plan and conductnegotiation


Prepare costand commitmentchanges andobtain approvals


Approve finalsettlement


Prepare ContractChange Order orAmendment (ifrequired)


Issue ContractChange Order orAmendment andobtain signatures




Final Inspectionand Acceptance

Lead__________

Prepare finalacceptancepackage


Assemble, statuspunch list


Coordinate andperform finalwalk down,recommend finalacceptance


PrepareContractCloseoutChecklist


Coordinatecompletion ofContract CloseoutChecklist


Release of Lienand FinalPayment

Lead__________

Obtaincontractor'scertificate that allsubcontractorsand suppliershave been paidAssigned to:__________

Issue final checkto contractor


Warranty Claims

Lead__________

Prepare warrantyclaim


Notify contractor


Monitor timelyresponse


Evaluateproposedremedial actionand direct bestsolutionAssigned to:__________

Monitor completionof remedial action


Inspect/acceptremedial action



TABLE OF CONTENTSSECTION 3. INITIAL TASKS Page i

Initial Tasks

TABLE OF CONTENTS

3.1 PRE-AWARD ACTIVITIES ......................................................................................................13.1.1 Purpose ..................................................................................................................................13.1.2 Procedure ...............................................................................................................................13.1.3 Exhibits..................................................................................................................................33.1.4 Checklists...............................................................................................................................3Pre-Bid Meeting Agenda [SAMPLE] (EXHIBIT 3.1.2-A) ..................................................................4Pre-Bid And Site Inspection Visit Contracts Agenda Checklist (EXHIBIT 3.1.2-B) ............................5Pre-Award Meeting Agenda [SAMPLE] (EXHIBIT 3.1.2-C) .............................................................6Pre-Award Action Checklist (EXHIBIT 3.1.4) ...................................................................................7

3.2 PRE-CONSTRUCTION MEETING..........................................................................................93.2.1 Purpose ..................................................................................................................................93.2.2 Procedure ...............................................................................................................................93.2.3 Exhibits................................................................................................................................ 103.2.4 Checklist .............................................................................................................................. 10Pre-Construction Meeting Agenda [SAMPLE] (EXHIBIT 3.2.2-A).................................................. 11Kickoff Letter To Contractor [SAMPLE] (EXHIBIT 3.2.2-B).......................................................... 14Notice of Site Mobilization (EXHIBIT 3.2.2-C) ............................................................................... 17Pre-Construction Meeting Checklist (EXHIBIT 3.2.4.)..................................................................... 18

3.3 FILING SYSTEM..................................................................................................................... 193.3.1 Purpose ................................................................................................................................ 193.3.2 Procedure ............................................................................................................................. 193.3.3 Filing Index .......................................................................................................................... 213.3.4 Exhibit ................................................................................................................................. 21Contract Management File Index [SAMPLE] (EXHIBIT 3.3.3)........................................................ 22

3.4 CORRESPONDENCE AND CORRESPONDENCE CONTROL......................................... 253.4.1 Purpose ................................................................................................................................ 253.4.2 Effective Correspondence...................................................................................................... 253.4.3 Procedure ............................................................................................................................. 263.4.4 Exhibits................................................................................................................................ 26Correspondence Log - Incoming (EXHIBIT 3.4.2-A)........................................................................ 27Correspondence Log - Outgoing (EXHIBIT 3.4.2-B)........................................................................ 28Correspondence Checklist (EXHIBIT 3.4.5)..................................................................................... 29

3.5 INSURANCE AND BONDS ..................................................................................................... 303.5.1 Scope ................................................................................................................................... 303.5.2 Insurance.............................................................................................................................. 303.5.3 Bonds................................................................................................................................... 303.5.4 Exhibits................................................................................................................................ 323.5.5 Checklist .............................................................................................................................. 32Insurance Certificate Review Instructions (EXHIBIT 3.5.4-A) ......................................................... 33


TABLE OF CONTENTSSECTION 3. INITIAL TASKS Page ii

Certificate of Insurance (EXHIBIT 3.5.4-A - Attachment A) ............................................................ 36Insurance Register (EXHIBIT 3.5.4-B) ............................................................................................ 37Insurance and Bonds Checklist (EXHIBIT 3.5.6) ............................................................................. 38

3.6 SCHEDULE SUBMITTALS.................................................................................................... 393.6.1 Purpose ................................................................................................................................ 393.6.2 Procedure ............................................................................................................................. 39

3.1 PRE-AWARD ACTIVITIESSECTION 3. INITIAL TASKS Page 1 of 40

3.1 PRE-AWARD ACTIVITIES

3.1.1 Purpose The purpose of this Section is to provide guidance to jobsite personnel withrespect to their participation in the pre-bid and pre-award process.

Pre-Bid Site Visits and Pre-Bid Meetings are held to provide prospectivebidders an opportunity to evaluate jobsite conditions and to obtain clarificationof bid or work scope requirements.

Bid Clarification Meetings are held with selected bidders prior to contractaward to review their proposals and to allow further clarifications, ifnecessary.

Pre-Award Meetings are held with the selected contractor to assure that aclear, mutual understanding of the work to be awarded has been reached.

3.1.2 Procedure The following general guidelines apply to all meetings held prior to award:

• Each meeting will have an agenda prepared in advance.

• Attendance, pertinent information, questions and answers will all berecorded. Bidders should be advised that for fairness and consistencythey are only to rely on written answers to questions. Meetingminutes will be issued, after internal review, to all meeting attendees.However, meeting minutes will not be used to change any contractrequirement. If a change in the contract requirements is necessary,the change will be implemented by addendum to the bid documents.

• All contacts with bidders prior to award of the contract are to becoordinated through the designated representative.

The objective of the meetings held prior to award is to do the best jobpossible to ensure there is a meeting of the minds regarding the contractrequirements.

• The Pre-Bid Meeting is an opportunity to elaborate on therequirements as stated in the bid documents. In addition, it provides aforum for an interactive exchange with potential bidders to discussquestions and concerns they may have. (Refer to Exhibit 3.1.2-A fora sample Pre-Bid Meeting Agenda.)

3 INITIAL TASKS



• The Pre-Bid Site Visit provides bidders an opportunity to examine thesite and locale in order to reach their own conclusions regarding themany site related factors, e.g., physical conditions/constraints, labormarket, laydown area, access/congestion. (Refer to Exhibit 3.1.2-Bfor a Pre-Bid and Site Inspection Visit Contracts Agenda Checklist.)This is also an opportunity to share any unique or "superior"knowledge you may have regarding the project or site and how suchfactors might affect the contract. If there are separate jobsite visits,each bidder should receive the same information and any questionsanswered must be recorded and shared with all bidders.

• Bid Clarification Meetings are held to resolve any questions that mayarise with respect to bids from bidders in the competitive range. BidClarification Meetings may evolve into negotiation sessions. Terms,scope or price issues may arise that require negotiation to resolve.

• The Pre-Award Meeting is held only after selection and approval of acontractor, but prior to award (Refer to Exhibit 3.1.2-C for a samplePre-Award Meeting Agenda). The Pre-Award Meeting provides anopportunity to reaffirm and confirm understandings that have beenreached during the pre-bid/bidding stages and an opportunity to resolvedetail level issues that affect the contractor’s mobilization. Thefollowing should be addressed:

— Confirm that all addenda issued during the bidding process havebeen incorporated in the contract scope, specifications anddrawings.

— Review the contract drawings to ensure that all changes discussedhave been incorporated in the "Issued for Construction" set.Formally set aside (forever) the "Bid Drawings". Ideally this isaccomplished with a drawing by drawing review of the Issued forConstruction drawings to ensure no design evolution has crept in.If the drawings are not ready for reissue at the time of award, theaward will state that the Bid Issue Drawings (with markups, ifapplicable) constitute the Contract Drawings. If the Bid IssueDrawings are to be used "For Construction" they shall bedesignated "Issued For Construction".

— Confirm acceptability of all proposed substitutions.

— Confirm any agreements reached with respect to work plan,access, changes in sequence or other schedule constraintsnecessary for the contractor to be able to make its initial schedulesubmittal.

— Discuss in detail owner provided materials, services and facilities in



— Reinforce the pre-mobilization administrative requirements (e.g.insurance, bonds, pre-job labor conference) that can betroublesome if not handled properly.

— Discuss specific activities that must be accomplished to receivemobilization payment, if applicable. (Refer to Section 5.3 entitled"Progress Measurement and Payment.")

• Combining Pre-Award and Pre-Construction Meetings

There are some situations where a Pre-Construction Meeting (referenceSection 3.3) and a Pre-Award Meeting can be held as a single meeting.In these cases, the agenda should be adjusted for appropriate contentand the minutes should indicate a joint meeting.

3.1.3 Exhibits Pre-Bid Meeting Agenda [Sample] (Exhibit 3.1.2-A)Pre-Bid and Site Inspection Visit - Contracts Agenda Checklist (Exhibit 3.1.2-B)Pre-Award Meeting Agenda (Exhibit 3.1.2-C)

3.1.4 Checklists Pre-Award Action Checklist (Exhibit 3.1.4)



Pre-Bid Meeting Agenda [SAMPLE] (EXHIBIT 3.1.2-A)

Contract:

Contractor:

1. Introduction of company (and Customer) participantsA. Point of contact for questionsB. Role of participantsC. Brief description of evaluation and target award dateD. Discussions and meeting minutes cannot change requirements, only addendum

2. Review of technical requirements by Engineering representativeA. Overview of scopeB. Interfaces with others' work packages/crewsC. Explain drawing release planD. Explain use of RFI'sE. Quality

3. Review site considerations by Construction representativeA. Safety considerationsB. Access and work areasC. Facilities and utilities providedD. Permits required and permits furnishedE. Labor relations

This presentation may include a jobwalk of the work site.*

4. Review schedule requirementsA. Milestone datesB. Reporting requirementsC. Work execution/ interface

5. Review bid package mechanicsA. Explain Exhibit C forms individuallyB. Explain formation process and content of contractC. Describe written question and answer process and stress that all questions must be in

writingD. Describe bid package addendum processE. Restate due dates and point of contact

6. ConclusionsA. QuestionsB. Minutes will be provided by the company and sent to all attending Bidders, company

Departments and Owner



Pre-Bid And Site Inspection VisitContracts Agenda Checklist (EXHIBIT 3.1.2-B)

1. Site conditions under which the work will have to be performed. __________

2. Access to the project and the work area. __________

3. Contractor laydown area(s). __________

4. Location, capacity and details of Customer/Company -Furnished power, water, fuel,and compressed air. __________

5. Material handling equipment and procedures. __________

6. Site investigation program (i.e. borings, samples, test pits, borrow pits, quarries). __________

7. Customer/Company -furnished permits, contractor-furnished permits and __________generation of hazardous waste.

8. Customer/Company -furnished facilities and schedule for availability (e.g. camp,warehousing, delivery or construction materials or equipment on site, contractorresponsibility for loading, unloading, storing of Customer/Company -Furnishedmaterials). __________

9. Contractor participation in the company's safety and first aid programs. __________

10. Other work which will or may be in progress during the term of the contract. __________

11. Scope of work for the contract and any unusual or difficult construction that maybe required. __________

12. Point out building sites, access roads, borrow pits, and other important sitefeatures. __________

13. Work of a similar nature, if underway on the site, to show the required standardof workmanship. __________

14. On foreign jobs, available communications set-up for on-job and external to job. __________

15. Location of disposal areas for cleanup purposes, and cleanup areas where morethan one contractor is working. __________

16. Full scope of the project and the facilities yet to be performed that will have aninfluence on the work of the contract being bid. __________

17. Details of the work which might involve premium time. __________



Pre-Award Meeting Agenda [SAMPLE] (EXHIBIT 3.1.2-C)

Request for Proposal (RFP) NO._________________

Title:_________________________________________

1. General Introduction

1.1 Introduction; Individual greetings and Attendance Sheet signature1.2 Purpose; Review and sign finalized contract1.3 Distribution; Provide contractor copy of Contract Documents.

2. Contract Document Review

2.1 RFP Changes; Discuss agreed changes and indicate where incorporated in the Contract Documents.

A. Specifications; Technical Department (Engineering and Construction) input as required

B. Drawings; Technical Department input as requiredC. Terms and Conditions

2.2 Contract Interpretation; Review Terms and Conditions utilizing the General and Special Conditions definitions in Appendix I of the Contracts/Subcontracts Formation Manual.

3. Securities (bonds or bank guarantees) and Insurance

3.1 Securities; Remind contractor when they are due or collect securities.3.2 Insurance; Remind contractor when they are due or collect insurance certificates.

4. Jobsite Requirements

4.1 Jobsite Procedures; Construction to review Jobsite Procedures which bid was based on (key procedures should have been issued at Pre-bid Meeting).

4.2 Jobsite Update4.3 Labor Agreements and Trade Council Meetings

5. Contract Signing

5.1 Contractor Copy; Contractor takes home signed copy.5.2 Company Copy; Copied to provide conformed copy distribution and then maintained

in Procurement contract formation file.5.3 Customer Copy; Only when the company is agent a third signed original is provided,

otherwise conformed copy(ies) will suffice.

6. Turnover to Contract Administrator



6.1 Point of Contact; Exchange notification with contractor under the General Condition titled NOTICES.

6.2 Meeting Minutes; Announce meeting minutes will be prepared and distributed to all parties and Company/customer departments in attendance.

Pre-Award Action Checklist (EXHIBIT 3.1.4)

Contract Number:_____________________Contractor:______________________________

ContractScope:________________________________________________________________________

1. Pre-bid: Company/Customer provided materials, facilities and construction servicesreviewed.

YES NO

Comments:

2. Pre-bid: Contract Schedule conforms to project schedule. YES NOComments:

Pre-bid: Special construction support requirements, if any, reviewed. YES NO

Comments:

Bid Evaluation: Bidder understands total scope. YES NO

Comments:

5. Bid Evaluation: Manpower loading reviewed. YES NO

Comments:

6. Bid Evaluation: Bidder’s schedule and construction plan reviewed and resolved. YES NO

Comments:

7. Bid Evaluation: Substitutions, if any accepted/rejected (list accepted substitutions). YES NO

Comments:

8. Bid Evaluation: Bidder's Safety and Health Plan and experience reviewed anddetermined to be satisfactory?

YES NO

Comments:

. Pre-Award: Pre-Mobilization requirements reviewed and understood. YES NO

Comments:

10. Pre-Award: Issued for Construction drawings reviewed -- all bid periodcomments/changes incorporated.

YES NO

Comments:



Name:_______________________________ Date:______________________________

3.2 PRE-CONSTRUCTION MEETINGSECTION 3. INITIAL TASKS Page 9 of 40

3.2 PRE-CONSTRUCTION MEETING

3.2.1 Purpose The goal of the Pre-Construction Meeting is to achieve a mutualunderstanding with the contractor regarding the way in which the contractrequirements will be translated into action.

3.2.2 Procedure A meeting agenda will be developed. (Refer to Exhibit 3.2.2-A for a samplePre-Construction Meeting Agenda.)

There are some situations where a Pre-Construction Meeting and a Pre-Award Meeting (reference Section 3.1.) can be held as a single meeting. Inthese cases, the agenda should be adjusted for appropriate content and theminutes should indicate a joint meeting.

The Pre-Construction Meeting will be conducted prior to the contractor'smobilization.

The contractor will be provided an advance copy of the agenda.

Each participant will be instructed by the meeting leader on the scope oftheir involvement.

Attendance at the meeting will be recorded.

A contract representative will prepare the meeting minutes and formallydistribute them to the contractor.

A contract representative will prepare an Action Items List and assumeresponsibility for verifying closure of open items.

A confirming letter summarizing contract management expectations andcontract provisions of particular significance should be sent to thecontractor. (Refer to Exhibit 3.2.2-B for a sample Kickoff Letter.)

3 INITIAL TASKS



A Notice of Site Mobilization (reference Exhibit 3.2.2-C) should be issued ifthere is a need to notify various departments of impending mobilization of acontractor.

3.2.3 Exhibits Pre-Construction Meeting Agenda [Sample] (Exhibit 3.2.2-A)Kickoff Letter to Contractor [Sample] (Exhibit 3.2.2-B)Notice of Site Mobilization (Exhibit 3.2.2-C)

3.2.4 Checklist Pre-Construction Meeting Checklist (Exhibit 3.2.4)



Pre-Construction Meeting Agenda [SAMPLE] (EXHIBIT 3.2.2-A)

Contract:_____________________________________________________________________________

Contractor:_________________________________________________________________________

I. Introduction and Background

A. Meeting purposeB. Introductions

II. Organization

A. YoursB. ContractorC. Authorized representatives

1. Yours2. Contractor

III. Safety and Health

A. Your policyB. Contractor Safety Action PlanC. First aidD. Fire protection and preventionE. Sanitation and housekeepingF. Review contractor's proposed usage of hazardous materialsG. Hazardous Material handling and disposalH. CitationsI. Drug Testing/Fitness for Duty (as applicable)

IV. Environmental

A. Your PolicyB. Contractor Environmental Control PlanC. Environmental permit requirementsD. Hazardous waste generation and managementE. Asbestos inspection and notificationF. Compliance monitoring

V. Construction

A. Scope



B. Facilities and equipment furnished by you, owner and contractorC. Permits and Environmental Impact StatementD. Work coordinationE. Quality control and inspection

VI. Labor Relations

A. Pre-job conferenceB. Craft accessC. Project Labor AgreementD. Job RulesE. Daily Force ReportF. Reporting disputesG. BadgingH. Work assignmentsI. Jurisdictional procedures (disputes/grievances)

VII. Construction Schedule and Progress Reporting

A. Project/construction schedule• Initial submittal and requirements for approval• Periodic updates

B. Manning curvesC. Contractor-furnished equipment and material (schedule and coordination)D. Four-week rolling scheduleE. Progress review meetingsF. Coordinating work areas with othersG. Coordination meetings

VIII. Quality Assurance/Quality Control/Quality Surveillance

A. Contractor responsibilitiesB. Your/Owner rolesC. Offsite QA/QCD. Pre-fabrication submittal requirements

IX. Drawings

A. Design drawings and their distributionB. Drawing controlC. Contractor drawing submittals, approvals and schedules

X. Other Submittals

A. Fabrication procedures, if requiredB. Construction proceduresC. QA/QC proceduresD. Health and Safety Plan



XI. Contract Management

A. Correspondence

1. Addressee2. Control and distribution3. Requirement for sequential serialization4. Formal notices

B. Contract Change Procedures

1. Directed Changes (Authorized)2. Notice Requirements and Constructive Changes (risk of proceeding without authorization)3. Discovery of potential errors, omissions and ambiguities and required notifications4. Cost records - all changes5. Proposal requirements6. Duty to proceed7. Dispute resolution8. Claim submittal requirements

C. Insurance and Bonds -contractor submittals

D. Payments

1. Progress payment schedule2. Progress measurement and approval3. Invoice and Certificates of Payment4. Submittals required prior to payment

(see Mobilization Payment Checklist in Section 5.3)5. Force Account Work

E. Backcharges

1. Notices2. Procedure3. Performance

F. Ethics and Conduct

1. Conflicts of Interest2. Gifts

G. Warranty Procedures

H. Project Schedule Reviews and Coordination Meetings

I. Contract Close-out Procedures



Kickoff Letter To Contractor [SAMPLE] (EXHIBIT 3.2.2-B)

To: Smith Construction Company B-SCC-001Subject: COMPANY JOB NO.______________________ DATE

CONTRACT NO.________________________KICKOFF LETTER

Gentlemen:We are pleased to be working on this project with you and look forward to a mutually beneficialrelationship. To ensure that this relationship is a positive one and to avoid any future misunderstandings,we have listed below some of the more important and sometimes overlooked contract articles. Althoughevery provision of the contract is significant, we want to call your particular attention to the following:

Section No. Title Action[Use project article numbers and titles and include clauses which should be highlighted for this particularcontract.]

Authorized Representatives A letter designating the contractor's authorizedrepresentative and scope of authority should besubmitted to the company prior to the start ofconstruction

Permits The contractor should review this article and confirmthat all required permits, licenses and certifications havebeen obtained prior to the start of construction, and thatall permit conditions are satisfied, prior to, during or afterconstruction.

Labor, Personnel and WorkRules

This provision establishes the contractor’s obligation tocomply with project labor agreements and provides thebasis for settling jurisdictional disputes. It also establishesthe company’s right to remove unacceptable personnel.

Publicity and Prior written permission is required from the companyfor any Advertising announcements, photographs and videos orrelease of any information regarding the contract orProject.

Safety & Health The contractor must comply with the requirements of thecompany’s Safety & Health Plan and shall have sole responsibilityto implement its own Safety and Health Program. Please appoint aSafety & Health Representative for your work and inform thecompany of your designation in writing.

Environmental Requirements This provision emphasizes the contractor’s obligation tocomply with environmental laws, regulations andpractices to minimize adverse impact to the site,personnel on the site and adjacent environmentally



a copy of your Environmental Control Plan prior tocommencing work.

Section No. Title Action

Changes This provision establishes the mechanism for change. Aclear understanding and adherence to this provision fromthe onset of the project is of great importance.

Assignments andSubcontracts

Prior written approval from the company is requiredbefore the contractor assigns the contract or enters intoany subcontracts for the performance of work related tothis contract.

Insurance All insurance requirements must be met before mobilization. Areview of the contractor's coverage with the companyrepresentative is required.

Commencement, Progressand Completion of theWork

The contractor will be required to furnish the resourcesnecessary to meet contract milestones. Progress meetingsand schedule submittals will be utilized to monitor thisprogress. The company has the right to direct thecontractor to take corrective action to restore progress tomeet the schedule.

Contract Schedule A detailed CPM contract is to be submitted within thirty(30) days of contract award and is therefore due on orbefore . The progress reports specified in this articlewill be required as stated.

Measurement for Payment The contractor should review this article carefully.An early meeting with the company to ensure a thoroughunderstanding and complete compliance with this article issuggested. The company will supply the correct formsand review the proper invoicing procedures.

The provisions of the contract relating to changes will be strictly observed. Insofar as possible, changeswill be covered by Change Order prior to execution of the work, but if the demand of time or the nature ofthe work makes that impossible, the company may issue written instructions (Change Notices) to proceedwith the change. Any such work undertaken without such written instructions will be at your own risk andany resulting charges may not be allowed. Change Orders will be issued only for work authorized by thecompany. This policy will be firmly enforced and all invoices for work not covered by the contract or byChange Orders will be returned unpaid.

All correspondence you receive from the company will carry sequential serial numbers. Please ensure thatall letters which you send to the company are likewise numbered. All correspondence to and from thecompany will be required to be identified with the contract number, be dated, and carry a unique sequentialserial number. Letter logs will be exchanged on a monthly basis to ensure no letters have been lost ormisplaced.



All correspondence you receive from the company will carry sequential serial numbers. Please ensurethat all letters which you send to the company are likewise numbered. All correspondence to and from thecompany will be required to be identified with the contract number, be dated, and carry a unique sequentialserial number. Letter logs will be exchanged on a monthly basis to ensure no letters have been lost ormisplaced.

For example:

Letters To:Smith Construction Company

Letters To:Company (Contract No. )

_____________________[Contracts representative] has been assigned for your portion of this project.[Contracts representative] will work with your field supervisory personnel and will be your primary contactwith respect to construction procedures and technical compliance. When you encounter field problemsthat require our assistance, please bring them to the attention of [Contracts representative]. We expectthat with the help of [Contracts Representative] you will be able to resolve such problems, but if anyshould persist, please feel free to contact me.

We will require [three] copies of all correspondence from your designated representative which shall beaddressed to the attention of the, .

If we can otherwise assist you in any way, do not hesitate to call on us. We feel that your success will beour success and we will extend our cooperation and assistance to the fullest degree possible.

Very truly yours,



Pre-Construction Meeting Checklist (EXHIBIT 3.2.4.)

Contract Number:________________________________________Contractor:_____________________

Contract Scope:________________________________________________________________________

1. Need for Pre-Construction Meeting. YES NO

Comments:

2. The date is set PRIOR to contractor mobilization. YES NO

Comments:

3. Agenda issued to contractor and key company participants. YES NO

Comments:

4. Attendance list prepared. YES NO

Comments:

5. Open actions identified. YES NO

Comments:

6. Meeting minutes prepared and issued. YES NO

Comments:

7. Kickoff letter sent to contractor. YES NO

Comments:

8. Notification(s) of contractor mobilization given. YES NO

Comments:

9. Contractor's authorized representative designated. YES NO

Comments:

Name:______________________________________________ Date:___________________________

3.3 FILING SYSTEMSECTION 3. INITIAL TASKS Page 19 of 40

3.3 FILING SYSTEM

3.3.1 Purpose The Contract Management Files must contain all pertinent original contractdata and documents and be organized to allow for efficient storage,identification and retrieval.

The files should be integrated into the project's document control program.

3.3.2 Procedure A complete contract file set will be maintained for each contract. Thefollowing file subjects, as a minimum, will be included:

• Conformed Contract

• Change Notices/ Change Orders

• Amendments

• Internal Approval

• Chronological, sequentially numbered correspondence and relevantphone notes of telephone and other conversations

− Outgoing correspondence− Incoming correspondence

• Insurance and Bond Certificates

• Daily Reports

• Inspection Reports

• Construction Schedules

• Requests for Information

• Drawing File

• Backcharge File

• Progress Payment File

3 INITIAL TASKS



• Minutes of Meetings File

• Claims File

• Warranty File

• Closeout File

At the conclusion of the project all closed contract files will be dispositionedin accordance with project procedures. All contract files that may have abearing on open claims or other unresolved matters are to be separatelydispositioned in accordance with project procedures.

GENERAL DISCUSSION OF DOCUMENTATION

A. WHY IS DOCUMENTATION NECESSARY

Documentation, including a monitoring program for receipt, closeoutand maintenance, is of crucial importance to proper contractmanagement. Its significance cannot be over-emphasized.

B. DISCUSSION

1. Concise and complete documentary records always will have asubstantial effect on the resolution of any problems. Frequently,proper documentation will serve as sufficient and clear evidence toresolve problems at the lowest possible level.

It is imperative in the administration of contracts that significantevents be documented in permanent records such ascorrespondence, written notes and memoranda.

It is essential to summarize important discussions and meetings.Notes covering conferences, telephone calls and discussions, shouldgive the date, location, parties involved and important issuesdiscussed. The contract number should also be included on all ofthese items.

2. In order for any piece of documentation to be useful, it must standon its own. Each must contain information to satisfy thefundamental six questions of what, where, when who, how and why.Documentation should be dated and signed providing continuitythroughout the length of a project. In addition to being complete,documentation must be objective.


3.3 FILING SYSTEMSECTION 3. INITIAL TASKS

Page 21 of 40

If no problems materialize on a contract, it may seem the time andefforts documenting a contract's performance was wasted. This is notthe case, as the documentation effort likely contributed significantly tosuccessful management of the contract.

3.3.3 Filing Index The Contract Management Files will conform to approved project documentcontrol procedures and utilize the approved project document controlcomputer tracking program. A Sample Contract Management File Index isprovided in Exhibit 3.4.3.

3.3.4 Exhibit Contract Management File Index [Sample] (Exhibit 3.3.3)



Contract Management File Index [SAMPLE] (EXHIBIT 3.3.3)

GENERAL FILES

1.1 File Index1.2 Prime Contract1.3 Contract Plan1.4 Project Master Schedule1.5 Contract Register1.6 Inter-Office Correspondence1.7 Customer Correspondence1.8 Standard Document Distribution1.9 Directives and Special Procedures1.10 Site Survey/Soil Reports1.11 Site Procedures and Instructions1.12 Site Labor Agreement1.13 Project F & A Procedures and Audit Programs

CONTRACT FILES

As each contract is awarded and Construction assumes responsibility from Procurement ContractFormation, individual files are established in the following typical major groups:

2.0 CONTRACT2.1 Master Bid Package2.2 Pre-Award Documentation (See Procurement Procedures)2.3 Contract (Conformed Copy)2.4 Change Notice Log2.5 Change Notices2.6 Change Order/Amendment Log2.7 Contract Change Orders/Amendments (Conformed)2.8 Commitment Authorizations2.9 Insurance Correspondence2.10 Payment/Performance Bond Correspondence2.11 Contract Fact Sheet

3.0 ADMINISTRATION3.1 Backcharge Register3.2 Backcharge Notices3.3 Contractor Schedules

3.3.1 Contract Schedule3.3.2 Construction Schedules3.3.3 Non-Manual Manpower Schedule



3.3.1 Contract Schedule3.3.2 Construction Schedules3.3.3 Non-Manual Manpower Schedule

3.4 Contractor Key Personnel, Addresses, Day/Night Phones3.5 Drawing and Specification Control

4.0 COMMUNICATIONS4.1 Correspondence Log4.2 General Correspondence Files

4.2.1 Correspondence with Customer4.2.2 Out-going Correspondence to Contractor4.2.3 Incoming Correspondence from Contractor4.2.4 Inter-Office Correspondence

4.3 Log/General Facsimile Files4.4 Contacts File (Discussions/Telephone)4.5 Minutes of Meetings4.6 Memos for Record4.7 Transmittal Memo Receipts

5.0 REPORTS5.1 Daily Force Reports5.2 Contractor Daily Report5.3 Progress Reports5.4 Work Interruption Reports5.5 Inspection Reports5.6 Accident Reports5.7 Progress Photo/Video File

6.0 CONTRACTOR PROCEDURES AND PROGRAMS6.1 Safety (Personnel, Equipment, Traffic)6.2 Security6.3 Environmental Compliance6.4 Fire Protection6.5 Inspection6.6 Training6.7 Housekeeping

7.0 CONTRACTOR EQUIPMENT7.1 Equipment Schedule7.2 Control Procedures7.3 Customer/Company -Furnished Tools and Equipment

8.0 PAYMENTS8.1 Contractor Invoices/Applications for Payment



8.2 Quantity Verifications (Field Engineering)8.3 Cash Flow/Schedule "S" Curve8.4 Contract Financial Status Sheet8.5 Contractor Forecasts8.6 Contract Trend Reports (if required)8.7 Certified Payroll Reports (if required)


3.3 FILING SYSTEMSECTION 3. INITIAL TASKS Page 25of 40

9.0 ACCEPTANCE AND CLOSEOUT9.1 Final Inspection Reports9.2 Punch List Reports9.3 Taking Over Works9.4 Completion Certificates9.5 Maintenance Certificates9.6 Final Acceptance9.7 Closeout

10.0 WARRANTIES10.1 Log10.2 Vendor Backcharges10.3 Site Backcharges or Rework Accounts

11.0 CLAIMS11.1 Contractor Proposal/Claims Log11.2 Contractor Proposals (Claims)11.3 Claims Analysis11.4 Statements/Depositions (Personnel Concerned)11.5 Claims Correspondence

11.4.1 Customer Correspondence11.4.2 Company/Contractor Correspondence

11.6 Claims Reports to Management11.7 Claims Settlement Agreements

12.0 CONTRACTOR PERFORMANCE EVALUATION/HISTORICAL12.1 Fact Sheet and Historical Record12.2 Performance Evaluation

3.4 CORRESPONDENCE AND CORRESPONDENCE CONTROLSECTION 3. INITIAL TASKS Page 25 of 40

3.4 CORRESPONDENCE AND CORRESPONDENCECONTROL

3.4.1 Purpose Contract correspondence control is designed to ensure that allcorrespondence to and from a contractor is accounted for, required repliesare sent and responses received, correspondence is cross-referenced,correspondence can be quickly identified and retrieved, and actionrequirements generated by correspondence are closed out on a timely basis.

3.4.2 EffectiveCorrespondence

Make an exceptional effort to eliminate any chance of communications beingmisunderstood. Clear communication is essential to contract managementsuccess. Everyone on the project team should understand that all contractualcommunications may have legal ramifications, or at a minimum, be one ofthe primary tools available to reconstruct facts if a dispute arises.

Correspondence should have a well defined purpose. Separate topics shouldbe addressed in separate letters. Clear, simple language should be used.Ideas should be presented logically.

To maximize the value and effectiveness of correspondence:

• Serialize all contract correspondence

• Log all contract correspondence to ensure accountability for actionand timely responses.

• Coordinate all outgoing correspondence through one individual percontract

• Periodically exchange logs with contractors to secure agreement onopen and closed items

• Write a separate letter for each subject

• Keep all correspondence objective and factual (avoid inflammatorylanguage or style)

• Clearly state the subject in all correspondence

• Identify all referenced items by title, date or revision

• Identify all enclosures

• Establish a minimum response time for all communication andclearly state this in the correspondence

3 INITIAL TASKS



• Outgoing correspondence which requires no response should sostate

• Show "blind" distribution on the file copy

• Date stamp all incoming correspondence to establish chronology

• Acknowledge every letter by one of the following:

−Answer as required by incoming letter

−Interim reply if full response cannot be provided within theestablished time period and then maintain an action item list toensure follow up.

3.4.3 Procedure Correspondence to and from each contractor will be sequentially numberedfor each contract.

All outgoing and incoming correspondence will be logged, action/replyresponsibility assigned, and replies recorded. Correspondence control logsshould be checked weekly to ensure that all open items are taken care of andto provide follow-up. Larger projects are encouraged to electronically "sort"the logs and distribute an open correspondence report weekly as a controldevice. Ideally the project should exchange logs monthly with the contractorto confirm agreement on open and closed items as well to confirm receipt ofcorrespondence requiring no response.

Original documents will be retained in the Contract Management Files andonly copies will be circulated.

Email, while an attractive convenience, is not to be used for contractcorrespondence unless each transmittal is serially numbered, logged, signed andcontrolled in the same manner as hard copy correspondence.

By establishing designated points of contact, you can control the flow ofcorrespondence. The authorized signatory should be identified to the contractorin writing and no others should sign correspondence. However, various people onthe project team may originate correspondence. An appropriate counterpart in thecontractor's organization should be identified as contractor's addressee. (Multipleoriginators and multiple addressees results in lack of coordination andconsistency.)

Contract management correspondence control will conform to approvedproject document control procedures and utilize the approved projectdocument control computer tracking program. A Sample ContractManagement File Index is provided in Exhibit 3.3.3.

3.4.4 Exhibits

3.5.5 Checklist

Correspondence Log - Incoming (Exhibit 3.4.2-A)Correspondence Log - Outgoing (Exhibit 3.4.2-B)

Correspondence Checklist (Exhibit 3.4.5)

(Outgoing)Correspondence Log

COMPANY: JOB NO.:

CONTRACT NO.: CONTRACTOR:

NOTE: ENTER ONLY ONE LETTER PER LINE

LETTER REQUESTREPLY

DATE ACTION CONTRACTOR

SERIAL NO. DATED ANSWERING LETTERSUBJECT NO YES REPLY ASSIGNED

Expedition



Correspondence Checklist (EXHIBIT 3.4.5)

Contract Number:________________________ Contractor:___________________________

Contract Scope:________________________________________________________________________

1. Correspondence is objective/factual and has the appropriate tone. YES NO

Comments:

2. Correspondence is input to correspondence/document control system. YES NO

Comments:

3. All letters to contractor including email are being logged and tracked. YES NO

Comments:

4. All letters from contractor, including email are being logged and tracked. YES NO

Comments:

5. Open items are identified. YES NO

Comments:

6. Open items are statused and updated (at least bi-weekly). YES NO

Comments:

7. There are no past due action due dates. YES NO

Comments:

8. No letter numbers are missing. YES NO

Comments:

9. YES NO

Comments:

Name:___________________________________ Date:___________________________

3.5 INSURANCE AND BONDSSECTION 3. INITIAL TASKS Page 30 of 40

3.5 INSURANCE AND BONDS

3.5.1 Scope This procedure outlines the requirements for obtaining, verifying andmonitoring contractor Certificates of Insurance and bonds.

3.5.2 Insurance Certificates of Insurance are submitted by a contractor to confirm that theinsurance policies required by the contract have been obtained. Becauseinsurance policies can expire by their terms, their expiration dates must bemonitored and policies extended as necessary.

The contractor should submit a Certificate of Insurance or otherdocumentation of insurance meeting contract requirements immediatelyfollowing contract award but no later than contractor's site mobilization.Contractors without complete and satisfactory Insurance Certificates willnot be permitted to mobilize. Furthermore, if during the course of the work,the contractor's insurance expires or is significantly modified, the contractormust be denied access to the site until the required insurance is in place.

Verify that the certified insurance coverage conforms to the contractrequirements and is valid. (Refer to Exhibit 3.5.4-A for Insurance CertificateReview Instructions.)

After the contractor starts work, Insurance Certificates will be monitored toverify that the coverage is maintained in force and proper renewal isobtained by the contractor.

An Insurance Register with expiration dates will be maintained (referenceForm 3.5.4-B).

An early notification system (tickler) which identifies 45 days in advancethose Certificates which require renewal will be maintained.

3.5.3 Bonds A performance bond is a surety company's guarantee that the obligationsthat the contractor undertakes pursuant to the contract will be performed,including those that extend past final acceptance (e.g., warranty). Apayment bond ensures that the contractor's suppliers and subcontractors arepaid for the work and/or material they supply. Performance and paymentbonds are typically issued together as a package for a single premium.Bondingrequirements, if any, are contained in the contract. Performance andpayment bonds should be in a penalty amount equal to 100% of the contract.There is no reduction in bond premium for a reduced bond penalty.

3 INITIAL TASKS



The contractor should submit performance and payment bonds which meetcontract requirements immediately following contract award. Typically, thesuccessful bidder's bid bond is not returned until receipt of satisfactoryperformance and payment bonds. Note that bonds do not normally need tobe updated during the course of the work. If extra work is added that isequivalent to another contract, it will be necessary to obtain another bond tocover this work.

Verify that the bonds conform to the contract requirements and have beenissued.

Note that while Change Notices do not normally necessitate notification tothe bonding company, Contract Amendments for extra work outside of theoriginal scope of the contract may require specific notification to the bondingcompany to ensure coverage of this extra work.

Verify that the bond(s) conform to the contract requirements. The suretyshould be on the U.S. Department of Treasury's approved list of sureties.

When a contractor is required to obtain a performance/payment bond, thepremium is based on the final contract price. Therefore, an adjustment to thepremium will apply when pricing change orders. Performance and paymentbonds typically provide coverage for the contractually specified warrantyperiod without an additional premium.

Advance payments to a contractor in excess of what has been earned underthe contract should not be made. Such payments may be construed to be"loans" to the contractor and therefore not credited toward the contractbalance owed by the bonding company.



An Advance Payment Bond is a special category of payment bond (unrelatedto the standard performance/payment bond) which is sometimes used oninternational projects but rarely in the U.S. An Advance Payment Bondassures that moneys advanced to the contractor will be used in connectionwith the project. Such a bond may be required prior to making advancepayments to the contractor.

A Maintenance or Warranty Bond is usually written by the surety thatprovided the Performance and Payment Bond and provides an extendedwarranty for defects in materials and workmanship. Its cost is significantlyless than that of the Performance and Payment Bond. The normal penaltyamount is 10% of the contract price.

When a contractor's supplier or a lower-tier subcontractor has filed a lienagainst the owner’s property, you may require the contractor to purchase arelease of mechanic's lien bond to release the lien. Thesupplier/subcontractor's lien is then attached to the bond allowing the lien tobe removed from the customer's property. In effect, these bonds allow theproject to be turned over to a customer without any encumbrances and allowthe contractor to receive its retention pending resolution of the dispute withits suppliers and subcontractors. Such bonds will typically have a penaltyamount of 125% to 150% of the lien obligation.

In some jurisdictions, to be able to file a lien the contractors must submit aPreliminary Notice of Intent to file a lien at the start of work. ThePreliminary Notice looks very much like a lien and can be alarming, but hasno adverse consequences.

Reference Special Topics Section 7.2 "Basis for Claims" pages 27 and 28.

3.5.4 Exhibits Insurance Certificate Review Instructions (Exhibit 3.5.4-A)Insurance Register (Exhibit 3.5.4-B)

3.5.5 Checklist Insurance and Bonds Checklist (Exhibit 3.5.6)



Insurance Certificate Review Instructions (EXHIBIT 3.5.4-A)

PURPOSE

To establish responsibility for acquiring initial contractor submitted Certificates of Insurance and toprovide guidelines for determination of the validity of such Certificates.

DEFINITIONS

A Certificate of Insurance establishes that the contractor has appropriate insurance to cover claims forwhich the contractor is responsible.

REQUIREMENTS

Attachment A is a sample Insurance Certificate. The sections below provide explanations anddirections. The numbers also correspond to the sections on the Certificate.

1. This is the date the Certificate of Insurance was typed.

2. The name and address of the agent or broker who placed the insurance coverage for the contractor.

3. The name and address of the contractor who provided the evidence of insurance on the Certificate.

Verify that the name of the contractor is the same as the name in the contract.

4. The names of the insurance companies providing the insurance for the insured.

When there is any question about a contractor purportedly having valid insurance coverage,contact the insurance company directly referencing the policy number.

5. Letter designation will indicate which insurance company is providing insurance coverage from thelist of insurance companies under Companies Affording Coverage.

6. Type of Insurance identifies the specific insurance being provided.

Commercial General Liability (formerly Comprehensive General Liability) is the insurancegenerally available to contractors to cover third party liability arising from their operations. Thistype of policy includes the following coverages:

• Premises and Operations• Products and Completed Operations• Contractual Liability• Broad Form Property Damage• Explosion, Collapse and Underground Hazards• Personal Injury Liability• Cross Liability or Severability of Interest Clause

The company requires that the Commercial General Liability policy be on an OccurrenceForm. This form provides coverage for a loss that happened during the policy term even if



• Cross Liability or Severability of Interest Clause

The company requires that the Commercial General Liability policy be on anOccurrence Form. This form provides coverage for a loss that happened during thepolicy term even if the claim is made after the policy has expired. A Claims Madepolicy restricts the time that is allowed to make a claim to either the policy term or thepolicy term plus a limited extended reporting period thereafter. Both Occurrence andClaims Made policies will show per occurrence and annual aggregate limits. Thecompany requires that for contractors the minimum limits be $2,000,000 peroccurrence/$4 ,000,000 annual aggregate, with this aggregate being a policy aggregatefor all of the contractor's work. If the contractor has an aggregate less than $4,000,000, it should obtain an endorsement from its insurer to establish a projectaggregate for the work it is doing for the company. (While we require contractors tofurnish Occurrence policies, it is likely that those contractors performing environmentalwork will be able to obtain only Claims Made coverage.) The limits referred to hereinare for the company’s long form subcontract. Subcontracts with reduced scopes maynot need insurance limits this high. Refer to the Procurement Manual for theacceptable limits.

Verify that the types of insurance and the limits of coverage being provided areconsistent with the contract requirements. If in doubt, have the Certificate reviewed bythe Risk Management Department.

7. The policy number of the insurance policy provided to the contractor.

8. The policy effective date must be effective on or before the contract inception date.

9. The policy expiration date must expire on or after the contract completion date.

If the expiration date is before the contract completion date, Procurement (or ContractAdministration if the contract has been transferred to the field) must monitor to insurereceipt of renewal certificates.

10. Generally the typed entries and special request items will appear in this space on the Certificate ofInsurance and may also include the "per project" limit mentioned above.

A sample of what might appear:

"XYZ Corporation (Owner) and the company are included as additional insureds except forWorker's Compensation for the Fixed Project, #xxxxx, but only with respect to liability arisingout of the operation for the Owner and the Company by or for the contractor. Suchinsurance shall be primary with any other insurance maintained by the additional insuredexcess thereto."



The project name, contract number, and the specific company entity named as additionalinsured as well as the Customer/Owner, if required, must appear. (While in practice theadditional insured provision is show in item 10; it is preferable to have this provision shown on aseparate endorsement attached to the Certificate.)

11. The certificate holder is the company entity which requested the Certificate of Insurance from thecontractor.

Verify that it is the correct company entity.

12. The company requires thirty (30) days notice of material alteration to the contractor's policies orcancellation.

The standard cancellation provision does not include a provision for notice of termination ormaterial alteration and there is no industry standard for amending the Certificate. Look fora typed entry or require the standard Certificate to be modified.

13. The Certificate of Insurance must be signed to be valid. It can be signed by the agent, the broker,or the insurance company.

Verify that the Certificate of Insurance has been signed.



Insurance and Bonds Checklist (EXHIBIT 3.5.6)

Contract Number:_______________________Contractor:____________________________

Contract Scope:________________________________________________________________________

1. Insurance Certificates have been obtained from contractor PRIOR to mobilization. YES NOComments: ______________________________________________________

2. Contractor's insurance coverage meets contract requirements. YES NOComments: ______________________________________________________

3. Expiration dates have been entered into the tickler system. YES NOComments: ______________________________________________________

4. Special insurance coverage, if required has been obtained. YES NOComments: ______________________________________________________

5. Bond (or Letter of Credit), if required, has been obtained. YES NOComments: ______________________________________________________

6. Insurance and bonding companies have been checked through the Risk ManagementDepartment.

YES NO

Comments: ______________________________________________________

7. Validity of Insurance Certificates and bonds have been verified with the insurancecompany as appropriate.

YES NO

Comments: ______________________________________________________

8. Insurance Register is maintained to monitor expiration dates. YES NOComments: ______________________________________________________

9. YES NOComments: ______________________________________________________

Name:____________________________________ Date:____________________________

3.6 SCHEDULE SUBMITTALSSECTION 3. INITIAL TASKS Page 39 of 40

3.6 SCHEDULE SUBMITTALS

3.6.1 Purpose The contractor is usually obligated by the terms of the contract to submit aresource loaded, precedence diagram schedule as an early deliverable forapproval. The contractor’s schedule must show the logical sequence,construction methods, and estimated durations of activities necessary tomeet the milestones and completion dates established in the contract.Approval of the contractor’s schedule indicates that it appears to be areasonable plan and commits us to cooperate in its implementation. Thecontractor is committed to perform in accordance with the plan unlessrevisions are subsequently submitted and approved. Changes to theschedule may also be directed pursuant to the Changes clause.

Project Controls should participate in the review and approval of allcontractor schedules and revisions. They should also review periodicupdates which report progress against the current approved plan andfragmentary networks submitted in support of contractor proposals foradjustments to the contract milestones or completion dates based uponcritical path analysis.

3.6.2 Procedure • Verify that the contractor submits the initial schedule as required bycontract.

• Assure the schedule is in the form required by the contract. If thecontract requires a CPM schedule, and the contractor submits abar chart, approval in this form may act as a waiver of the CPMrequirement.

• Assure the schedule meets the milestones required by contract.

• Analyze the submitted schedule for reasonableness of networklogic, durations, the occurrence of float, completeness, appropriatelevels of detail, and the identification of critical paths.

• Assure that completion dates shown earlier than contemplated bythe milestones do not adversely affect the work of others (or cashflow constraints).

• Review to see how the contractor's schedule supports the overallproject schedule.

• Review to see if the work of others supports the contractor'sschedule.

• Assure work as planned is consistent with parameters of the site,e.g., no double shift if the site is working one shift.

3 INITIAL TASKS


3.6 SCHEDULE SUBMITTALSSECTION 3. INITIAL TASKS Page 40 of 40

• Formally approve the schedule.

Remember the contractor’s method of performance is its own. Requiringany non-essential changes in the contractor’s planned methods ofperformance, or a significant change in sequence, could, be considered achange to the contract.

Finally, comments and exceptions, should be resolved before approval.Although a contractor may seek permission to finish early, you and theowner have the right to reasonably deny the request and insist uponadherence to the contract completion dates. Reasonable denial may bebased on cash flow constraints, inability to support early accessrequirements or the delivery of customer-furnished equipment, but if an earlyfinish is approved, you may be liable for extra costs if you fail to support oractively interfere with its accomplishment. Refer to Section 4.3 of thisManual for a discussion of schedule issues to be considered duringperformance.

TABLE OF CONTENTSSECTION 4. PERFORMANCE Page i

Performance

TABLE OF CONTENTS

4.1 CHANGES .............................................................................................................................1

4.2 INTERNAL APPROVALS..................................................................................................274.2.1 Purpose........................................................................................................................... 274.2.2 Procedure........................................................................................................................ 274.2.4 Checklist ......................................................................................................................... 28

4.3 SCHEDULE.........................................................................................................................374.3.1 Purpose........................................................................................................................... 374.3.2 Procedure........................................................................................................................ 37

4.4 REQUEST FOR INFORMATION (RFI) ...........................................................................384.4.1 Purpose........................................................................................................................... 384.4.2 Definitions ....................................................................................................................... 384.4.3 Discussion ....................................................................................................................... 384.4.4 Procedure........................................................................................................................ 384.4.5 Exhibits ........................................................................................................................... 40Request For Information (RFI) Contractor Instructions (EXHIBIT 4.4.4-A) ................................... 41Request for Information (RFI) (EXHIBIT 4.4.4-A - Attachment) .................................................. 42Request for Information (RFI) Log (EXHIBIT 4.4.4-B) ................................................................ 43

4.5 TECHNICAL TRANSMITTALS .......................................................................................444.5.1 Purpose........................................................................................................................... 444.5.2 Discussion ....................................................................................................................... 444.5.3 Procedure........................................................................................................................ 444.5.4 Checklist ......................................................................................................................... 45Technical Transmittals Checklist (EXHIBIT 4.5.4) ....................................................................... 46

4.6 CLAIMS ..............................................................................................................................474.6.1 Purpose........................................................................................................................... 474.6.2 Scope .............................................................................................................................. 474.6.3 Procedure........................................................................................................................ 484.6.4 Claims Defense .............................................................................................................. 514.6.5 Disputes .......................................................................................................................... 544.6.6 Exhibits ........................................................................................................................... 54Directive To Maintain Schedule [SAMPLE] (EXHIBIT 4.6.3-A) .................................................. 55Claim Flowchart (EXHIBIT 4.6.3-B) ........................................................................................... 56

4.7 BACKCHARGES................................................................................................................584.7.1 Purpose........................................................................................................................... 584.7.2 Discussion ....................................................................................................................... 584.7.3 Procedure........................................................................................................................ 584.7.4 Exhibits ........................................................................................................................... 59Notice of Backcharge Work to be Performed (EXHIBIT 4.7.3-A) ................................................ 60Backcharge Log (EXHIBIT 4.7.3-B)........................................................................................... 61Daily Summary of Backcharge Work (EXHIBIT 4.7.3-C)............................................................. 62Notice of Backcharge Completion (EXHIBIT 4.7.3-D) ................................................................. 63

4.1 CHANGESSECTION 4. PERFORMANCE Page 1 of 63

4 PERFORMANCE

4.1 CHANGES

4.1.1 Purpose This section describes activities and documentation required to handleContract Changes effectively.

4.1.2 Background Change Orders, which can be issued unilaterally, allow you to compensatethe contractor based on your determination of an equitable adjustment (timeand money) when agreement cannot be reached. The contractor may elect tocontinue to pursue additional compensation, but the incentive to do so isdiminished considerably because of the amount already paid. Amendmentsshould be used for contract modifications outside the general scope of workof the contract, or to change the basic provisions of the contract (i.e., outsidethe operation of the Changes clause) and require bilateral agreement.

4.1.3 Definitions Amendment -- a formal modification of a contract, signed by both parties,which must be mutually agreed upon to effect a change to the rights andobligations of one or both. An Amendment may be used to modify price andtime of performance in lieu of a Change Order but normally will be used onlyfor modifications outside of the scope of the Changes clause.

Change -- a modification to the work, time or method of performanceauthorized by the Changes clause within the scope of the contract. Adirected change is one in which the contractor is directed to proceed with thework independent of resolution of the commercial impact (if any) arisingfrom the change.

Change Notice -- a document issued notifying the contractor of a potentialor directed contract change made. Directed Change Notices which affect thecost or time of performance obligate you to compensate the contractor, butdo not provide any funding for payment.

The Change Notice is to be used to:

• Transmit all new or revised drawings, data or any other instructionsto the contractor.

• Invite a proposal for new prices or schedule.• Direct changes (revisions, additions and deletions) within the general

scope of the contract.

The Change Notice requires the contractor either to confirm adjustments totime and/or compensation ( if any) or to submit its proposal for adjustmentsto time and/or compensation.

Change Notice Request -- a contractor initiated request for a Change Noticedue to some differing site conditions, constructive change or similar eventjustifying issuance of a Change Notice

CONTRACT/SUBCONTRACT MANAGEMENTMANUAL


Change Order – a document which represents the commercial and technicalresolution of a Contract Change. A Change Order describes the scope,price, schedule and method of payment for a change. It may be agreed to andsigned by both parties; or, if authorized by the terms of the contract, issuedunilaterally representing your determination of an equitable adjustment.

The original contract plus all of the Change Notices, Change Orders andAmendments constitute the complete contract.

Change Proposal -- a proposed adjustment to contract price and/or time ofperformance in response to a Change Notice or any other circumstance inwhich the contractor believes an adjustment to the price or period ofperformance is due. Proposals should conform to the contract requirementsfor pricing of adjustments.

Directive to Proceed -- a document ordering the contractor to proceed withthe defined work despite a lack of agreement as to whether the work is withinthe scope of the contract. The need for a directive arises when the contractorasserts that such work should be compensated as a change (additional timeand/or money); however, your position is that the work is within the workscope and thus not the subject of a Change Notice. The Directive willinstruct the contractor to segregate all costs associated with the workdescribed in the Directive. This work should be managed and monitored asforce account work pending resolution of whether or not the work is aContract Change. (Refer to the paragraph on Force Accounts in Section4.1.5 and Special Topics Section 7.6 "Force Accounts.")

Extra Work -- work, which the contractor is requested to perform andagrees to perform that, is outside of the general scope of the contract. Youcannot issue a directed Change Notice if the changed work was beyond theparties' original contemplation of the scope of work. The agreement with thecontractor for Extra Work is formalized in an Amendment, which definesscope, payment terms and schedule. The addition of Extra Work should betreated as sole source procurement requiring appropriate approvals.

Not all additional work is Extra Work. This is a complicated area withbroad guidelines. See the section below under Discussion titled “ExtraWork”.

4.1.4 Discussion

4.1.4.1

Changes

Contract Changes

You may make changes to a contract that are within the general scope of thecontract in accordance with the Changes provisions of the contract. Changesin the drawings, designs or specifications, method, manner or sequence of the



contractor’s work; changes to Customer or your furnished facilities,equipment, materials, services or site; directing acceleration or decelerationof the work and modifying the contract schedule or contract milestonesqualify as Contract Changes.

The formal lines of communication for design changes must be consistentwith approved project procedures, and communicated to the contractor at thePre-Construction Meeting.

Engineering changes to drawings and specifications made in the office andnot formally controlled and communicated to the site may, if they affect thecontractor, constitute "constructive changes" and result in additional costsand delays for which the contractor may have to be compensated.

The scope of each change should be clearly defined and coordinated with theon-site team by the originator. The designated contract administrator shouldassume responsibility for such coordination and clarification as may berequired as soon as the contract administrator becomes aware of theproposed change.

The change approval process should include cost and schedule analysis in allcases. The cost estimate is also required for the committed authorization if itis intended to issue a directed change.

All approved Contract Changes must be communicated and confirmed inwriting by using a Change Notice and then incorporated into the contract byuse of either a Change Order or Amendment, depending upon the contractterms and Project Procedures.

As a minimum, the following items must be included in the Change Notice:

• Descriptive scope of the change• Method of payment (lump sum, unit prices, or force account)• Time (schedule) adjustments (if known)• Direction to proceed or to wait for notice• Acknowledgment

The current status of all Change Notices must be formally monitored andrecorded in a Change Notice Log.

NOTE: Marked up contractor-submitted drawings that are not expected torequire an adjustment in time or money may be returned to thecontractor by controlled transmittals in accordance with ProjectEngineering Procedures. The project transmittal form should havelanguage similar to the RFI form that indicates that the transmittalis not a Change Notice and that the contractor is not to proceed on



work it considers to be a change without Change Notice orDirective to Proceed.

Marked up contractor drawings being returned with comments thatconstitute Contract Changes must be transmitted to the contractorby Change Notice.

4.1.4.2. Contractor Initiated Changes

Contractors will frequently submit unsolicited proposals in response to whatthey view as a change under the Changes clause. An unsolicited contractorrequest may take the form of a proposal for work that you agree is a changeor it may take the form of a claim in which you have made an initialdetermination of no entitlement.

A claim is a disputed demand by the contractor for time and/or money. Itmay arise from a Contract Change where impact is at issue, or fromsomething the contractor believes to constitute a compensable change butentitlement is at issue.

The term "claim" has often been applied to any unsolicited proposal, butshould only be applied to disputed requests. This is particularly important toobserve on Government projects, for which the acceptability of proposalpreparation/negotiation costs differ for changes vs. claims. For additionalinformation on claims see Sections 4.6 and 7.2.)

In contracts which include a disputes resolution clause, if the contractorgives you notice of a dispute, the issue should be handled according tocompany procedures for guidelines in establishing mediation, arbitration orother procedures for resolution.

4.1.4.3 Change Order/ Amendment File

A Change Order or Amendment package (which should be reviewed forcompleteness after execution of the Change Order or Amendment) consists ofthe following information:

• Change Order/Amendment• Commitment authorization• Change Summary -- a narrative describing why the change was made• Technical Documents (e.g., drawings, sketches, DCNs)• Change Notice(s)• Contractor's proposal, if submitted• Cost analysis (or price justification)• Schedule analysis• Correspondence• Record of negotiation• Time sheets, invoices or other supporting documentation, if

appropriate



4.1.4.4 Extra Work Generally speaking, increases in scope can almost always be directed. ExtraWork is work that is a significant departure from the contracted generalscope (e.g., directing a tank subcontractor to install a building). Determiningwhether scope increases are "in scope" increases or “out of scope” ExtraWork, can be a gray area. Adding one more pump and 500 feet of pipe to amechanical subcontract scope that already includes pumps and pipe shouldbe a directed change. Adding a 250 MW turbine generator to the samecontract probably should not be directed as a change.

Depending on the nature and scope of the Extra Work, attention must begiven to whether modifications to the insurance, bonding [includingagreement by the bonding company], and warranty provisions of the contractwill be required.

It is rare for contractors to flatly refuse a directed change because if the workis later determined to be within the general scope of the contract, they may be indefault and liable for significant reprocurement costs. Changes "within thegeneral scope of the contract" should be very broadly interpreted.

All negotiations with a contractor must be documented. All proposedsettlements should be approved internally prior to negotiation with thecontractor. (Refer to Section 7.3, Negotiation, for a discussion onnegotiation preparation and strategy).

4.1.5 Procedure A Change Notice is prepared and will include all related data, drawings anddocumentation that are available at the time of its issuance. (ReferenceExhibit 4.1.4-A for the Change Notice form.) Change Notices authorizingwork to proceed require internal approval. (Reference Section 4.2.)

Each Change Notice will be sequentially numbered and entered in the ChangeNotice Log. (Reference Exhibit 4.1.4-B for the Change Notice Log form.)The approved Change Notice will be transmitted to the contractor. Alltransmittals to contractors will contain a serialized letter number.

The contractor should be required to respond to each Change Notice. Allcontractor responses, whether acknowledgments without comment, disagreementwith the Change Notice, or contractor counter-proposals, must be entered inthe Change Notice Log. The Log should be updated on a regular basis tostatus open Change Notices and follow up should occur where there has beenno responses.

All proposals submitted by the contractor (in response to Change Notices,unsolicited proposals and claims) must be provided a unique trackingidentifier. Each proposal must be entered into a Contractor Proposals/ClaimsLog kept for each contract. (Reference Exhibit 4.1.4-C for the ContractorProposals/Claims Log.)



Once contractor proposals are negotiated and adjustments are agreed upon,they will be incorporated into the contract by either a Change Order orAmendment. (Reference 4.1.4-D and 4.1.4-E for the Change Order andAmendment Forms.) Each Change Order and Amendment should be givena unique sequential number, which is entered into a Change Order/ Amendment Logfor each contract. (Reference Exhibit 4.1.4-F for the ChangeOrder/Amendment Log form.) It is important that the cross-references in thelogs are completed to ensure a change can be tracked fromIts inception (Change Notice or Proposal) to its incorporation in a ChangeOrder or Amendment.

Situations may arise where the contractor will be directed to performchanged/disputed work in the absence of mutual agreement. In such cases,the Company will issue a Directive to Proceed to the contractor requiring thecontractor to perform the work pending final agreement. (Reference Exhibit4.1.4-G for a sample Directive to Proceed letter.) In such cases, the workbeing performed must be clearly defined. Also, complete documentationmust be maintained to record costs and schedule impact. If there is asubsequent final agreement for additional costs for this work, it should beincorporated into the contract by Change Order. If necessary, a unilateralChange Order may be issued to modify the price or time of performance asdetermined per the Disputes clause.

4.1.6 Equitable Adjustments

The Changes article of the contract will generally provide words to the effectthat:

"If any change under this clause directly or indirectly causes anincrease or decrease in the contractor's cost of, or the time requiredfor, the performance of any part of the work under this contract,whether or not changed by any order, an equitable adjustment shallbe made and the contract modified accordingly."

Prompt and fair resolution of changes is contractually required and will alsobest serve your long-term interests. The following material is intended toprovide general guidance, not procedural direction. The terms of the contractand Project Procedures will dictate the basis for negotiating equitableadjustments.

Schedule AdjustmentsAdjustments to the contract period of performance generally will be based onthe effect the change has on the time required to perform the contract work.However, there are many factors to consider in evaluating the actual impactof a change on a contractor's schedule. For example, even though changedwork may require some time to perform, the change may not affect any workon the critical path of the current approved schedule. Consequently, itwould be inappropriate to modify the contract milestones or completion date.



Similarly, the effect of a change may be exaggerated because of aperformance problem for which the contractor is responsible. The period ofperformance should only be adjusted for the effect for which the you areresponsible. When delays are caused by concurrent events for which bothparties are responsible, the period of extended performance is excusable butnot subject to compensation.

Price Adjustments

Price adjustments will fall into one or a combination of three categories:lump sum, unit price or cost reimbursable. The preferred method of pricinga change generally follows the base contract pricing. The contract Changesarticle normally provides you the right to prescribe the pricing method,regardless of the base contract pricing method, e.g., unit rates in lieu of lumpsum.

Fixed Price (Lump Sum or Unit Price) Contracts

For a lump sum contract, the preferred method of pricing a change is toestimate the cost for the effect of the change and negotiate a fixed price. Ifthe change is priced before the work is performed, the fixed price will bebased on the estimated cost effect of the change plus a reasonable profitbased on traditional profit factors, such as risk, resources required andinvestment.

If the change is negotiated after the work is performed, you may both takeadvantage of the actual costs incurred to assist in establishing an appropriateprice for the change. Do not, however, rely solely on cost records if a "lumpsum" settlement is being negotiated after the work is partially performed orcompleted. Cost records are a tool to evaluate proposed settlement values andare not necessarily an indicator of the reasonable amount the company isobligated to pay. The contractor is entitled to an equitable adjustment for thechange. That may or may not be reflected in the amount that the contractorhas spent depending upon its productivity, skill and efficiency.

The estimated cost is based on the expected direct costs for material, laborand equipment, to which negotiated factors are applied for the indirect costs(scaffolding, cleanup, etc.), for overhead (site facilities, site management,etc.) and for general and administrative expenses (home office support, etc.).Note that it may be expedient to establish the factors for indirects, overheadand G&A early in the project to be used for changes, avoiding renegotiationof the rates for each change.

Where available and appropriate for the nature of the change, the contract



unit prices should be used to price quantity changes. Changes that add workfor which no applicable unit rates exist will necessitate the establishment ofnew unit prices, as will changes for which established unit prices areinappropriate. Unit prices are actually a form of fixed price and negotiatednew unit prices will be based on the estimated cost for the changed work,plus a reasonable profit, similar to the method described above for lump sumwork.

Cost Reimbursable Contracts

Changes on cost reimbursable contracts are generally less complicated andcontroversial to administer (although more labor intensive) than fixed pricecontracts. The contractor will always recover its reimbursable costs, and willgenerally recover at least the site overhead as a factor applied to direct costs.

Cost plus fixed fee contracts typically include language that requiresadjustment in the "fixed" fee for changes. The "negotiated" fee adjustmentis not necessarily based on the ratio of the original fee to the originalestimated cost. The fee for each change should be evaluated for its ownimpact based on the traditional consideration of risk, investment andresources.

Cost plus percentage of cost contracts normally require no negotiations forany changes. All elements of cost and profit are adequately recovereddirectly or in the percentage fee. It is seldom appropriate to contract on acost plus percentage basis, and it is illegal in U.S. federal government work.

Time and Materials Work

Time and materials (T&M) work is usually a combination of unit rates forlabor and cost plus a percentage (typically 10%) for materials. Equipment ispriced based on negotiated rates or a percentage (typically 80%) usingindustry publications such as the Blue Book for U.S. projects. U.S. federalgovernment contracts do not allow a markup for material on T & M work.

The unit rate for labor normally includes a markup for supervision, tools,overhead and profit. The percentage markups for materials may cover thelabor effort to purchase, inspect, expedite, warehouse and handle thematerials plus a profit.

T&M work, while convenient, is often expensive. T&M work should belimited to those occasions when the scope of the change work to beperformed is not very large, is not well understood and must proceed on anexpedited basis, rather than waiting until the scope is better defined. T&Mwork should be monitored by requiring the contractor to submit, forapproval, a Daily Summary of Time and Materials Work (reference Exhibit4.1.5).



Force Accounts

Force Accounts are actually an accounting mechanism (holding accounts) forwork being performed prior to agreement on a price. (Refer to the SpecialTopics Section entitled “Force Accounts” for a discussion of the applicationof Force Accounts.) The terms Force Account and T&M are often used(incorrectly) interchangeably. This can lead to misunderstandings if thecontractor has a different view of the terminology. (Reference Special TopicsSection 7.6 "Force Accounts".)

Settlement Finality

Use this language when preparing a Change Order or Amendment:"The price adjustment and time extension (if any) grantedunder this Change Order (Amendment) constitute payment infull for the work covered by this Change Order (Amendment),including without limitation, all direct costs; indirect costs;overhead costs; general and administrative expenses; profit;and all effects (direct, indirect, and consequential, includingimpacts, and "ripple effects") on the work, covered by thisChange Order (Amendment) on all contract work, whether ornot changed by this Change Order (Amendment)."

All of the indicated cost elements mentioned, “indirects, consequential,impacts, etc.” should be discussed in negotiation. Then an affirmativestatement should be made in each Change Order or Amendment eithergranting an extension to milestone completion dates or stating there are noschedule adjustments caused by this Change Order or Amendment.

4.1.7 Cost Records for Changes

For fixed price contracts (lump sum or unit price) changes should be issuedand negotiated on a fixed price basis. This objective assumes the scope ofthe changed work is well enough defined and understood to supportpreparation of a fixed price estimate. On all changes you should implementcost tracking upon initiation of the change to develop sufficient informationon which to base pricing (i.e. time sheet review, material and equipmentusage reports review).

4.1.8 Exhibits Contract Change Notice (Exhibit 4.1.4-A)Subcontract Change Notice (Exhibit 4.1.4-AA)Change Notice Log (Exhibit 4.1.4-B)Contractor Proposals/Claims Log (Exhibit 4.1.4-C)Contract Change Order (Exhibit 4.1.4-D)Subcontract Change Order (Exhibit 4.1.4-DD)Contract Amendment (Exhibit 4.1.4-E)Subcontract Amendment (Exhibit 4.1.4-EE)Change Order/Amendment Log (Exhibit 4.1.4-F)Directive to Proceed (Notice to Proceed Letter) (Exhibit 4.1.4-G)



Daily Summary of Time and Material Work (Exhibit 4.1.5)Contract Proposals Summary (Reference Form)Flowchart of Changes/Claims (Equitable Adjustment Procedure) [Sample](Exhibit 4.1.9)

4.1.9 Checklists Change Notice Checklist (Exhibit 4.1.8-A)Change Order/Amendment Checklist (Exhibit 4.1.8-B)Contractor Proposal Checklist (Exhibit 4.1.8-C)

SUBMIT proposal within _____ days

COMPANY:

JOB NO.:

OWNER:

SUBCONTRACTOR:

ADDRESS:

LETTER NUMBER:

COMMODITY CODE:D-U-N-S NO.:

This change notice is forwarded for your signature. Please complete this form as required and return the original to thisoffice. A copy has been included for your files.

PRICING METHOD:LS UP NEW UP T&M COST RE N/A

PROCEED with work

DESCRIPTION OF CHANGE:

NO change in price authorized

Drawings/data ATTACHED

TO :

DATE COMMITMENT AUTHORIZATION APPROVED SIGNATURE AUTHORITY DATE

SUBCONTRACTOR LETTER SERIAL NO.:

ARE ARE NOT PROCEEDING WITH THIS CHANGE

A PROPOSAL HAS BEEN SUBMITTED WILL BE SUBMITTED WILL NOT BE SUBMITTED

ACKNOWLEDGE AND ACCEPT ACKNOWLEDGE WITH EXCEPTIONS:

SIGNATURE TITLE DATE

Expedition

NO extension of time authorized

Notice to proceed REQUIRED

CHANGE NOTICE NO.:

SUBCONTRACT NUMBER:

REPLY REQUIRED:

EFFECTIVE DATE:

Subcontract Change Notice



Directive To Proceed (Notice To Proceed) [SAMPLE] (EXHIBIT 4.1.4-G)

[Date]

XYZ Corp.123 Adams St.Richland, WA 99352Attention: [Contractor's Authorized Representative]

Subject: Company Job 29999Hanford Waste Treatment FacilityTank Post Weld Heat Treatment

Reference: Letter 29999-KLB-1234

Dear [Contractor's Authorized Representative]:

The reference letter indicates that XYZ Corp. considers the Post Weld Heat Treatment of the LiquidEffluent Tank to be out of scope and requests a Change Notice to proceed with the work. The companyconsiders this work to be in scope work [OPTION: "but will research this matter and adviseseparately as to a final decision"].

In accordance with Article ___, entitled Contract Interpretation, XYZ Corp. is hereby directed to proceedwith the Post Weld Heat Treatment and, if XYZ Corp. still considers this work to be out of scope, treatsuch work as if it were a change and segregate costs and maintain separate cost records. This direction isnot to be construed by XYZ Corp. as the company's acceptance that this work is a change, but doesprotect both the interests of the company with respect to continuation of the work and the interests ofXYZ Corp. should this work be determined later to be a bona fide change.

Please signify your intent with respect to this matter in the space provided below. If you have anyquestions, please contact [contract administrator] at (509) 377-1234.

Very truly yours,

[Company's Authorized Representative]

Work proceeding, accepted as in scope.

Work proceeding, will prepare change proposal.

Authorized Representative: _____________________

Name typed or printed: _____________________

Daily Summary of Time

CONTRACT NO.:

CONTRACTOR:

WORK DESCRIPTION:

LOCATION:

LABOR EQUIPMENT

CLASS. RATE HOURS RATE AMOUNTMENNO. EQUIP.

NO. DESCRIPTIONWAGESTOTAL

SUBSISTENCETOTALHOURS

ST OT

COMPANY:

JOB NO.:

CHANGE NOTICE/CHANGE ORDER/AMENDMENT/WORK ORDER NO.:

CURRENCY:

BC NO.:

DATE:

and Material Work

APPROVED BY:SUBMITTED BY:

REMARKS

TOTAL OTHER

OTHER

TOTAL EQUIPMENTTOTAL LABOR

AMOUNTUNIT PRICEDESCRIPTIONQUANTITY

TITLE TITLE

Expedition



Contract Change Notice Checklist (EXHIBIT 4.1.8-A)

Contract Number:______________________ Contractor:______________________________

Contract Scope:________________________________________________________________________

1. Verify that changed work is not actually part of original contract scope. YES NO

Comments:

2. Change Notices are accurately entered in Change Notice Log. YES NO

Comments:

3. Change Notice documentation is sufficiently clear to minimize contractor questionsand uncertainty.

YES NO

Comments:

4. Change Notices have initiated cost commitment changes, if necessary, and properapprovals have been obtained.

YES NO

Comments:

5. Cost and schedule impacts of Change Notices have been identified. If no costchanges, this, too, has been noted.

YES NO

Comments:

6. Verify contractor's cost records for changes. YES NO

Comments:

7. YES NO

Comments:

8. YES NO

Comments:

Name:________________________________________ Date:____________________________________



Contract Change Order/Amendment Checklist (EXHIBIT 4.1.8-B)


Contract Scope:________________________________________________________________________

Scope of Change Order/Amendments is clearly defined. YES NO

Comments:

2. Schedule impact or change, if any, is noted on the Amendments. Changes with noimpact will be noted as such.

YES NO

Comments:

3. All Change Notices or unsolicited contractor requests (proposals) are available and onfile as back up.

YES NO

Comments:

4. The file contains estimates, schedules, notes, meeting minutes or other documentswhich substantiate the agreed upon price.

YES NO

Comments:

5. There are statements in the file regarding what caused the changes. YES NO

Comments:

6. Verify that the Commitment Authorization has been approved and signed by someonewith appropriate delegated authority.

YES NO

Comments:

7. Both parties have signed the Amendments. YES NO

Comments:

8. Verify that the Change Orders/Amendments have been approved and signed bysomeone with appropriate delegated authority.

YES NO

Comments:

Name:________________________________________ Date:____________________________________



Contractor Proposals Checklist (EXHIBIT 4.1.8-C)


Contract Scope:________________________________________________________________________

1. Contractor proposals are immediately identified, separately logged and acknowledged. YES NO

Comments:

2. Contractor proposals are evaluated to verify if they are clearly changed work or areclaims.

YES NO

Comments:

3. Contractor proposals are evaluated for additional costs. YES NO

Comments:

4. The company is aware of all Contractor proposals and is focusing additional efforts ondocumenting contractor performance.

YES NO

Comments:

5. Contractor proposals are closed by Change Order or formally rejected in writing. YES NO

Comments:

6. At time of closure, alternative positions and possible negotiation positions areprepared.

YES NO

Comments:

7. Records of negotiations and settlements, if any are included in the contract file. YES NO

Comments:

8. Change Orders and Amendments have been prepared and approved to reflectsettlements, if any.

YES NO

Comments:

Name:________________________________________ Date:____________________________________

4.2 COMMITMENT APPROVALSSECTION 4. PERFORMANCE Page 27 of 63

4.2 INTERNAL APPROVALS

4.2.1 Purpose This section defines the procedure for preparing and executing CommitmentAuthorizations and will be used in conjunction with Section 4.1 "Changes."

Commitment Authorizations will be obtained in advance of any activitywhich may cause a change to the currently authorized expenditure limits orto the Contract Schedule. This includes field issued contracts, changes ordirectives to contractors. The mechanics of the Change Notice/ChangeOrder/Amendment cycle described below, preclude payment for work onChange Notices until a Contract Change Order Request is processedfunding the change. This is an intended control point. It is not appropriateor acceptable to fund changes from the base contract commitment unless afunding pool is specifically established, e.g., for Work Orders. The fundingcommitments for changes are to be separately processed and approved priorto issuing changes.

No one is to execute Change Notices, Change Orders or Amendmentswithout the appropriate authority.

4.2.2 Procedure Assemble all documentation which is relevant to the proposed commitmentchange.

Prepare a concise change narrative if it will help convey the intent andpurpose of the proposed change.

Prepare an internal approval document. Verify the proper approvalauthorities have been identified.

Submit the Commitment Authorization and all relevant support documentsto the approval authorities. Relevant documents may include:

• Draft change document• Records of negotiation• Correspondence

Retain the original change document for the Contract Management Files.The supporting documentation will include:

• Commitment Authorization • Change Notice/Change Order/Amendment • Company's cost study or estimate • Records of negotiations • Pertinent correspondence or a summary of correspondence

references

PERFORMANCE4

1 For unit price contracts for which adequate funding exists, quantity releases are not considered commitments.


4.2 COMMITMENT APPROVALSSECTION 4. PERFORMANCE Page 36 of 63

Cost Commitment Checklist (EXHIBIT 4.2.4)


Contract Scope:________________________________________________________________________

1. Commitment Authorization obtained in advance of authorizing work to proceed. YES NO

Comments:

2. Commitment Authorizations approved by both Regional and Contractsrepresentatives.

YES NO

Comments:

3. All relevant documents assembled. YES NO

Comments:

4. Delegation of Commitment Approval Authority on file.. YES NO

Comments:

5. Delegation of Execution/Signature Authority on file. YES NO

Comments:

6. All Commitments reported to Central Procurement. YES NO

Comments:

7. Sole source approval on file for out of scope changes. YES NO

Comments:

Name:________________________________________ Date:____________________________________

4.3 SCHEDULESECTION 4. PERFORMANCE Page 37 of 63

4.3 SCHEDULE

4.3.1 Purpose Keeping a contract schedule current is a key element of contractmanagement. Most contracts require regular updates to show progress onapproved baseline schedules and submittal for approval of any proposedrevised schedules. Further, contract changes and excusable delays mayrequire adjustments to contract milestones, and/or the contractor's schedule.

Another important aspect of schedule management is keeping as-builtschedules reflecting progress as it occurs. This not only provides a tool forstatusing performance, but is also essential to critical path analysis if a claimis filed at a later date.

4.3.2 Procedure It is important to identify exactly the schedule submittal requirements of thecontract. It is essential these requirements be rigorously enforced. Allowinga contractor not to submit scheduling information may result in a waiver ofthose requirements.

Once a revised schedule is approved, it becomes the basis for future progressmeasurement.

Retain copies (hard copy and, as appropriate, electronic) of all approvedschedules and updates. Formal written approval of schedules is required.

In reviewing a revised schedule:

• Assure that the schedule reflects changed work.

• Assure the schedule incorporates any approved time extensions.

• Assure that the contract milestone dates are not changed except asmodified by Change Order or Amendment . If the contractor haschanged milestone dates, this may constitute a request for anextension of time and should therefore be addressed/resolved withthe contractor. (Refer to Section 4.6 "Claims", subsection 4.6.3.)

The contractor's schedule should be marked up (maintained) in accordancewith the contract requirements. This mark-up should be retained as itreflects actual progress. All legitimate delays should be incorporated in theschedule as they occur. When all tasks are complete the final mark-upconstitutes the as-built schedule.

NOTE: See Section 5.2 for a discussion of Progress Review andCoordination Meetings and Special Topics Section 7.4 "InterfaceCoordination".

Refer to Special Topics Section 7.8 "Delays and Extension ofTime" and Section 7.9 "Acceleration".

4 PERFORMANCE

4.4 REQUESTS FOR INFORMATION (RFI’S)SECTION 4. PERFORMANCE Page 38 of 63

4.4 REQUEST FOR INFORMATION (RFI)

4.4.1 Purpose This procedure provides for controlled identification, notification andresolution of contractor initiated technical questions.

4.4.2 Definitions Request for Information (RFI) -- a contractor initiated technical question.An RFI is initiated if the contractor:

• Is unable to understand the technical documents (i.e., scope,specifications, drawings or data).

• Discovers or perceives a conflict, ambiguity, error or omission in oramong the technical documents.

• Has an alternate/substitute material or method to propose that willnot adversely affect cost or schedule.

4.4.3 Discussion RFI's often represent, in shear numbers, the single largest form ofdocumentation on the project. Further, some RFI's may affect thecontractor's ability to continue a portion of work until its question isanswered. Consequently it is critical that an efficient, effective and timelymechanism for dealing with such technical questions be implementedimmediately upon contract inception (prior to mobilization, if the contractoris performing initial design or other preparatory work offsite).

RFI's are not change documents and cannot be used to direct a change incontract requirements. If a technical response represents a compensablechange, it must be issued by Change Notice.

4.4.4 Procedure Each project should develop a project instruction for RFI's to be given toeach contractor. (Refer to Exhibit 4.4.4-A for a sample instruction.)Immediately after a contract is awarded the contractor should be provided theinstruction sheet and a supply of RFI forms. Even if the pre-constructionmeeting is delayed, the contractor should be informed immediately of theintended RFI procedure. Performing this bit of housekeeping will help toensure that the contractor utilizes the standard format for dealing withtechnical questions, rather than a format of its own.

To administer the RFI process, the project will identify for each contract anindividual to be designated recipient for the RFI's on that contract. Thisindividual is responsible for ensuring that RFI's that may affect ongoingwork receive appropriate expedited responses.

4 PERFORMANCE



Upon receipt of an RFI, the designated recipient will ensure that the RFI islogged and that an individual is assigned to take the necessary action. (Referto Exhibit 4.4.4-B for a sample RFI Log form.) RFI's that indicate a specificdate for a required response should be monitored for a response and, if noresponse has been issued three (3) days before the response is due, theindividual responsible for follow up should contact the assigned person toensure that the response will be issued on time. RFI's that indicate animmediate response is required should be responded to as quickly as possible,within reason and with due care. The target for responding to most RFI'sshould be within three (3) working days and for all RFI's within two (2)weeks.

Outgoing RFI's will be reviewed by the designated technical representative(reviewer) to verify that the response is technically adequate and correct.The response has the same technical weight as the base technical documents:scope, specifications, drawings and data, and accordingly requires the samelevel of technical attention, review and control as the base technicaldocuments. The reviewer will also provide a "commercial check" to ensurethat you are not giving commercial direction in response to an RFI andprovide a "tone check" to ensure that the response is limited to a factual andobjective answer to the question.

A special note with respect to tone. It is "contractually" advantageous if theresponses to RFI's are written in the same professional, impersonal style thatstandard specifications adopt. It is counter-productive to use such phrases as"as the contract clearly indicates" or "this question is unnecessary" or othersuch terms or phrases that might be perceived as contentious orinflammatory. Reply in the simplest, most direct and technically correct andcomplete manner, even if an RFI appears to be unnecessary or purposefullyobtuse.

It also serves no purpose to reply to an RFI with: "Perform the work inaccordance with the technical documents." Trying to avoid a commercialliability by providing an incomplete response will actually disadvantage youif the contract issue turns into a dispute.

Commercial language should be avoided in the responses to RFI's, even if theRFI question from the contractor suggests a commercial issue. For example,avoid including a commercial phrase such as "the painting specification,which has precedence over the drawing notes, indicates that inorganic zincpaint is required in all outdoor environments." Say instead:

"Please refer to the painting specification, A-102, article 13.1.2,which states, in part, that "inorganic zinc paint is required in alloutdoor environments. Work should proceed on this basis."



or simply

"The contractor is directed to proceed in accordance with paintingspecification A-102, article 13.1.2."

Order of precedence, the presence or absence of ambiguity or conflict, and allother such commercial issues should be dealt with in letter form.

Although commercial language is not included in RFI's, your responses willoften result in commercial impacts. Consequently, your representativeresponsible for commercial administration of the contract should receive adistribution copy of all RFI's as they are issued. This provides an earlywarning if a contractor is likely to consider that the response will require aContract Change Notice for implementation.

If it is clear that an RFI response requires a Change Notice forimplementation, a Change Notice should be prepared and transmitted as theresponse to the RFI. In response, simply state: "Refer to (attached) ChangeNotice No. XX."

4.4.5 Exhibits Request for Information (RFI) Contractor Instructions (Exhibit 4.4.4-A)Request for Information (RFI) Log (Exhibit 4.4.4-B)



Request For Information (RFI) Contractor Instructions (EXHIBIT 4.4.4-A)

This procedure provides for controlled identification, notification and resolution of contractor initiatedtechnical questions. A Request for Information (RFI) is a contractor initiated technical question. An RFIis initiated if the contractor:

• Is unable to understand the technical documents: scope, specifications, drawings or data.

• Discovers or perceives a conflict, ambiguity, error or omission in or among the technicaldocuments.

• Has an alternate/substitute material or method to propose that will not adversely affectcost or schedule.

Upon determination that an RFI is required, the contractor should prepare its question on the attached form,log the RFI using a sequential numbering system (e.g., the first RFI is [Job #]-RFI-0001, and deliver theRFI to _________________________).

RFI's that indicate a specific date for a required response should be monitored for a response and, if noresponse has been issued three (3) days before the response is due, the originator should contact thecompany to ascertain the status of the response. The company will target to respond to most RFI's withthree (3) working days and all RFI's within two (2) weeks.

RFI's are not authorized change documents and cannot be used to direct a change in contract requirements.If the company's response on the RFI has a cost and/or schedule effect, it is the contractor's responsibilityto immediately advise the company with a contractor change proposal. Work undertaken without companyauthorization is at the contractor's risk and expense.

Request for Information(RFI)

SUBCONTRACT NO.:JOB NO.:LOCATION:

RFI NO.:PAGE of

REFERENCE DRAWING

LOCATION

INFORMATION AND REASON REQUESTED

REQUESTED BY

REPLY REQUIRED BY

SPECIFICATION

Information to Subcontractor

DATE COMPANY NAME

OF:

TO:

REQUESTED INFORMATION

TO:

OF:

FROM:

OF:

PROJECT NAME:

1 1

Expedition

SUBCONTRACTOR

4.5 TECHNICAL TRANSMITTALSSECTION 4. PERFORMANCE Page 44 of 63

4.5 TECHNICAL TRANSMITTALS

4.5.1 Purpose This procedure outlines responsibilities for transmitting company designdocuments to contractors and for processing technical submittals receivedfrom contractors.

4.5.2 Discussion Poor control of technical documents can lead to uncontrolled changes to thecontract and can raise questions about design configuration control and,ultimately, the quality of installed work. It is important that all teammembers understand and follow the project's technical document change andtransmittal procedures.

Transmitting Your Drawings to a Contractor

Drawings included in the contract at the time of contract award are consideredthe base set of drawings.

The base set of drawings is issued by Engineering and incorporated into theoriginal contract.

Processing Drawings Received from Contractors

The procedure for processing contractor submittals will parallel approvedEngineering procedures.

Marked up contractor submitted drawings that are not expected to require anadjustment in time or money are returned to the contractor by controlledtransmittals in accordance with Project Engineering Procedures. The projecttransmittal form should have language similar to the RFI form that indicatesthat the transmittal is not a Change Notice and that the contractor is not toproceed on work it considers to be a change without a Change Notice.

Marked up contractor drawings being returned with comments that areknown to impact cost or time of performance must be transmitted to thecontractor by Change Notice.

4.5.3 Procedure Revised Drawings

Prior to the Pre-Award Meeting, the bid set of drawings will be updated toreflect changes during the pre-award phase and reissued in the status of"Issued for Construction." All changes from the bid set to the Issued for

4 PERFORMANCE


4.5 TECHNICAL TRANSMITTALSSECTION 4. PERFORMANCE Page 45 of 63.

Construction set of drawings are to be noted on the drawings.

The list of contract specifications, drawings and data will be kept current andupdated every time drawings are changed or new drawings issued.

A summary of significant changes associated with a revised technicaldocument should accompany each drawing transmittal.

A Change Notice which identifies the drawings and engineering datatransmitted will be issued to the contractor. Change Notices may addressmore than one drawing transmittal. They will be issued in a timely manner inorder to avoid adverse impact to the contractor's performance of the work.

The contractor may initiate unsolicited proposals in response to the ChangeNotice transmitting the drawings. Change Notices and unsolicited proposalswill be handled in accordance with the Section 4.1 "Changes" of this Manual.

Contractor Technical Submittals

Contractor drawings/data submittals required by the specifications will bereceived and processed pursuant to the appropriate project procedures.

Contractor submittals and your review of comments for compliance withcontractual commitments and commercial effect will be monitored via copiesof the transmittal documents concurrently with the technical review to:

• Ensure that each contractor submittal is reviewed and returned tothe contractor.

• Establish a logging and control system to monitor the submittalagainst contract requirements.

• Monitor approved technical submittals for changes in scope.

• Monitor timely (per contract requirement) return of submittals.

4.5.4 Checklist Technical Transmittals Checklist (Exhibit 4.5.4)


4.5 TECHNICAL TRANSMITTALSSECTION 4. PERFORMANCE Page 46 of 63

Technical Transmittals Checklist (EXHIBIT 4.5.4)

Contract Number:__________________________Contractor:____________________________________

Contract Scope:

1. Cost/Schedule reviews have been performed for all revised or added drawings. YES NO

Comments:

2. Change Notices, Change Orders and Amendments are being processed for allcontracts and include an accurate accounting of drawing revisions.

YES NO

Comments:

3. Change Notice for added and revised drawings are processed within the timeperiods required by this procedure.

YES NO

Comments:

4. YES NO

Comments:

5. YES NO

Comments:

6. YES NO

Comments:

7. YES NO

Comments:

8. YES NO

Comments:

Name:________________________________________ Date:____________________________________

4.6 CLAIMSSECTION 4. PERFORMANCE Page 47of 63

4.6 CLAIMS

4.6.1 Purpose This procedure describes the process for analysis, evaluation, and resolutionof contractor claims for price or schedule adjustments.

Definition:

"A claim is a disputed demand by the contractor for time and/ormoney which arises from a contract change or a contractor'sperception of entitlement for something the contractor believes toconstitute a compensable change."

4.6.2 Scope A wide variety of causes may give rise to claims from contractors. Sometypical causes are:

• Impact from directed changes (pricing and effect on unchangedwork)

• Constructive changes (not formally directed by Change Notice butrequired by the work or your direction)

• Untimely direction and administration of changes

• Deficient or tardy customer supplied materials or equipment,specifications and drawings, design releases, facilities and utilities,or payments

• Delays, disruptions and interferences by others

• Unduly strict inspection

• Force majeure conditions

• Interference by you of the contractor's method or manner ofperformance of the work

• Failure to disclose relevant information to the contractor

• Taking over/managing a contractor's subcontractor

• Untimely clarification and approvals

• Unanticipated subsurface conditions

• Failure to act fairly and in good faith

• Almost anything else you can think of

4 PERFORMANCE


4.6 CLAIMSSECTION 4. PERFORMANCE Page 48 of 63

Refer to Special Topics Section 7.2 "Basis for Claims".

Contractors are obligated to provide adequate explanation and documents ofclaims, preferably at the time the claim arises, but sometimes ultimately incourt. They are entitled to fair and timely consideration of their claims andclear, equitable replies. The basis for the settlement of claims or for yourrecommendations to your customers for settlements should be the contract,applicable law, the facts and fundamental fairness.

For the orderly administration of contracts, all members of the project teamshould endeavor to avoid claims by:

• Identifying potential claims and taking steps to mitigate

• Frank discussions with contractors to discourage spurious claims

• Application of contract provisions for relief where justified

• Prompt resolution of acknowledged changes

When claims cannot be avoided or resolved by management, the followingprocedure should be followed and documented.

4.6.3 Procedure Submittals — Encourage the full and complete submittal of the factualcauses, contractual basis, quantified impact, documentary evidence, andproposed resolution from the contractor. Submittals should address:

• Description of the work performed, delayed or impacted

• Cost and schedule quantification

• Contractual basis for entitlement

• Requested relief

Requested Schedule Extensions — Note that any claim for time extension,with or without money, should be expeditiously resolved i.e., rejected ornegotiated to conclusion. Unanswered requests for time extensions, wherethe contractor has been compelled to accelerate its work to meet schedule inthe absence of a response, may be treated by the contractor (and by thecourts) as "Constructive Acceleration". Even if it is impractical to make animmediate determination whether the contractor is entitled to a scheduleextension, it is generally quickly determinable if a time extension isacceptable (whether or not justifiable) to the project. If an extension is notacceptable, you should direct the contractor to complete on time andsimultaneously advise the contractor that you are evaluating the merits of itsrequested schedule extension. (Refer to Exhibit 4.6.3-A for a sample"Directive To Maintain Schedule" letter.) If the extension is justified, thecontractor will be entitled to compensation for acceleration. If the extensionis not justified, the contractor has maintained the schedule at its own cost.



By deferring the evaluation but not deferring direction to the contractorregarding the schedule, you have protected the schedule while providing timeto evaluate properly who has responsibility for the cost to maintain theschedule. (Refer to Special Topics Section 7.8 on "Delays and Extensions ofTime" in this Manual.)

Logging and Tracking — Claims will be logged and tracked In accordancewith Section 4.1.4 of the "Changes" Section of this Manual. (Refer toExhibit 4.6.3-B "Claim Flowchart".)

Fact Findings — Before a reliable analysis or evaluation can be performed,it is important to be thoroughly familiar with all of the facts. It can bewasteful and even counterproductive to develop a negotiating position andattempt resolution with an inadequate grasp of the fact situation.Accordingly, fact-finding discussions or correspondence should be undertakenwhenever necessary to identify all of the circumstances applicable to theissues.

Analysis — There are three separate and distinct steps to be taken inevaluating claims. The first and second must be completed and doneindependently from the third.

• Technical Validity — The scope of work, resources required andtechnical engineering or construction methods involved should beevaluated by the appropriately skilled staff to ensure that the claim has asound technical basis.

• Entitlement — Unlike recognized changes where the contractor's right to

seek price or schedule relief is not in question, a go/no-go, accept orreject determination should be made based upon the terms and conditionsof the contract and applicable law. The time and money involved shouldnot be a factor in determining entitlement. While sympathy claims ornuisance settlements may, as a matter of management judgement, beconsidered, the contractual rights and obligations related to any claimshould be analyzed and understood.

• Confidentiality — In a claim situation the confidentiality of yourdocuments should be protected. Documents relating to your evaluationof the claim should have limited distributed and be maintained in a securelocation.



• Quantification — If and when it is determined that the contractor iscontractually entitled to an adjustment to price and schedule, eachclaim should be evaluated for price and schedule impact. To avoidfragmented, conflicting or overlapping claims, each analysis shouldaddress to the extent applicable:

− Labor, including fringe benefits, direct and indirect categories− Material, including taxes and transportation− Equipment, tools and supplies− Overhead and G & A expense− Bond and insurance costs− Profit− Actual time durations (planned and actual)− Critical path significance− Impact on efficiency

Rejection — Claims that are determined to be without merit will be rejectedin writing.

Counterclaims — After analysis of the contractor's claim and before anamendment or negotiation plan is prepared, all counterclaims, back-charges,credits or off-sets arising out the same issues or circumstances should beidentified, developed, priced, and included in the resolution.

Negotiations — If the analysis validates all aspects of a claim, a ContractAmendment incorporating the requested adjustments should be prepared andprocessed in accordance with project procedures. If not, and somesignificant difference of opinion regarding validity, entitlement orquantification exist, a negotiation plan should be developed, documented andapproved as a prerequisite to negotiations with the contractor. Negotiationsshould be conducted with the objective of reaching a fair and equitableresolution of the claim, not to coerce settlements which deny either party theirfull rights under the contract.

Unsuccessful negotiations should be governed by the disputes process of thecontract or by escalation to senior management levels where appropriate.

Contract Change Order and Amendments — Upon reaching a negotiatedsettlement at any level, a Contract Change Order or Amendment andCommitment Authorization should be prepared and, with appropriateapprovals, executed by both parties. All Contract Change Orders andAmendments for claims settlements must:

• Accurately define the technical scope.

• Provide price and schedule resolution. An affirmative statement of



• Provide price and schedule resolution. An affirmative statement ofno schedule impact must be made if applicable.

• State that the terms of the Contract Change Order or Amendmentrepresent a "complete accord and satisfaction of all issues raised byand consequences arising out or related to the claims described."

• Provide payment terms for the price adjustment.

4.6.4 ClaimsDefense

Because claims may arise and not be resolved, contracts will generallyprovide for a method of handling disputes. These may range from resolutionof protests in accordance with a specified procedure, settlement througharbitration, or recourse to litigation. The specific contract clauses must beclearly understood before undertaking resolution of a claim.

Evaluation of the Claim or Change Proposal

1. Evaluate each claim element, change proposal or expected ChangeOrder or Amendment on its own merits. Consider:

a. The degree of responsibility and degree of fault caused by eachside

b. Whether the work was done in accordance with the contractspecifications or in keeping with standard industry practice

c. The contractors past practice with regard to settlement or litigationof claims

d. The comparative cost of alternatives

2. Require the contractor to accompany its claim or proposal with a fullydocumented report. Require all relevant information (including CPMschedules, correspondence, and graphic material).

3. If applicable, obtain the opinion of the Architect/Engineer of the validityof the claim.

Determining Entitlement or Initial Liability

In reaching a determination of the validity of the claim and the entitlement, ifany, of the contractor, the following elements are essential in reaching athorough, balanced conclusion.



made part of the contract.

2. Identify the proper parties.

3. Determine the facts, using information from all relevant sources. Mostclaims are based upon factual disputes and a full knowledge of the truefacts is essential in reaching a correct conclusion.

4. Carefully examine the material presented by the contractor as proof ofcausation to spot any inaccuracies or ambiguities which may discreditor negate all or part of the contractor's claim. Require that thecontractor prove a cause and effect relationship.

5. When analyzing damages, remember that claims are often calculated onthe basis that the customer has ample resources to compensate thecontractor. Analysis of claimed damages should:

a. Require the contractor to provide proof of expenditures anddetailed calculation of damages.

b. Include an audit, if feasible.

c. If possible, require the contractor to provide actual cost informationfrom its records as proof of damages.

d. Include as a deduct/offset any additional cost the customer hasincurred in repairing or completing deficient work.

Defense Preparation

Review all records of contract actions and overall administrationcorrespondence. The outcome will ultimately depend upon thedocumentation and presentation of the facts.

Factual defense includes:

1. Disputing Facts: Use every opportunity to find inconsistencies in thecontractor's approach. Identify and utilize contradictions in the records.

2. Disputing Damages: Carefully analyze and dispute the damages whichcontractor alleges to have suffered, so as to reduce potential liability toonly those damages directly and specifically caused by the customer'sactions.

3. Concurrency: If both the customer and the contractor are at fault, thelaw may not provide for recovery or for the apportionment of damages



to either side. Seek a legal opinion based on the actual circumstances andbe guided by that opinion.

4. Mitigation: Utilize evidence to show steps/action that the contractorcould have taken to avoid or reduce the effect of the claimed cause on itsoperation and did not do so.

Contractual or legal defenses include:

1. Notice Requirements: Compliance by the contractor to provide thenotices required by the contract. However, consider other factors whichmay be pertinent, such as:

a. Constructive notice

b. Waiver of notice requirements by actions of the customer

c. Lack of prejudice to the customer by the contractor's failure toprovide notice

Exhibit 4.6.4 provides a sample response for a claim which has beensubmitted without proper notice.

2. Exculpatory Clauses: Contract clauses which clearly relieve the customerof responsibility or which limit its exposure to potential liability for itsactions. Note that these clauses are strictly construed by the Court, buttheir validity is generally upheld.

3. Prior Settlement: Be aware of all possible circumstances in theadministration of the contract, or in the settlement of changes where thecontractor may have waived any of its rights or provided a release inconnection with a particular issue.

4. Excusable Delays: The contractor will not be able to assert a right torecover from the customer if the cause or the delay is excusable, but notcompensable. Unless by contract the customer assumes the risk for adelay, it cannot be held responsible for any excess costs which thecontractor may incur for a delay which was outside the control of thecustomer.

Counterclaims

Defense against a claim should include the possibility of asserting a claimagainst the contractor for breaches of contract (technical as well assubstantive) and its actions or inactions which resulted in excess costs to the



customer.

4.6.5 Disputes Occasionally it is not possible to resolve a claim. The contract may contain adisputed article that provides a procedure for resolution of disputes. Such aprocedure may indicate the steps and sequence of events to resolve thedispute, or may only provide that "the parties agree to attempt in good faithto resolve disputes". Detailed procedures, if provided, should be followedcarefully.

It should be a goal to resolve all contractor claims at the project level throughnegotiations between parties who have the best knowledge of the facts andcircumstances. Where this is not possible, it may be necessary for thedispute to be resolved through a third party. The most costly and time-consuming process is litigation which should therefore be avoided if at allpossible. Alternative Dispute Resolution (ADR) processes (such asmediation, expert panels, and dispute review boards) can be considered.

Many contractor claims may ultimately be passed through to your customer.If your prime contract has a disputes provision with express proceduralrequirements, it may be necessary to instruct the contractor how to proceedin a dispute in order for you to comply with these requirements.

4.6.6 Exhibits Directive to Maintain Schedule [Sample] (Exhibit 4.6.3-A)Claim Flowchart (Exhibit 4.6.3-B)Claim Rejection [Sample] (Exhibit 4.6.4)

Contract/Subcontract Mangement Manual Page 55 of 63Section 4

EXHIBIT 4.6.3-ADIRECTIVE TO MAINTAIN SCHEDULE

[SAMPLE]

DATE_________________

ADDRESSEE

__________________________________

__________________________________

__________________________________

__________________________________

Subject: Schedule Extension

On ____________ [Contractor] made a request for an extension of time. That

request is being evaluated for merit; however, the extension you have requested

cannot be accommodated. You are directed to take such action as is necessary to

recover schedule and meet the contract milestone dates and segregate the costs

associated with this effort pending a final determination.

Please provide an estimate of this cost as soon as possible and, in any event, within

[ ] days.

Very truly yours,



Claim Rejection [SAMPLE] (EXHIBIT 4.6.4)

May 9, 1993

Dear Sir:

Re: General Civil ContractChange Order Request for Imbedded Anchorsin Primary Concrete for Gate PartsYour Ref. No. _________, dated April 15, 1993________________________________________

We have reviewed your request and find that the constructiondrawings showing the revision were issued February 13,1991 and that the first pour with these anchors wascompleted September 29, 1991.

Raising this issue more than two years after the constructiondrawings were issued, more than 16 months after the workwas commenced, and after the work is essentially completehas denied us the opportunity to either return to the tenderscheme, consider alternatives, or implement specialmonitoring of the operation. We consider your request atthis time to be unreasonable and, in accordance with Section36 of the General Specifications, will not be given furtherconsideration.

Yours truly,

4.7 BACKCHARGESSECTION 4. PERFORMANCE Page 58 of 63

4.7 BACKCHARGES

4.7.1 Purpose This procedure describes the process for generating and collecting costsagainst a contractor who has provided goods or services that are not incompliance with the contractor's obligations under the contract.

4.7.2 Discussion Contracts often have express provisions for backcharges describing theadministrative requirements for notice and pricing terms. If so, they must befollowed. However, legitimate backcharges may be generated and collectedpursuant to other contract provisions or basic legal rights as well.

The necessary elements are:

• Notice• Cost determination• Pricing• Collection

It is always preferable, for warranty, resource and pricing purposes, to haverework or other corrective action performed by the responsible party.

4.7.3 Procedure When rework or other corrective action for defects is determined to benecessary or when you intend, out of necessity to perform work on behalf ofthe contractor (e.g., cleanup, material offloading or providing constructionequipment), you should prepare a written notice to the responsible contractoridentifying the nature of the problem and asking the contractor to perform thenecessary work. If safety or other urgent considerations dictate, the noticemay explain and provide that correction is being undertaken by you or others.(Note that if you have another contractor perform the backcharge work, youshould require adequate cost records to support the backcharge.)

If the contractor is unable or unwilling to perform the work, a Notice ofBackcharge Work to be Performed (reference Exhibit 4.7.3-A) should belogged (reference Exhibit 4.7.3-B) and issued seeking acceptance by thecontractor and advising of the pricing mark-ups, if not provided by contract.

If agreement or acceptance cannot be obtained, proceed to authorize the workand establish a Force Account by cost code to accumulate labor, material andequipment charges in accordance with project procedures and authorization.(Reference Special Topics, Section 7.6 "Force Accounts.")

4 PERFORMANCE


4.7 BACKCHARGESSECTION 4. PERFORMANCE Page 59 of 63

Prepare Daily Summaries of Backcharge Work (reference Exhibit 4.7.3-C)and seek contractor acceptance on a daily basis. If refused, make a notationon the form and continue the process.

Upon completion of the work, prepare a Notice of Backcharge Completion(reference Exhibit 4.7.3-D) apply agreed or appropriate rates and supply aconsolidated request for billing (including any indirect or other costs forwhich the contractor is liable) to the Controller for collection or off-setagainst amounts otherwise due.

When resolved through collection or negotiation, close out the backchargeforce account in accordance with project procedures.

4.7.4 Exhibits Notice of Backcharge Work to be Performed (Exhibit 4.7.3-A)Backcharge Log (Exhibit 4.7.3-B)Daily Summaries of Backcharge Work (Exhibit 4.7.3-C)Notice of Backcharge Completion (Exhibit 4.7.3-D)

Daily Summary of Backcharge WorkCONTRACT NO.:

CONTRACTOR:

WORK DESCRIPTION:

LOCATION:

TOTAL LABOR TOTAL EQUIPMENT

COMPANY:

JOB NO.:


CURRENCY:

BC NO.:

DATE:

TITLE

TOTAL OTHER

DESCRIPTION AMOUNT

REMARKS

OTHER


(FOR WHOM BACKCHARGE WORK IS BEING PERFORMED):APPROVED BY CONTRACTOR:

UNIT PRICEQUANTITY

TITLE

NO.MEN CLASS. ST OT

HOURSLABOR

RATE WAGESTOTAL TOTAL

SUBSISTENCEEQUIP.

NO. DESCRIPTION

EQUIPMENT

HOURS RATE AMOUNT

COMPANY

TITLE

Expedition


TABLE OF CONTENTSSECTION 5. MONITORING/REPORTING Page i

Monitoring/Reporting

TABLE OF CONTENTS

5.1 DAILY REPORT ........................................................................................................................15.1.1 Purpose ..................................................................................................................................15.1.2 Procedure ...............................................................................................................................15.1.3 Exhibit ...................................................................................................................................45.1.4 Checklist ................................................................................................................................4Daily Report (EXHIBIT 5.1.2) ..........................................................................................................5Daily Report Checklist (EXHIBIT 5.1.4) ...........................................................................................6

5.2 PROGRESS REVIEW AND COORDINATION MEETINGS.................................................75.2.1 Purpose ..................................................................................................................................75.2.2 Procedure ...............................................................................................................................75.2.3 Exhibit..................................................................................................................................85.2.4 Checklists...............................................................................................................................85.2.5 Reference ...............................................................................................................................8Progress Review Meeting Checklist (EXHIBIT 5.2.3-A) ....................................................................9Coordination Meeting Checklist (EXHIBIT 5.2.3-B) ........................................................................ 10Schedule Checklist (EXHIBIT 5.2.3-C)............................................................................................ 11

5.3 PROGRESS MEASUREMENT AND PAYMENT.................................................................. 125.3.1 Purpose ................................................................................................................................ 125.3.2 Procedure ............................................................................................................................. 125.3.3 Exhibits................................................................................................................................ 135.3.4 Checklists............................................................................................................................. 13Invoice For Progress Payment (EXHIBIT 5.3.2-A.1)........................................................................ 14Invoice For Progress Payment - Alternate (EXHIBIT 5.3.2-A.2)....................................................... 15Certificate of Payment (EXHIBIT 5.3.2-B) ...................................................................................... 16Invoice Concurrence Sheet (EXHIBIT 5.3.2-C)................................................................................ 17Progress Measurement Procedure [SAMPLE] (EXHIBIT 5.3.2-D)................................................... 18Mobilization Payment Checklist (EXHIBIT 5.3.4-A)........................................................................ 19Invoice Processing Checklist (EXHIBIT 5.3.4-B)............................................................................. 20

5.4 QUALITY SURVEILLANCE.................................................................................................. 215.4.1 Purpose ................................................................................................................................ 215.4.2 Procedure ............................................................................................................................. 21

5.5 SAFETY AND HEALTH.......................................................................................................... 225.5.1 Purpose ................................................................................................................................ 225.5.2 Definitions............................................................................................................................ 225.5.3 Procedure ............................................................................................................................. 235.5.4 Contract Compliance ............................................................................................................ 245.5.5 Exhibits................................................................................................................................ 245.5.6 Checklist .............................................................................................................................. 24


TABLE OF CONTENTSSECTION 5. MONITORING/REPORTING Page ii

Confirmation of Noncompliance with Contract Safety and Health Requirements (EXHIBIT 5.5.3-B)29Safety and Health Checklist (EXHIBIT 5.5.6).................................................................................. 30

5.6 ENVIRONMENTAL ................................................................................................................ 315.6.1 Purpose.............................................................................................................................. 315.6.2 Discussion ......................................................................................................................... 315.6.3 Procedure ............................................................................................................................. 325.6.4 Checklist .............................................................................................................................. 33Environmental Checklist (EXHIBIT 5.6.4)....................................................................................... 32

5.1 DAILY REPORTSECTION 5. MONITORING/REPORTING Page 1 of 33

5.1 DAILY REPORT

5.1.1 Purpose This section identifies the information required on the Daily Report of acontractor's activities.

The Daily Report is your internal document. It is an historical record thatdescribes your observations of the contractor's day-to-day operations. It canbe used later as a reference to determine the exact progress and status of acontractor's work at any given time. In the event of a claim or dispute, thedetails of events recorded in the Daily Reports become critically important.

Daily Reports must be complete and factual. Utmost care must be exercisedin preparing Daily Reports.

5.1.2 Procedure General

A Daily Report will be completed for each day a contract is active. Thereports will be sequentially numbered, beginning with 001 for the first day ofwork. (Refer to Exhibit 5.1.2 for a Daily Report form.) Preparation of theDaily Report is primarily the responsibility of your representative who ismonitoring the physical work (e.g., field engineer, contract coordinator,contract supervisor). (Although on short-staffed projects there may be atemptation to have the contractors prepare and submit Daily Reports for yourconcurrence, it is to be avoided because of a contractor's natural tendency to"shade" facts or include/exclude items based on its own best interests.) EachDaily Report will be signed by the preparer and submitted for managementreview no later than the morning of the following day. The original report willbe retained in the contract master file.

NOTE: If individuals feel compelled to enter contract related events,discussions or observations into personal diaries or logs, thesediaries or logs should be submitted periodically to site management forreview just as the Daily Reports are.

Each day of an active contract will be covered by a Daily Report; however, ifno work is performed on the weekend or holidays, a separate Daily Report isnot required for each day of the weekend, providing the Monday DailyReport contains a statement such as:

"No work was performed on Saturday and Sunday, ___________(month)____________(day) and ________________ (day), _________(year). "

Also, if work is not performed for a number of days, one Daily Report maybe prepared stating the specific dates covered by the report.




The Daily Report should include the following information:

Shift -- The shift and the starting and ending times will be indicated.

Forces and Equipment -- Records will be kept of the number of craftsmen(by trade) and the major pieces of contractor equipment on site.Equipment moved on or off site since the last report will be indicated.Any down equipment and the downtime, if it can be established, will beindicated. (Note: this section will normally reference the contractor's priordaily force and equipment reports if adequate details are covered in thosereports.)

Description of Work Performed Today - Progress

A brief description of the work being performed will be entered, indicatingthe area, location, elevations, column lines, etc.

• The progress made relative to the contractor's plan will beindicated, noting the initiation and completion of any major item ofwork. (Note: This and the preceding item may reference thecontractor's rolling 4-week schedule if the data is included in thatdocument.)

• Major items of material received and/or removed or installed willbe recorded.

• When a contractor ceases work or returns to work after a period oftime away from the job, this will be noted with appropriatelydetailed comments.

Special Comments -- While the level of detail indicated below is notexpected for every Daily Report, each of the issues raised should beconsidered and chronicled, as appropriate, if potentially significant. It isimportant, though, for the report to include only factual statements. If thepreparer has no factual basis for an assessment (e.g., regarding avoidabledelays), the writer should not hazard a guess or opinion. This commentapplies to all notations and reports prepared by those involved in contractmanagement.

• Work Stoppages, Interruptions, Delays, or Potential Causes ofDelays



In recording information on such delays, stoppages, andinterruptions, the following items will be considered:

— Was the activity on the critical path?— Was it unavoidable?— What was the cause?— What was the impact?— What was the productivity result?— How much time was lost - craft and man-hours?— What equipment was affected or idled?— Were there concurrent delays due to other causes (i.e.,

contractor caused)?

• Weather

— Weather conditions will be described, indicating if weatheraffected the contractor's operation.

— Weather that may result in a force majeure request forextension from the contractor will be noted separately.

• Surveillance

— A record will be kept of such items as:

- Unusual field conditions

- Unsatisfactory work notifications and actions taken bycontractor to remedy the situation.

NOTE: When comments are made concerning anyunsatisfactory conditions, each succeeding report willindicate action taken by the contractor to remedy thesituation until all unsatisfactory conditions have beencorrected.

- Tests performed and results

- Inspections performed (record satisfactory/unsatisfactoryitems)

• Accidents, Injury, and Safety



— Any accidents, injuries, or safety violations will be recorded.

• Requests from the contractor for field related assistance

• Requests from other departments and action taken

• Direction/Instructions

— Direction/Instructions given to the contractor will be recorded,listing the name of the person and the time given. Any actiontaken will also be indicated.

• Conflicts

— When conflicts occur, the following will be recorded:

-- What was the conflict?-- Who discovered and reported it?-- Who was informed?-- What steps were taken to resolve the conflict?-- What was the resolution?

• General

— Action taken on any previous outstanding items will berecorded

SPECIAL NOTE: Items of significance (e.g., work stoppages, conflicts)should be carried forward to the agenda for theProgress Review Meeting or Coordination Meeting(as appropriate).

5.1.3 Exhibit Daily Report (Exhibit 5.1.2)Daily Report [Sample] (Exhibit 5.1.2.A)

5.1.4 Checklist Daily Report Checklist (Exhibit 5.1.4)

Daily Report

SUBCONTRACT NO:

SUBCONTRACTOR:

CONTRACTOR REP:

COMPANY:

PROJECT:

REPORT NO:

PAGE: of1 1

SPECIAL COMMENTS:

DESCRIPTION OF WORK PERFORMED TODAY:

Building demolition completed.------------------------------------------------------------------------------Acme setting up paint mixing room.

WEATHER

Temp. Precipitation WindSkySHIFT DATE

None03/30/1999Daily 82 LightClear

EQUIPMENT

DESCRIPTION SOURCE UNITS TYPE WORK AREA REMARKS

PC200 Hoe STDPAV 1 3/4 CY Hoe

Pickup Truck ACMEGC 1 Ford - NJ 08996 A

Dumpster ACMEGC 2 30 ton dumpsters ALL

D6 Bulldozer STDPAV 1 Caterpillar

DATE

09/02/1999

REPORTED BY:

XX

09/02/1999

REVIEWED BY: DATE

Expedition



Daily Report Checklist (EXHIBIT 5.1.4)

Contract Number:____________________________Contractor:_______________________________

Contract Scope:

1. Daily Reports include contractor's first day on site, days not worked and cover allshifts

YES NO

Comments:

2. Daily Reports cover all calendar days and are sequentially numbered YES NO

Comments:

3. Information on Daily Report is factual and cannot be considered as an opinion. YES NO

Comments:

4. Sufficient information is included to reconstruct contractor's progress at a later date YES NO

Comments:

5. Action items or potential problems identified and actions taken YES NO

Comments:

6. Daily Reports are current within one day YES NO

Comments:

7. YES NO

Comments:

8. YES NO

Comments:

Name: ____________________________________ Date: __________________________

5.2 PROGRESS REVIEW AND COORDINATION MEETINGSSECTION 5. MONITORING/REPORTING Page 7 of 33

5.2 PROGRESS REVIEW AND COORDINATION MEETINGS

5.2.1 Purpose Progress Review and Coordination Meetings are held to evaluate the progressof a contractor; review schedules; discuss past, current, and potentialproblems; and resolve interfaces and restraints. Generally there are twotypes of meetings:

• Progress Review Meetings (you and an individual contractor)

• Coordination Meetings (you and two or more contractors

5.2.2 Procedure Progress Review Meetings – Progress Review Meetings are generallyconducted once a week or as project or contract conditions warrant.Coordination Meetings are held periodically (e.g., weekly, or on an as-neededbasis). An agenda will be prepared by the company and sent to allparticipants in advance of each meeting. (Refer to Exhibit 5.2.2. for asample Progress Review Meeting Agenda).

The meeting participants will:

• Discuss outstanding action items from previous meetings, their statusand resolution.

• Evaluate the contractor's progress since the last meeting and compareit to the scheduled progress.

• Agree on status of work and mark up a schedule for progress to date.

• Discuss the schedule and the proposed plans and progress for the nextschedule period.

• Discuss interfaces, critical items, and current and potential problems,including a review of the Change Notices and Proposals/Claims Log,and potential and pending claims.

• Determine action items and assign responsibility.

• One of your participants will summarize the results of the meeting,distribute minutes to the participants, and provide the contractor witha list of action items and any agreements or understandings reached.

The use of a 4-week rolling schedule in lieu of a 3-week look ahead scheduleis recommended as a tool to record as-built schedules and for planning newwork. For each new revision of the 4-week rolling schedule, the most recentpast week (as-built) and the next three weeks should be shown.




The importance of adequate and proper monitoring of the contractor'sprogress cannot be over emphasized. Inevitably, this becomes the mostsignificant factor in processing claims after the Project is completed.Therefore, documentation of progress and reasons for delays is a must.

In addition to schedule performance there are numerous other ways tomonitor progress in the field including comparison of actual to forecast:

• Cash Flow• Manpower Projections• Quantity Installation• Design and vendor drawing submittals• Equipment Deliveries

Coordination Meetings -- Coordination Meetings are conducted to schedulework area accessibility, equipment and schedule coordination among thecontractors and you. An agenda for the meeting will be prepared by you anddistributed to the participants in advance of the meeting. CoordinationMeetings are generally held weekly or as work schedules require.

The meeting participants will:

• Discuss outstanding action items from previous meetings, their statusand resolution.

• Discuss foreseeable interfaces and potential conflicts betweencontractors. Address foreseeable constraints to the flow of work,including constraints caused by other parties (e.g., you, othercontractors, customer, government authorities).

• Determine action items and assign responsibility.

• A company participant will summarize the results of the meeting,distribute minutes to the participants, and provide the contractor witha list of action items and any agreements or understandings reached.

SPECIAL NOTE: When "accepting" or "approving" the contractor'sworking schedule(s), be sure it is understood by all thatsuch "acceptance" or "approval" is for workcoordination purposes only and does not alter thecontract schedule milestone dates. The contractschedule milestone dates can only be modified byContract Amendment.

5.2.3 Exhibit

5.2.4 Checklists

5.2.5 Reference

Progress Review Meeting Agenda (Exhibit 5.2.2)

Progress Review Meeting Checklist (Exhibit 5.2.3-A)Coordination Meeting Checklist (Exhibit 5.2.3-B)Schedule Checklist (Exhibit 5.2.3-C)

Contract/Subcontract Coordination Handbook


5.2 PROGRESS REVIEW AND COORDINATION MEETINGSSECTION 5. MONITORING/REPORTING Page of 35

5.2.5 Reference Contract/Subcontract Coordination Handbook

Progress Review Meeting Checklist (EXHIBIT 5.2.3-A)


Contract Scope:

1. Meeting frequency is appropriate for this contract and are being held as scheduled. YES NO

Comments:

2. Agendas and meeting minutes are being prepared. YES NO

Comments:

3. Action items, due dates and responsibilities are being identified. YES NO

Comments:

4. Action items are being followed up. YES NO

Comments:

5. The appropriate attendees are invited. YES NO

Comments:

6. Is the 3/4-week working schedule being used to plan work?. YES NO

Comments:

7. Schedule changes are being approved per the contract. YES NO

Comments:

8. YES NO

Comments:

9. YES NO

Comments:



Coordination Meeting Checklist (EXHIBIT 5.2.3-B)


Contract Scope:

1. Meeting frequency is appropriate for this contract and are being held as scheduled. YES NO

Comments:

2. Agendas and meeting minutes are being prepared. YES NO

Comments:

3. Action items, due dates and responsibilities are being identified. YES NO

Comments:

4. Action items are being followed up. YES NO

Comments:

5. The appropriate attendees are invited. YES NO

Comments:

6. Schedule changes are being approved per the contract. YES NO

Comments:

7. YES NO

Comments:

8. YES NO

Comments:

9. YES NO

Comments:

Name: ____________________________________________________ Date:__________________________



Schedule Checklist (EXHIBIT 5.2.3-C)


Contract Scope:

1. Contractor's initial schedule has been obtained. YES NO

Comments:

2. Initial schedule has been approved and contractor has been formally notified. YES NO

Comments:

3. Periodic schedule submittal received from contractor. YES NO

Comments:

4. Change notices written to reflect contract schedule changes. YES NO

Comments:

5. Schedule submittals meet contract requirements for form and substance. YES NO

Comments:

6. Continuous as-built schedule is maintained. YES NO

Comments:

7. As-built schedule contains sufficient data to reconstruct events at a later date. YES NO

Comments:

8. Contractor submits a revised schedule for each claim of additional time indicating thecause and effect.

YES NO

Comments:

9. YES NO

Comments:

Name: __________________________________________________ Date: __________________________


5.2 PROGRESS REVIEW AND COORDINATION MEETINGSSECTION 5. MONITORING/REPORTING Page 8a of 33

I. Action Items from Last Meeting

II. Updated Rolling 3/4 Lookahead Schedule III. Quantity Progress by Area or Activity

− Progress since last meeting

− Total progress to date

− Planned progress to date

− Variations to baseline quantities• from changes• from design growth• from revised estimates

− Schedule trend (early/late) (if any)

IV. Manpower by Craft

− Headcounts since last meeting

− Updated manpower curves• by headcount• by man-hours expended

− Overtime issues

− Productivity• man-hours against quantities• man-hours against budgets

− Cost trends (if any)

V. Equipment by Task/Crew

− Operated hours

− Standby hours

− Downtime hours

− Availability against plan

− Revised equipment plan (if any)

VI. Manpower Availability

− Manpower curves against plan• Manual Crafts• Non-manual supervision

− Recruiting/approval issues

VII. Material

− Critical items lists

− Over/Short/Damaged information

− Purchase Order and Subcontract status• Contractor furnished• Owner/Company Furnished

− Equipment data issues

− Rejections, rework, warranty items

VIII. Quality

− Rejections, defects

− Proposed/Approved Corrections

− Trends and counter measures (if any)

IX. Safety

− Incidents/status since last meeting

− Project to date experience/trends (if any)

− Safety initiatives

X. Requests for Information

− Initiated since last meeting

− Cumulative/resolved/open status

− Critical items

XI. Technical Data Submittals

− Submitted since last meeting

− Status of items for approval

− Delinquent data (if any)

XII. Change Notices

− Issued to date

− Priced by Contractor

− Negotiated

− Documentation Complete

XIII. Change Orders/Amendments

− Executed to date

− Pending

XIV. Correspondence Pending (reply required)

− Company to Contractor

− Contractor to Company

XV. Invoice and Payment Status

− Submitted but not paid

− Paid to date

− Retained amounts, ( if any)

− Exceptions, rejections, or revisions XVI. New Action Items with Target Closure Dates

Progress Review Meeting Agenda [Sample] (Exhibit 5.2.2)

5.3 PROGRESS MEASUREMENT AND PAYMENTSECTION 5. MONITORING/REPORTING Page 12 of 33

5.3 PROGRESS MEASUREMENT AND PAYMENT

5.3.1 Purpose This procedure outlines actions required before progress payment requestsare transmitted for payment.

Most contracts contain provisions to pay a contractor upon completion of ameasurable segment of the work. Effective contract management involvesensuring that what is paid for is actually received and acceptable.

5.3.2 Procedure The contractor's progress payment schedule will be approved prior tocommencement of contract work.

The contractor's mobilization payment will not be made until certainsubmittals have been made. These submittals, which must be listed in thecontract as prerequisites for mobilization payment if the payment is intendedto be withheld until submittal, will include:

• Contract schedule• Insurance Certificates and bonds

and may include:

• Safety and Health Program• Quality Plan• Environmental Compliance Program,• Technical procedures (e.g., welding procedures)• Pre-job (labor) conference results• Progress payment schedule, when applicable

In order to avoid progress payment disputes, reconcile percentage ofcompletion and/or quantities with the contractor prior to the contractor'ssubmitting an invoice. (Reference Exhibits 5.3.2-A.1 and 5.3.2-A.2 fortypical invoice formats.) The reconciled payment schedule is returned to thecontractor who submits an invoice with the updated and approved paymentschedule as backup. For cost reimbursable contracts, the contractor will, inaddition, submit verified time sheets, material invoices and approvedequipment lists with the invoice.

An updated progress payment schedule is prepared for each payment requestreceived from the contractor.




The contractor will be required to submit with each invoice a Certificate ofPayment form (reference Exhibit 5.3.2-B). This document, which should besigned by an officer of the contractor's firm, certifies that the contractor haspaid all of its subcontractors and suppliers for services and/or materialsfurnished for the period of time or scope of work covered by the invoice.

The contractor's invoice should be verified for contract compliance andpreviously reconciled payment schedule, and submitted for approval.(Reference Exhibit 5.3.2-C for a Invoice Concurrence Sheet form.)

Reconcile all invoice offsets such as retention or backcharges.

Verify arithmetic and issue payment to contractor on approved invoices.

It is often advantageous to develop detailed, contract-specific procedures forprogress measurement. These procedures will reflect the contract terms forprogress measurement and provide additional details typically not included inthe contract language (reference Exhibit 5.3.2-D for a sample "Procedure forProgress Measurement").

5.3.3 Exhibits Invoice For Progress Payment (Exhibit 5.3.2-A.1)Invoice For Progress Payment - Alternate (Exhibit 5.3.2-A.2)Certificate of Payment (Exhibit 5.3.2-B)Invoice Concurrence Sheet (Exhibit 5.3.2-C)Progress Measurement Procedure [Sample] (Exhibit 5.3.2-D)

5.3.4 Checklists Mobilization Payment Checklist (Exhibit 5.3.4-A)Invoice Processing Checklist (Exhibit 5.3.4-B)

Invoice Concurrence SheetCONTRACTOR:

JOB NO.:

COMPANY

Expedition

SUBCONTRACTOR'S NAME

SUBCONTRACT

NOTES:

INVOICE NO.

SUBCONTRACT NUMBER

TECHNICAL REVIEW

PROJECT CONTROLS

CONTROLLER

APPROVAL FOR PAYMENT

SITE MANAGER

PAYMENT IN FULLCONCUR WITH INVOICE PROCEED WITHCONCUR WITH INVOICE PROCEED WITH

PAYMENT IN FULL

REJECT INVOICE-RETURN TOSUBCONTRACTOR

REJECT INVOICE-RETURN TOSUBCONTRACTOR

CONCUR WITH INVOICE IN PART. PROCEED WITHPARTIAL PAYMENT IN THE AMOUNT OF

CONCUR WITH INVOICE IN PART. PROCEED WITHPARTIAL PAYMENT IN THE AMOUNT OF

QUALIFICATION FOR REDUCTION OF PAYMENT

SUBCONTRACT MANAGER

ACCOUNT CODE DISTRIBUTION

ACCOUNT AMOUNT

FUNCTION NAME CONC REJECT

D-U-N-S NO.

CONTRACT SUPERVISORCOORDINATOR

COMMODITY CODE



Progress Measurement Procedure [SAMPLE] (EXHIBIT 5.3.2-D)

CONTRACT NO. 20001 CONTRACT SCOPE - Furnish and Erect Siding

Terms of Payment:

1. Payment made for siding material as it arrives at the Site.2. Pricing for siding to be paid on a square foot basis as installed.3. Pricing established for penetrations on a per each basis, based on size.

Time of Payment: Invoices submitted monthly. Agreed to measure for payment prior to the 15th of eachmonth.

Measurement for Payment:

1. As siding arrives on site, contractor must furnish bills of material. The company representativereviews contractor material receiving reports. Receiving reports will show square footage and numberof pounds shipped.

Contractor provided a unit price breakdown with bid showing material cost represented 50% of price.

Procedure - Agreed with contractor on what material receiving reports represent, such as all materialfor Face "A" of building XYZ. Then allow progress payment based on 50% of that square footage.

2. As siding is installed, it will be shown in marked up drawings.

Procedure - Based on a joint walkdown, drawings will be marked up showing what has been installed.For example, the Face "A" drawings may show that it is agreed that 1/3 of the square footage isinstalled. This can be figured roughly using dimensions on the drawings.

3. Penetrations

Procedure - As penetrations are installed, they will be colored green on the marked up drawings. Forexample for Face "A" the green circles represent penetrations. Alongside each green circle is markedthe size of the penetration, such as 48" - perimeter.

Note only one set of drawings will be kept, and progress will be added as work is complete. Thedrawings will show break marks for what is on Progress Payment #1, #2, etc.

4. The marked up drawings will be kept at Bill Smith's desk. Bill Smith is assigned responsibility forthis work. As each face is completed, the marked up drawing will be transferred to the ProgressPayment drawer for contract XYZ.



Mobilization Payment Checklist (EXHIBIT 5.3.4-A)


Contract Scope:

1. Contractor has submitted and the company has approved a contract schedule. YES NO

Comments:

2. Contractor has submitted acceptable Certificates of Insurance. YES NO

Comments:

3. Contractor has submitted evidence of adequate bonds, if required. YES NO

Comments:

4. Contractor has submitted an acceptable Safety and Health Action Program. YES NO

Comments:

5. Contractor has acceptable document controls in place. YES NO

Comments:

6. Technical procedures have been received. YES NO

Comments:

7. Labor relations plan is in place. YES NO

Comments:

8. Progress payment schedule and payment procedures are approved and in place. YES NO

Comments:

9. YES NO

Comments:

Name: __________________________________________________ Date: __________________________



Invoice Processing Checklist (EXHIBIT 5.3.4-B)


Contract Scope:

1. The person(s) who will approve invoices is identified. YES NO

Comments:

2. The invoice has been reviewed for contract and/or commercial compliance. YES NO

Comments:

3. Billings have been reconciled with approved progress requests. YES NO

Comments:

4. Certification of Payment form is submitted with each invoice. YES NO

Comments:

5. Controller concerns or comments have been acted upon and closed out. YES NO

Comments:

6. All offsets such as retention and backcharges have been reconciled. YES NO

Comments:

7. YES NOComments:

8. YES NOComments:

9. YES NOComments:

Name: __________________________________________________ Date: __________________________

5.4 QUALITY SURVEILLANCESECTION 5. MONITORING/REPORTING Page 21 of 33

5.4 QUALITY SURVEILLANCE

5.4.1 Purpose This section addresses issues that may arise with respect to your qualitysurveillance of the contractor's work in progress. Refer to Section 6.1 of thisManual for a discussion of acceptance of the work.

Your surveillance is a monitoring function to provide an independentassessment of both quality and physical progress. First line inspection is thecontractor's responsibility. Your role is quality assurance, not quality control.

The contractor is responsible for completing the work in accordance with thecontract and, where your inspections are required for work in progress, fornotifying you in a timely manner to permit inspections.

Over-inspection is to be avoided because it can potentially cause aconstructive change in favor of the contractor, or it may lead a contractor tothe conclusion that it does not need to inspect its own work.

A contractor's repeated inability to meet the technical requirements of thecontract warrants consultation with management.

5.4.2 Procedure The contractor will give notice of:

• Work in progress that is ready for inspection.

• Portions of the work that are ready for testing and acceptance whenpartial acceptance is permitted in the contract. (Refer to Section 6.1of this Manual.)

Inspect the work. Avoid giving direction to the contractor regarding potentialcorrective actions. The results of your inspections will be formallydocumented.

The contractor will be notified of non-conforming items and requested toprovide a corrective action plan.

Comment on and approve all corrective action prior to implementation.Rework will be re-inspected.

5 MONITORING/ REPORTING

5.5 SAFETY AND HEALTHSECTION 5. MONITORING/REPORTING Page 22 of 33

5.5 SAFETY AND HEALTH

5.5.1 Purpose This section provides an outline for monitoring a contractor's Safety andHealth Program and for handling contractor safety and health violations.

The Project Safety and Health Program is intended to implement safe workpractices which must be observed by all jobsite employees. Contractors mustadhere to the Project Safety and Health Program and its requirements. Thefundamental principle is that contractors are responsible for developing thesafety and health program for their employees and for ensuring the safety andhealth of their own employees.

The contractor is responsible for performing work in a safe manner and forconforming to established Federal, state, local and contractual safety andhealth requirements. The contractor is also responsible for providing a safeand healthy working environment for its employees, including correctingunsafe working conditions.

Monitor contractor compliance with the contractual requirements of thecontractor's safety and health program. Your Safety Group reviews thecontractor's safety and health program submittal to verify contractorcompliance with it’s Safety and Health Program and applicable Federal andstate regulations.

5.5.2 Definitions Imminent Danger Violations -- Any conditions or practices in any place ofemployment where an immediate danger exists which could reasonably andimmediately be expected to cause death or serious physical harm.

Serious Violations -- If there is a potential probability that death or seriousphysical harm could result from an existing condition.

Non-serious Violation -- Where an incident or occupational illness resultingfrom violation of a standard would probably not cause death or seriousphysical harm, but would have a direct or immediate effect on the safety orhealth of employees.




5.5.3 Procedure Obtain the contractor's Safety and Health Program and forward it within 30calendar days after contract award and prior to commencing work at thejobsite, unless otherwise specified in the contract.

Although "stop work" action in response to a safety or health problem isnormally the responsibility of the contractor, potential safety and healthviolations may be reported by workers or observed in the course of day today operations. Management will be notified of all such potential and actualsafety and health violations that come to attention.

Violations will be classified by Safety as imminent danger, serious or non-serious violations.

Imminent Danger Violation

• Work shall be immediately halted, and the contractor instructed toremove all personnel from the area if required to preclude death orserious injury.

• Immediately notify management.

• Resumption of work shall not be permitted until corrective action hasbeen taken by the contractor and verified to eliminate the unsafesituation.

• A Confirmation of Noncompliance with the Contract Safety andHealth Requirements form (reference Exhibit 5.5.3-B) will be issuedto the contractor and monitored to ensure a timely response.

Serious Violation

• This condition will be brought to the immediate attention ofmanagement, who shall cause the contractor to cease work andremove all personnel from the area if required to preclude possiblephysical harm.

• Correction of the cause of the violation by the contractor andverification of the correction shall be a prerequisite to resumption ofwork in that area.

• A Confirmation of Noncompliance will be issued to the contractor andmonitored for a timely response.

Non-Serious Violation

• The contractor and your representative will be informed of the



violation as soon as practicable.

• A Confirmation of the Noncompliance will be issued to the contractorand monitored for a timely response.

• The contractor will confirm resolution of the violation.

• If the condition is not corrected within the time stipulated in the notice,the contractor's site representative will be contacted to resolve thematter.

• If the safety and health violation is not corrected after a second notice,or if the contractor has continued to repeat violations, the situationwill be referred to management to pursue remedies under the contract.

5.5.4 ContractCompliance

When work is stopped or suspended, a confirming letter citing the contractprovision under which the action was taken will be issued to the contractor.

5.5.5 Exhibits Confirmation of Noncompliance with Contract Safety and HealthRequirements (Exhibit 5.5.3-B)

5.5.6 Checklist Safety and Health Checklist (Exhibit 5.5.6)



Safety and Health Checklist (EXHIBIT 5.5.6)


Contract Scope:

1. The contractor is required to submit a Safety and Health Action Program and/or a Fireprevention Plan.

YES NO

Comments:

2. The contractor has submitted the name of its person responsible for safety and healthcompliance.

YES NO

Comments:

3. Safety and health submittals required by the contract have been obtained from thecontractor.

YES NO

Comments:

4. Safety and health submittals have been reviewed and acknowledged by the companySafety and Health Services.

YES NO

Comments:

5. Company comments have been resolved with the contractor. YES NO

Comments:

6. Company Safety and Health Services confirms contractor's safety and health and fireprevention plans comply with the company's requirements.

YES NO

Comments:

7. The contractor's workers compensation insurance coverage has been confirmed by thecompany (if required).

YES NO

Comments:

8. A copy of the contractor's Hazard Communication Program has been submitted to thecompany.

YES NO

Comments:

Name: __________________________________________________ Date: __________________________

EXHIBIT 5.5.3-A

Safety and Health History


(Page 1 of 5)

CONTRACT NO.________________________ COMPANY__________________________CONTRACTOR ________________________ COMPANYJOB NO. ________________________

1. EMR

1A. List your firm's Interstate Experience Modification Rate (EMR) for the three most recent years andtotal hours worked.

19_____ 19_____ 19_____

a. EMR __________ _________ __________

b. Hours Worked __________ _________ __________

1B. If the state where the jobsite is located has an EMR rating system, provide the state EMR for thethree most recent years and total hours worked.

19_____ 19_____ 19_____

a. EMR __________ _________ __________

b. Hours Worked __________ _________ __________

2. SAFETY PERFORMANCE

2A. List safety performance incident rates for the three most recent years:

19_____ 19_____ 19_____

a. OSHA Recordable Incident Rate __________ _________ __________

b. Lost Workday Case Incident Rate __________ _________ __________

2B. Use your OSHA No. 200 Log to fill in the three most recent years:

19_____ 19_____ 19_____

a. Number of lost workday cases. __________ _________ __________

b. Number of restricted workday cases. __________ _________ __________

c. Number of cases with medical attention only. __________ _________ __________

d. Number of fatalities. __________ _________ __________

3. Check your type of work:

❏ Non-Residential Building❏ Heavy (Non-Highway) Construction❏ Mechanical❏ Electrical❏ Other (State Type): ______________________________________________________

EXHIBIT 5.5.3-A



(Page 2 of 5)


4. Are accident reports (OSHA 200) and report summaries sent to the following and how often?

No Yes Monthly QuarterlyAnnually

a. Project Superintendent/Site Mgr.

b. Vice President/Mgr. of Construction c. Safety Director

d. President of Firm

5. Do you hold site safety meetings for field employees both Manual and Non-Manual?Yes No How Often?Weekly Bi-Weekly Monthly Less Often, As Needed

6. Do you conduct project safety inspections?Yes No

If yes, who conducts this inspection?TITLE HOW OFTEN?

7. How are accident records and accident summaries kept? How often are they reported?No Yes Monthly Annually

a. Accidents totaled for the entire company b. Accidents totaled by project

(1) Subtotaled by superintendent (2) Subtotaled by foreman

8. How are the costs of individual accidents kept? How often are they reported?No Yes Monthly Annually

a. Costs totaled for the entire company b. Costs totaled by project

(1) Subtotaled by superintendent (2) Subtotaled by foreman

EXHIBIT 5.5.3-A



(Page 3 of 5)


9. List key Safety and Health personnel planned for this project. Please list name, expected position andsafety performance on last three projects (OSHA Recordable and Lost Workday Case Incident (LWCI)rates). When a project has not been specified, list key company personnel.

NAME POSITION PROJECT OSHA LWCI________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

10.Do you have a written safety program?Yes No

If yes, submit a copy for evaluation.

11.Do you have an orientation program for new hires?Yes No

If yes submit a copy for evaluation. Does it include instruction on the following?

Yes No Yes Noa. Head protection i. Fire protection

b. Eye protection j. First aid facilities

c. Hearing Protection k. Emergency procedures

d. Respiratory protection l. Toxic substances

e. Safety belts and lifeline m. Trenching and excavation

f. Scaffolding n. Signs, barricades, flagging

g. Perimeter guarding o. Electrical safety

h. Housekeeping p. Rigging and crane safety

q. Road Safety (Driving)

EXHIBIT 5.5.3-A



(Page 4 of 5)


12.Do you have a program for newly hired or promoted foremen?

Yes No

If yes submit a copy for evaluation. Does it include the following?

Yes No Yes Noa. Safe work practices e. First aid procedures

b. Safety supervision f. Accident investigation

c. Toolbox meetings g. Fire protection and prevention

d. Emergency procedures h. New worker orientation

13.Do you hold craft "toolbox" safety meetings?Yes No

How Often?Weekly Bi-Weekly Monthly Less Often, As Needed

14.Do you have a written Hazard Communication program?Yes No

If yes, how is it implemented on each project?

15.Do you have/require Material Safety Data Sheets (M.S.D.'s) for material/chemicals/equipment?Yes No

If yes, explain field procedure for informing craft workers about potential hazards:

EXHIBIT 5.5.3-A



(Page 5 of 5)


16. List three (3) client references that could verify the quality and management commitment ofyour safety program.

Name Address Phone No.

a. ____________________________ ________________________ _______________

________________________

b. ____________________________ ________________________ _______________

________________________

c. ____________________________ ________________________ _______________

________________________

5.6 ENVIRONMENTALSECTION 5. MONITORING/REPORTING Page 31 of 33

5.6 ENVIRONMENTAL

5.6.1 Purpose

5.6.2 Discussion

This procedure describes methods for monitoring a contractor’s ProjectEnvironmental Control Program and other relevant environmental issues.(This section references contractor’s activities; it should be noted, however,that your responsibility for environmental activities and oversight of ourcontractors or a customer’s contractors varies depending on the contractand scope of work, and should be identified on a project specific basis).

Management has the responsibility for overseeing that activities at theconstruction site adhere to environmental requirements, including requiringcompliance by contractors. Generally, contractors will be formally notifiedin their contract that they are required to comply with all federal, state, andlocal environmental regulations applicable to their project site activities, andof course, have this responsibility by law regardless of contract terms.

Each contractor should be provided a copy of your ConstructionEnvironmental Control Plan (CECP), and advised that they must comply, ata minimum, with all requirements in it applicable to their work, as well aswith all other laws and regulations applicable to their work, which they aresolely responsible for determining. As appropriate, contractors should alsobe required to develop their own written Environmental Compliance Plan.Any plans that are prepared by a contractor shall be submitted prior to thestart of plan implementation.

Contractors should be required to cooperate fully in implementing anyproject specific procedures and guidelines developed regarding complianceand should be held responsible for failure to comply. Reasonable steps willbe taken to communicate pertinent project environmental compliancerequirements to contractors and to require such contractors to communicatethese requirements to their own personnel and subcontractors.Noncompliance with environmental requirements, no matter whose fault,may result in agency actions that can include fines, suspension of permits orauthorizations, or stop work orders potentially affecting everyone.

Routine inspections of the jobsite should be conducted, as appropriate,regarding compliance with environmental requirements, including properhandling and storage of hazardous materials and wastes. Contractors shouldimmediately be notified of any activity observed which is perceived as beingout of compliance with applicable procedures or requirements. Follow-upmonitoring should be conducted, as appropriate, to verify that any suchactivities have been brought into compliance.

Where required (in the contract), obtain the contractor's EnvironmentalControl Plan submittal and forward it to environmental specialists forreview prior to allowing the contractor to start work. This will include




5.6.3 Procedure

storage, waste management, spill controls, compliance with permitconditions, and related issues.

Monitor the contractor’s program for obtaining, reviewing and makingavailable the Material Safety Data Sheets to all affected parties.

Monitor contract requirements where contractors are required to have a spillcontrol plan and equipment available and on site at all times.

Monitor contractor activities with respect to storage, handling and removalof hazardous materials and hazardous waste.

Monitor the project to identify any unexpected activities or scope changesthat involve the potential for a contractor to perform hazardous wasteservices. Hazardous waste services include the following:

− Site Remediation. Services related to the potential remediation ofcontaminated property or facilities, including excavation, transport ordisposal of contaminated soil and groundwater encompassing:

• Site investigations, assessments, sampling, and analysis to

determine the nature and extent of the contamination • Remedial or corrective action designs for site contamination • Construction and/or implementation of site cleanup (including

storage, treatment, transport, or disposal of hazardous) − Environmental Property Audits. Environmental assessments to

determine the extent of hazardous substance contamination at a site,including those intended for use in connection with the sale ofproperty or other financial transactions.

− Waste Treatment/Disposal Facilities. Services related to thedesign construction, or operation of hazardous waste treatmentfacilities (e.g., waste impoundments, landfills, chemical wastetreatment facilities, incinerators, deep well injection units).

− Mixed waste . Work involving investigation, design, construction, ormanagement of mixed chemical and radioactive wastes.

Contractor is to notify you in writing of all site inspections by environmentalregulatory agencies and provide specifics of any notifications of non-compliance (e.g., notices of violation, fines or penalties).

Advise appropriate contractor personnel that excavation, demolition


5.6 ENVIRONMENTALSECTION 5. MONITORING/REPORTING Page 32a of 33

/disassembly or other actions resulting in the discovery of undergroundstorage tanks, buried drums, pooled liquids, stained soils, or strong odorsshould immediately be discontinued, until it can be determined whatregulatory requirements apply (e.g., reporting of releases of reportablequantities of hazardous substances in the United States). Upon such adiscovery, the customer should be notified immediately, and your contractualresponsibilities should be identified. In many cases, reporting to theresponsible agency is required within 24 hours. This potential requirementshould be addressed immediately on a project-specific basis. If reporting isrequired and the customer does not report the event, you should report it.

Notify the contractor in writing of any delay or stop work actions taken dueto environmental issues (e.g., discovery of contaminated soil, tanks) citingwhy it was taken, the contract provision and a response date. Log and trackopen environmental items.

Notify, in writing the contractor or the customer of any activity of which youbecome aware that appears to be out of compliance with the project’sprocedures or regulatory requirements.

5.6.4 Checklist Environmental Checklist (Exhibit 5.6.4)



Environmental Checklist (EXHIBIT 5.6.4)


Contract Scope:

1. Does the contract require a Project Environmental Control Plan ?. YES NO

1a. If so, has it been submitted to the company? YES NO

2. Contractor has provided lists of hazardous materials it will use and the list hasbeen approved by the company Safety and Health Services before thecontractor starts work.

YES NO

Comments:

3. Contractor has submitted the name of the person responsible for environmentalcompliance.

YES NO

Comments:

4. Required documents such as MSDS and proof of spill control procedures havebeen obtained from contractor.

YES NO

Comments:

5. Contractor has agreed to remove all hazardous materials/waste that it hasbrought onsite.

YES NO

Comments:

6. Determination has been made as to whether contractor needs to performasbestos inspection and notification.

YES NO

Comments:

7. YES NO

Comments:

8. YES NO

Comments:


5.6 ENVIRONMENTALSECTION 5. MONITORING/REPORTING Page 32a of 33

Name: __________________________________________________ Date: __________________________


TABLE OF CONTENTSSECTION 6. CLOSEOUT Page i

Closeout

TABLE OF CONTENTS

6.1 CONTRACT CLOSEOUT .........................................................................................................16.1.1 Purpose ..................................................................................................................................16.1.2 Procedure ...............................................................................................................................16.1.3 Exhibits..................................................................................................................................2Contractor Request for Inspection of Completed Work (EXHIBIT 6.1.2-A)........................................3Contractor Demobilization Checklist (EXHIBIT 6.1.2-B)...................................................................4Contract Closeout Checklist (EXHIBIT 6.1.2-C)................................................................................5Certificate of Acceptance (Partial Acceptance) (EXHIBIT 6.1.2-D)....................................................6Certificate of Final Acceptance (EXHIBIT 6.1.2-E) ...........................................................................7Release and Certificate of Final Payment (EXHIBIT 6.1.2-F).............................................................8Contractor Fact Sheet and Historical Record (EXHIBIT 6.1.2-H).......................................................9Contractor Performance Evaluation (EXHIBIT 6.1.2-I).................................................................... 10

6.2 BENEFICIAL OCCUPANCY .................................................................................................. 106.2.1 Purpose ................................................................................................................................ 106.2.2 Procedure ............................................................................................................................. 106.2.3 Exhibits................................................................................................................................ 11Notice of Beneficial Occupancy [SAMPLE] (EXHIBIT 6.2.2-A) ..................................................... 12Beneficial Occupancy Flowchart (EXHIBIT 6.2.2-B)...................................................................... 13

6.3 SUBSTANTIAL COMPLETION............................................................................................. 146.3.1 Purpose ................................................................................................................................ 146.3.2 Procedure ............................................................................................................................. 146.3.3 Exhibits................................................................................................................................ 15Notice of Substantial Completion [SAMPLE] (EXHIBIT 6.3.2-A) ................................................... 16Notice of Substantial Completion [SAMPLE] (EXHIBIT 6.3.2-B) ................................................... 17Certificate of Substantial Completion — Contractor [SAMPLE] (EXHIBIT 6.3.2-C) ....................... 18

6.5 WARRANTY ............................................................................................................................ 236.5.1 Purpose ................................................................................................................................ 236.5.2 Procedure ............................................................................................................................. 236.5.3 Exhibits................................................................................................................................ 24Warranty Defect Notice [SAMPLE] (EXHIBIT 6.5.2-A) ................................................................. 25Warranty Log [SAMPLE] (EXHIBIT 6.5.2-B) ................................................................................ 26Correction of Warranty Defect [SAMPLE] (EXHIBIT 6.5.2-C) ....................................................... 27

.

6.1 CONTRACT CLOSEOUTSECTION 6. CLOSEOUT Page 1 of 27

6.1 CONTRACT CLOSEOUT

6.1.1 Purpose This section covers the final inspection and actions required to close out acontract. Contract close-out means that all contractual obligations havebeen discharged by both parties. This includes all commercial, technical andadministrative obligations contained in the contract and requires formalresolution of all changes, requests for time extension, claims andbackcharges.

Although the contractor has the primary responsibility for in-processinspection, the contractor will be notified of non-complying items identifiedas they are discovered. The final inspection and walk down should simplybe a confirmation of the closure of all open non-conformance reports issuedduring the progress of the work. Final acceptance and closeout procedureswill have to be modified for those contracts that have turnover, start-up, orperformance test requirements.

6.1.2 Procedure The contractor will provide notice of work that is complete and ready forfinal inspection. (Refer to Exhibit 6.1.2-A.)

Initiate a Contract Closeout Checklist. (Refer to Exhibit 6.1.2-C.)

A joint inspection of the work will be conducted by you, the customer (ifappropriate) and the contractor.

Deficiencies will be recorded on a punch list and prepared for formaltransmittal to the contractor. (Refer to Section 6.4 "Punch List.")

Occasionally it may be necessary or appropriate to incrementally accept thework or "accept" just a portion of the work. If so, utilize the form providedas Exhibit 6.1.2-D.

Prior to demobilization, initiate Contractor Demobilization Checklist. (Referto Exhibit 6.1.2-B.)

When all check items on the Contract Closeout Checklist are complete,issue a Certificate of Final Acceptance (reference Exhibit 6.1.2-E) andprovide the contractor with a form for a Release and Certificate of FinalPayment (reference Exhibit 6.1.2-F). In certain instances, and as approvedby Management, a Partial Release and Certificate of Payment may be used(Exhibit 6.1.2-G.) (Note: Some states, such as California and Arizonaprescribe the type of form that must be used in order for the waiver andreleases to be valid.)

6 CLOSEOUT


6.1 CONTRACT CLOSEOUTSECTION 6. CLOSEOUT Page 2 of 27

After receiving a signed Release and Certificate of Final Payment from thecontractor, the contractor's final invoice may be processed, including releaseof retention in accordance with the provisions of the contract. (Note: Areasonable retention may continue to be withheld if necessary to ensuretimely resolution of claims against a contractor, but should not be withheldsimply to induce a contractor to settle on a claim against you or thecustomer. In some instances, the contractor in lieu of continuing to withholdretention if both parties agree could provide an irrevocable Letter of Credit.)

6.1.3 Exhibits Contractor Request for Inspection of Completed Work (Exhibit 6.1.2-A)Contractor Demobilization Checklist (Exhibit 6.1.2-B)Contract Closeout Checklist (Exhibit 6.1.2-C)Certificate of Acceptance (Partial Acceptance) (Exhibit 6.1.2-D)Certificate of Final Acceptance (Exhibit 6.1.2-E)Release and Certificate of Final Payment (Exhibit 6.1.2-F)Partial Release and Certificate of Payment (Exhibit 6.1.2-G)

Release and Certificate of Final Payment

With reference to Subcontract No. datedas amended, between the undersigned Subcontractor,

[NAME OF SUBCONTRACTOR]and

[CONTRACTOR]

for

at

COMPANY: JOB NO.:

[TYPE OF WORK]

[LOCATION OF OWNER'S PREMISES]

and/or used in connection with the Work under said Subcontract.incurred by it or on its behalf for work labor, services, materials and equipment supplied to the foregoing premisesthe Undersigned hereby certifies and represents that it has made full payments of all costs, charges and expenses

The Undersigned further certifies that to its best knowledge and belief, each of its subcontractors and materialmenhas made full payments of all costs, charges and expenses incurred by them or on their behalf for work, labor,services, materials and equipment supplied to the foregoing premises and/or used by them in connection with theUndersigned's work under said Subcontract and has obtained releases to that effect.

[NAME OF SUBCONTRACTOR]

In consideration ofhereby unconditionally releases and forever dischargesthe Ownerand Contractorand the Owner's premises and property from all claims, liens and obligations of every nature arising out of or inconnection with the performance of the said Subcontract and all amendments thereto except as set forth below:

Executed this day of

guarantees and indemnities.amended, which by their nature survive completion of the Work including, without limitation, warranties,The foregoing shall not relieve the Undersigned of its obligations under the provisions of said Subcontract, as

or willful misconduct of the party indemnified or held harmless.agents or employees except for those claims listed above, and except for claims arising out of the sole negligenceasserted by the Subcontractor or any of its suppliers, contractors of any tier or any of their representatives, officers,Owner or Contractor which claims arise out of the performance of the work under the Contract and which may bejudgments and expenses, including attorney's fees, arising out of or in connection with claims against the saidhold harmless the said Owner and Contractor from and against all costs, losses, damages, claims, causes of action,As additional consideration for this payment, the Subcontractor agrees to the fullest extent of the law to, indemnify and

TITLESIGNED

Expedition

as final payment under the Subontract, the Undersigned

With reference to Subcontract No. datedas amended, between the undersigned Subcontractor,

[NAME OF SUBCONTRACTOR]and

[CONTRACTOR]for

at[TYPE OF WORK]

[LOCATION OF OWNER'S PREMISES]

except for claims arising out of the sole negligence or willful misconduct of the party indemnified or held harmless.any tier or any of their representatives, officers, agents or employees except for those claims listed above, and

The foregoing shall not relieve the Undersigned of its obligations under the provisions of said Subcontract, asamended, which by their nature survive completion of the Work including, without limitation, warranties,guarantees and indemnities.

Executed this day of

the Undersigned hereby certifies and represents that it has made full payments of all costs, charges and expensesincurred by it or on its behalf for work labor, services, materials and equipment supplied to the foregoing premisesand/or used in connection with the Work under said Subcontract through

[DATE]

The Undersigned further certifies that to its best knowledge and belief, each of its subcontractors and materialmenhas made full payments of all costs, charges, and expenses incurred by them or on their behalf for work, labor,services, materials and equipment supplied to the foregoing premises and/or used by them in connection withthe Undersigned's work under said Subcontract through

[DATE]

In consideration of

[DATE]through

As additional consideration for this payment, the Subcontractor agrees to the fullest extent of the law to, indemnify

actions, judgments and expenses, including attorney's fees, arising out of or in connection with claims against thesaid Owner or Contractor which claims arise out of the performance of the work under the Subcontract through

and which may be asserted by the Subcontractor or any of its suppliers, contractors of[DATE]

the Ownerand Contractor

connection with the performance of the said Subcontract and all change orders and amendments hereto, throughand the Owner's premises and property from all claims, liens and obligations of every nature arising out of or in

except as set forth below:[DATE]

Partial Release and Certificate of Payment

[NAME OF SUBCONTRACTOR]

By:Title

.

.

JOB NO.:COMPANY:

Expedition

, the Undersigned hereby unconditionally releases and forever dischargesas payment under the Subcontract for all work performed

and hold harmless the said Owner and Contractor from and against all costs, losses, damages, claims, causes of

6.2 BENEFICIAL OCCUPANCYSECTION 6. CLOSEOUT Page 10 of 27

6.2 BENEFICIAL OCCUPANCY

6.2.1 Purpose The contract may expressly provide for the customer to take possession anduse all, or any part, of the contractor's completed or partially completed workat any time during the life of the contract. The customer may use the area forany purpose it chooses, ranging from occupying a portion of a structure toturning a system over to a third party for testing or use. "BeneficialOccupancy" is the term used to describe the situation where the customertakes possession of a discrete part of the contractor's work such as:

• A room, structure or area of land

• A site-wide system such as drainage, water or sewer system

• A street, road or parking area which may be utilized by thecustomers or others

Beneficial Occupancy is not used to take possession of an element of worksuch as concrete, structural steel, conduit or piping or other constructionelement.

Beneficial Occupancy is a contractually important step because it transfersresponsibility from the contractor to the customer for maintenance of the areaor for damage which may occur as the result of occupancy. The contractorremains responsible for completing the remaining work and for correctingany deficiencies noted during the period of occupancy.

Beneficial Occupancy does not:

• Accept any work

• Impact the warranty duration

• Relieve the contractor from responsibility to complete its contract

• Release retention or form the basis for any additional costs

6.2.2 Procedure Immediately prior to taking Beneficial Occupancy, the area should becarefully inspected with the contractor to establish the status of workremaining to be completed or corrected.

Beneficial Occupancy is initiated by giving the contractor written notice anumber of days (usually specified by contract) before the date on whichBeneficial Occupancy will occur. The notice should include:

6 CLOSEOUT



1. The area, by column or line, stationing, or building designation whichclearly defines the limits to be occupied.

2. A Punch List (Reference Section 6.4) of all incomplete work ordeficiencies which remain to be completed or corrected.

3. A clear statement regarding the responsibility for maintenance of the areaor structure after Beneficial Occupancy occurs.

4. The date on which the customer takes Beneficial Occupancy.

Refer to Exhibit 6.2.2-A for a sample Notice of Beneficial Occupancy and toExhibit 6.2.2-B for a flowchart of a typical procedure for the turnovernecessary to achieve "Beneficial Occupancy".

6.2.3 Exhibits Notice of Beneficial Occupancy [Sample] (Exhibit 6.2.2-A)Beneficial Occupancy Flowchart (Exhibit 6.2.2-B)



Notice of Beneficial Occupancy [SAMPLE] (EXHIBIT 6.2.2-A)

[ADDRESSED TO CONTRACTOR]

Attention: ________________________ Project Manager

Subject: XYZ ProjectContract No. 12345-M-XXXNOTICE OF BENEFICIAL OCCUPANCY

Dear ________________________,

In accordance with the General Condition, entitled "Use of Completed Portions of the Work," the customerintends to take possession of a portion of the contract work on _______________, 199__). The workwhich the customer will occupy is described as

Based upon the joint inspection of that area made with you on ____________________, the work shownon the attached list remains to be completed or corrected. Please contact the undersigned to arrange aschedule for completion of these work items which will be acceptable to the customer.

Effective upon the customer taking Beneficial Occupancy, you are relieved of responsibility for anydamage which may occur as the result of the occupancy or use of the work, and of maintenance of work orsystems within the area.

Beneficial Occupancy of this area does not constitute acceptance of the work or of the contract. You arereminded that the warranty duration extends ___________ months from the Final Acceptance of theProject as a whole by the customer. That date is currently forecast to be ___________. We recommendyou periodically contact ______________ if you wish to be kept apprised of the actual acceptance date.

Very truly yours,

COMPANY

_____________________________________________

CONCUR

_____________________________________________[CONTRACTOR'S NAME]

6.3 SUBSTANTIAL COMPLETIONSECTION 6. CLOSEOUT Page 14 of 27

6.3 SUBSTANTIAL COMPLETION

6.3.1 Purpose Work under a contract may be considered to be "substantially complete" atsome point before the entire contract is completed. Substantial Completionof work is advantageous to both the contractor and to the customer undersome circumstances. It also involves the transfer or activation ofresponsibilities among the parties.

The point at which work is substantially completed may not be defined in thecontract and, if it is not, is a matter of judgement on the part of you, thecustomer and the contractor. Normally, it occurs when:

• All major work under a contract is completed and only cleanup andpunch list correction remains

• A discrete building, sitewide utility system, or area is complete whilework continues on other work under the contract

• It is of benefit to the customer to take over and use a system orwork area

• The work under the original scope is complete and the contractor isworking only on changed or added/extra work which may extendbeyond the original contract completion date

6.3.2 Procedure There is generally no specific contractual provision governing SubstantialCompletion, but it may be mutually advantageous to transfer work that isessentially complete from the contractor to the customer. (The customer, aspart of taking possession of work under the Beneficial Occupancy contractprovisions may determine the work to also be substantially complete but isnot required to do so.)

In either case, representatives of all parties will make an inspection of thework. A Punch List (refer to Section 6.4 "Punch List") of incomplete anddefective work will be developed. The Punch List will include not onlyphysical work items to be completed, but also all administrative orcontractual items related to that physical work, such as completion of "as-built" drawings, obtaining code #1 approvals of all engineering submittals, orresolution of all outstanding proposals for changes to the work which issubstantially completed. Firm completion dates for each item will bedeveloped.

6 CLOSEOUT



Substantial Completion is formalized by issuance of a Certificate signed byall parties, and accompanied by the Punch List of work to be completed.Prior to issuance to the contractor, the Certificate should be reviewed withthe customer and responsibility for maintenance of the work clearlyestablished.

Issuance of the Certificate of Substantial Completion activates severalactions by both parties, principally:

• Submittal by the contractor (within a specified period — typically30 days from the date of the Certificate) of a final billing for workunder the contract, including a projection of all incomplete costs orfees.

• Start of maintenance by the customer, if the customer has elected totake over that responsibility. If not, the responsibility remains withthe contractor until Final Acceptance.

Completion of all items on the Punch List will be tracked against the firmdates established by the Certificate of Substantial Completion. Reinspectionto record satisfactory completion of each item will be carried out byrepresentatives of the contractor, the customer, and company.

In the event that the contractor fails to satisfactorily complete any or all ofthe items on the Punch List by the required dates, the customer retains theright to have the work performed by others and the cost deducted from anyfunds due the contractor.

6.3.3 Exhibits Letter from you to the owner advising that a contractor has achievedSubstantial Completion [Sample] (Exhibit 6.3.2-A)

Letter from you to a contractor transmitting the "Certificate of SubstantialCompletion" [Sample] (Exhibit 6.3.2-B)

Certificate of Substantial Completion [Sample] (Exhibit 6.3.2-C)



Notice of Substantial Completion [SAMPLE] (EXHIBIT 6.3.2-A)

[ADDRESSED TO CUSTOMER]

Subject: XYZ ProjectContract No. 12345-M-XXX

Substantial Completion

Dear ,

It has been determined that [all work under the contract] [a portion of the work under the contract] issubstantially complete. The work has been inspected by representatives of [customer], the contractor, andcompany to determine the status and a Punch List of all incomplete or deficient work has been developed.A date for completion of all items on the Punch List has been established and a re-inspection will be held onthat date to assure that all remaining items have been completed.

Attached herewith for your review and concurrence is the Certificate of Substantial Completion for thework, together with the listing of remaining work to be completed by the contractor. You will note that itspecifies the responsibility for future maintenance of the work described.

After your review, please sign and return the Certificate to the undersigned for issuance to the contractor.

Very truly yours,

COMPANY

_____________________________________________

____/__

Attachment



Notice of Substantial Completion [SAMPLE] (EXHIBIT 6.3.2-B)

[ADDRESSED TO CONTRACTOR]

Attention:Project Manager

Subject: XYZ ProjectContract No. 12345-M-XXX

Certificate of Substantial Completion

(Reference: If Contractor has requested Substantial Completion, reference its letter)

Dear ,

It has been mutually agreed that [all work under the contract] [a portion of the work under the contract] issubstantially complete. In accordance with the General Conditions, attached herewith is a fully executedCertificate of Substantial Completion covering [all work under the contract] [that part of contract workdescribed in the Certificate] and the Punch List of remaining items has been resolved. As reflected in theCertificate, the work is determined to be substantially complete as of .

The provisions of warranty as described in General Conditions continues to be in full force and effect, andare supplemented by other requirements of the technical specifications. Maintenance of the worksubsequent to [will be performed by others] [will remain your responsibility until FinalCompletion and Acceptance of the contract by the customer].

Please note that a formal billing for all costs or fees which you believe to be due under the contract must besubmitted within thirty (30) days of the date of the Substantial Completion, or .

Very truly yours,

COMPANY

_____________________________________________

____/__

Attachment

Response Required:



Certificate of Substantial Completion — Contractor [SAMPLE] (EXHIBIT 6.3.2-C)

Date:____________________________________

FACILITY/AREA :_________________________________________

DESCRIPTION OF FACILITY/AREA :_________________________________________

CONTRACTOR :_________________________________________

CONTRACT NO. :_________________________________________

PUNCH LIST COMPLETION DATE ______ :_________________________________________

This is to certify the work described above has been substantially completed in accordance with thecontract and associated documents. The facility/area designated above has been inspected byrepresentatives of all parties, and is complete with the exception of the attached Punch List whichcontractor agrees to complete by the date designated.

The extended warranty period commences on the date the remedial work is completed as described in thepunch list or from the date of Final Acceptance of the Project as a whole, whichever is later.

INSPECTION CERTIFICATE

CONTRACTOR:_____________________________ DATE:_____________________________

ACCEPTED BY

COMPANY:__________________________________DATE:_____________________________

CUSTOMER

6.4 PUNCH LISTSECTION 6. CLOSEOUT Page 19 of 27

�� 6 6 CLOSEOUT

6.4 PUNCH LIST

An essential aspect of contract closeout is the management of the Punch List.A Punch List Procedure should be developed to efficiently identify work whichrequires correction or completion and to monitor the closeout of this work.

Depending upon the nature and scope of the contractor's work, the followingtypes of events will require a walkthrough and inspection to develop a PunchList:

1) Substantial Completion/Completion of any contract package

2) Beneficial Occupancy of any portion of a facility by the customer

Punchlists will typically be itemized into major categories such as Mechanical,Electrical, and Civil/Architectural.

6.4.1 Exhibits Procedure for use on CM projects (Exhibit 6.4-A)

Contract Punch List [Samples] (Exhibit 6.4-B.1 and Exhibit 6.4-B.2)



Punch List Procedure (EXHIBIT 6.4-A)

1. To initiate a Punch List effort, the following action items will occur:

• The company will notify the customer of a Punch List walkthrough. This walkthroughis communicated via a formal letter issued a minimum of one week prior to the schedulewalkthrough.

• The notification letter will include the following:

a) Description of Punch List activity by category and area of facility

b) Date and time of scheduled walkthrough

c) Date required for final input from all parties on Punch List effort

d) Date Punch List is to be issued to contractor

2. Consolidation of Punch List input and issuance to contractor will be completed as follows:

a. Compile all Punch List input from various disciplines and other sources, and check forduplication

b. Prepare the formal Punch List and issue to distribution

3. Reinspection and sign off of completed items will be the responsibility of [designatedcompany representative] to coordinate with [the customer's representative(s)].



Contract Punch List [SAMPLE] (EXHIBIT 6.4-B.1)

FACILITY/AREA: ___________________ DATE_____________CONTRACTOR _____________________ DISCIPLINE ________CONTRACT NO.:___________________ PAGE ____ OF ____

ItemNo. Location Description

CompletionDate

CompletionVerification

____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________

[Company]______[Cust.]________Date__________

____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


RM#____ __________________________________ SCHD_______ [Company]_____



____ Elev_____Grid#____

____________________________________________________________________

ACT________ _[Cust.]________Date__________

____RM#____Elev_____Grid#____

______________________________________________________________________________________________________

SCHD_______ACT________


6.5 WARRANTYSECTION 6. CLOSEOUT Page 23 of 27

6.5 WARRANTY

6.5.1 Purpose Your contract with the Owner generally provides that you are directlyresponsible for warranting work performed and/or you are to obtainwarranties from its suppliers and contractors. In either circumstance, youwill endeavor to obtain warranties from contractors that match the extent ofyour liability with respect to duration and with respect to coverage (e.g.,including incidental cost of removal, replacement, re-testing, etc.). Recoveryunder the warranty requires that you follow the procedural requirements inthe warranty clause(s).

6.5.2 Procedure Construction contracts should contain a warranty provision in the GeneralConditions for material and workmanship. Be advised that the technicalspecifications may require a longer warranty on specific materials orequipment (roof, mech/elect. equipment, etc). These modified warrantyrequirements should be shown in the Special Conditions.

After Final Acceptance of the contractor’s work, a letter should be issuedconfirming the anticipated date of Final Acceptance of the project as awhole and, for post-construction issues, the points of contact for you and thecontractor. Note that post-acceptance rework will most often have adifferent (extended) warranty period and this, too, should be documentedwhen accepted. Deficiencies discovered in the work subsequent to FinalAcceptance and not included in the Punch List issued to the contractorshould be treated as warranty items and not as additions to the Punch List.(Note that resolution of all discrepancies/deficiencies must be documented,whether discovered during the work or after acceptance. "Informal"acceptance of deviations can lead to an extensive misunderstanding or resultin your liability for contractor warranty items.

Any potential warranty items noted by the customer or your personnelshould be reported to the designated representative who was responsible forthe construction contract. After verifying that the deficiency is thecontractor's responsibility, you will notify the contractor of the problem anddirect that corrective action be taken. A letter will be sent to the contractorconfirming the direction and accepted method of rework and establishing arequired completion date. (Reference Exhibit 6.5.2-A for a sample letter.)

Contractors and their subcontractors returning to the site for warranty workmust comply with all site safety and security rules in effect at that time.

Maintain a log of warranty work items for each contract. (ReferenceExhibit 6.5.2-B for a sample log.)

6 CLOSEOUT



Upon completion of the corrective work and any required re-testing, thework will be inspected and accepted by all parties. The contractor will benotified by letter of the customer's acceptance. (Reference Exhibit 6.5.2-Cfor a sample letter confirming correction work has been performed.)

Backcharges for Warranty Work

In the event the contractor does not correct a deficiency within a reasonabletime after written notification, or if time does not permit correction by thecontractor, you or the customer may have the deficiency corrected by othersand charge the contractor for the cost of the work. The contractor will benotified in accordance with the Project Backcharge Procedure that thecorrective work is proceeding. Alternatively, for practical reasons, you maydecide not to have the rework performed and adjust the contract valueaccordingly. Refer to Section 4.7 "Backcharges" of this Manual.

Subtier Work

Warranty claims for work that was originally supplied, fabricated, or installedby a subtier should be directed to the contractor, not to the subtier. Youhave no contractual relationship with the subtier, and it is the contractor'sresponsibility (and option unless the contractor refuses to act) to determinewho will perform the warranty work, and how it will be performed.

"Full Wrap" Warranties

Contracts need to be reviewed to determine exact warranty requirements.The warranty requirements of the prime contract for a Project need to beunderstood as they relate to the contracted work. Many prime contractsrequire "full-wrap" warranties. Under a "full-wrap" you typically warrant allof the work performed by your forces and contractors through the entireduration of the Project's overall warranty period.

"Evergreen" Warranties

Some contracts contain "evergreen" or partial "evergreen" warranties. In atrue "evergreen" warranty, if a warranty defect is encountered during theoriginal warranty period, the defect is corrected, and the warranty for thecorrected portion of work is extended for the original duration, but startingfrom the point of acceptance of the corrective work. If the same defectoccurs again, the defect is again corrected and the warranty again isextended a like amount of time. Therefore, the warranty is "evergreen."Theoretically, if the same problem kept occurring within a year of beingcorrected, the warranty would be endless.

6.5.3 Exhibits Warranty Defect Notice [Sample] (Exhibit 6.5.2-A)Warranty Log [Sample] (Exhibit 6.5.2-B)Correction of Warranty Defect [Sample] (Exhibit 6.5.2-C)



Warranty Defect Notice [SAMPLE] (EXHIBIT 6.5.2-A)

____________________________________________________________________________________

Attention:

Subject: XYZ ProjectContract No. 12345-M-XXX__________________________________Warranty Item No. 1 Sagging of Insulation

Gentlemen:

Confirming our verbal notice, you are hereby notified in accordance with the Warranty Provision ofContract General Conditions Article [ ] of the following defect in the work:

At intersection with the PF-027 tour bridge column lines A and 6-7, thebottom insulation installed between metal studs in the west cavity wall issagging.

You are [directed to take immediate action] [directed to advise your proposed measures] to correct thisproblem by no later than September 8, 1992. Please contact the undersigned to establish a schedule foryour corrective work.

Very truly yours,

COMPANY

_____________________________________________



Correction of Warranty Defect [SAMPLE] (EXHIBIT 6.5.2-C)

Attention:

Subject: XYZ ProjectContract No. 12345-M-XXX_________________________Correction of Warranty Defect

Gentlemen:

The deficiency described in reference letter has been corrected. The corrective work has been re-inspectedand appears to meet all of the requirements of the contract technical specifications.

Your responsiveness in correcting this problem is appreciated.

Please note that the extended warranty period for this corrective work begins as of the date of this letter.

Very truly yours,

COMPANY

_____________________________________________

(Contractor)


TABLE OF CONTENTSSECTION 7. SPECIAL TOPICS December 1995, Revision 2 Page i

Special Topics

TABLE OF CONTENTS

7.1 CONTRACT LAW...............................................................................................................1

7.2 BASIS FOR CLAIMS .........................................................................................................12

7.3 NEGOTIATION ..................................................................................................................29

7.4 INTERFACE COORDINATION .......................................................................................357.4.1 Purpose........................................................................................................................... 357.4.2 Initial Steps ...................................................................................................................... 357.4.3 Construction Coordination................................................................................................. 397.4.4 Interfaces........................................................................................................................ 407.4.5 Schedule Coordination ...................................................................................................... 417.4.6 Coordination with Procurement ......................................................................................... 427.4.7 Coordinating Clean-Up and Housekeeping ......................................................................... 427.4.8 Other Coordination Interfaces........................................................................................... 437.4.9 Sub-Tier Subcontractors ................................................................................................... 447.4.10 Conclusion....................................................................................................................... 44

7.5 LABOR AND INDUSTRIAL RELATIONS.......................................................................447.5.1 Purpose........................................................................................................................... 447.5.2 Procedure........................................................................................................................ 447.5.3 Checklist ......................................................................................................................... 44Labor Relations Checklist (EXHIBIT 7.5.3) ................................................................................. 45

7.6 FORCE ACCOUNTS ..........................................................................................................467.6.1 Purpose........................................................................................................................... 467.6.2 Discussion ....................................................................................................................... 467.6.3 Procedure........................................................................................................................ 467.6.4 Exhibit............................................................................................................................. 47Daily Report of Force Account Work (EXHIBIT 7.6.3) ................................................................ 48

7.7 LIQUIDATED DAMAGES.................................................................................................49

7.8 DELAYS AND EXTENSIONS OF TIME...........................................................................50

7.10 SUSPENSION OF WORK...................................................................................................54

7.11 DIFFERING SITE CONDITIONS......................................................................................55

7.12 TERMINATIONS ...............................................................................................................567.12.1 Purpose........................................................................................................................... 567.12.2 Discussion ....................................................................................................................... 567.12.3 Procedure........................................................................................................................ 567.12.4 Exhibits ........................................................................................................................... 597.12.5 Checklists........................................................................................................................ 59Notice Letter — Schedule Submittal Unacceptable [SAMPLE] (EXHIBIT 7.12.1)......................... 60


TABLE OF CONTENTSSECTION 7. SPECIAL TOPICS December 1995, Revision 2 Page ii

Termination for Convenience Letter [SAMPLE] (EXHIBIT 7.12.3-A) .......................................... 61Cure Notice — Refusal to Proceed [SAMPLE] (EXHIBIT 7.12.3-B.1)......................................... 62Cure Notice — Schedule Performance Endangering Contract Milestones [SAMPLE] (EXHIBIT7.12.3-B.2) ................................................................................................................................. 63Cure Notice — Schedule Submittal with Unacceptable Milestones [SAMPLE] (EXHIBIT 7.12.3-B.3) ........................................................................................................................................... 64Termination for Default Letter [SAMPLE] (EXHIBIT 7.12.3-C)................................................... 65Contract Termination Checklist/Termination for Convenience (EXHIBIT 7.12.5-A)........................ 66Contract Termination Checklist/Termination for Default (Cause) (EXHIBIT 7.12.5-B) ................... 67

7.13 PROJECT ENVIRONMENTAL CONTROLS ....................................................................17.13.1 Purpose.............................................................................................................................17.13.2 Overview - Strategic Planning.............................................................................................17.13.3 Phase I - Planning..............................................................................................................17.13.4 Phase II - Design................................................................................................................27.13.5 Phase III - Pre-Construction...............................................................................................47.13.6 Phase IV - Construction......................................................................................................67.13.7 Phase V - Project Completion..............................................................................................67.13.8 Exhibits ..............................................................................................................................7

.

7.1 CONTRACT LAWSECTION 7. SPECIAL TOPICS Page 1 of 67

7.1 CONTRACT LAW

To manage a contract effectively and respond to claims by contractors, it isnecessary to understand some fundamental legal principles, particularly thoserelating to contract interpretation. By understanding the basic principles ofcontracts you will be better equipped to analyze a contract problem andrespond appropriately.

Duty to Seek Clarification

It is generally accepted that bidders are obligated to bring to the owner'sattention major discrepancies or errors that they detect in the specifications ordrawings. If they fail to do so, they may be required to bear the consequencesthat may ensue. Address this point in the Instruction to Bidders when solicitingbids for a contract. The legal rule that applies is:

"Where a contractor knows that there is an ambiguity, or obviousomission or a significant conflict in provisions, it is under a duty toseek clarification prior to bidding."

However, contractors are business people. They are usually pressed for timeand are aggressively seeking to underbid a number of competitors. In order tobe the low bidder, they estimate only those costs that they feel the contractterms will permit the owner to insist upon in the way of performance. Theyare not expected to exercise clairvoyance or spend time and money looking forhidden ambiguities in the bid documents. They are protected if theyinnocently construe in their own favor an ambiguity that is equally subject todifferent construction. In the case of patent ambiguities or discrepancies, thecontractor's duty to seek clarification before bidding should be brought to theattention of contractors when questions of intent or interpretation arise.

Contract Interpreted Against Drafter

If during the performance of a contract, its language is found to be ambiguousor susceptible to two or more reasonable interpretations, it will be interpretedagainst the party who drafted it. However, before it is considered ambiguous,all specifications and drawings which form a part of the contract must be readtogether, and no portion is to be rejected or treated as meaningless if anymeaning which is reasonable and consistent with the rest of the contract can begiven to it. In the case of two or more reasonable interpretations, theambiguity is construed against the drafter of the document. It was the

7 SPECIAL TOPICS



drafter's responsibility to draft the documents with clarity and completeness inthe first place.

Rules of Precedence

Unfortunately, discrepancies or ambiguities can occur in the best contracts.When agreement on interpretation cannot be reached, there is a legal questionas to which of the conflicting interpretations prevails; that is, which provisionstake precedence over others.

The following are some basic rules to help address the resolution ofambiguities:

1. General vs. Specific

The parties are largely free to establish any order of precedence theywish by specifically incorporating language in the contract whichestablishes the precedence of one part of the contract over another.In the absence of such express instructions, the following rulesgenerally apply:

a. Where, in an agreement, there are both general and specialprovisions relating to the same thing, the special provisionswill prevail.

b. Where the technical specifications or special conditions referto a standard code or standard specification, the technicalspecifications or special conditions take precedence over thestandard referred to when there is a variation.

c. The specifications normally take precedence over thecontract drawings.

d. Large-scale details on the contract drawings take precedenceover the small-scale portion of the drawings from whence thedetail originates.

e. Every note on a contract drawing is considered to be aportion of the specification commenting specifically on thatparticular portion of the drawing and must take precedence ifa conflict exists.

2. Writing vs. Printing

"When a contract is partly typed and partly written and



the written portion cannot be reconciled with the typedportion, the written portion will prevail."

The reason behind this is that the written words are the immediatelanguage in terms chosen by the parties themselves for theexpression of their meaning. Accordingly, such written words aredeemed worthy of greater weight than typed words intended forgeneral use.

3. Written Words vs. Written Figures

"In the event of any inconsistency between words andfigures appearing in a contract, the words will govern."

4. Parol Evidence

"The law will not allow parol (oral or verbal) evidenceto be introduced to contradict what the parties haveagreed to in writing if the contract is clear andunambiguous."

This is known as the "Parol Evidence Rule" which is intended tolimit the opportunity for fraud and mistake.

When parties put their agreement in writing, all previous oralagreements merge in the writing and a contract as written cannot bemodified or changed by parol evidence, in the absence of a plea ofmutual mistake or fraud in the preparation of the writing.

5. Course of Conduct

When the agreement is not clear on its face, you may refer to the"course of conduct of the parties" up to the time of the dispute as tohow they interpreted the provision; or you may bring in the"standard practice of the industry," or what may have been the"interpretation of other parties to the identical contractprovision," or the "record of negotiations" between the partiesprior to execution of the contract.

6. Entire Agreement



Contracts typically include a provision that states "This Contractembodies the entire agreement... and supersedes all other writings.The parties shall not be bound by, or be liable for any statement,representation, promise, inducement and or understanding not setforth herein."

The purpose of the "Entire Agreement" provision is to ensure that atthe time the parties enter into their agreement they clearly identify inone place everything that comprises the "deal." Furthermore, thishas the effect of rendering ineffective anything not in the agreement(e.g., the contractor's bid, negotiation meeting minutes, biddrawings).

Errors in the Contract

1. Clerical Errors

"Where there is a definite and proper agreement between theparties and the sole difficulty is that a simple error of a clericalnature has been made in committing the understanding to writing,such a mistake will not invalidate the contract." In the occasionalinstance where the contracting parties cannot correct such an errorby mutual agreement and one party seeks unfairly to take advantageof the situation, the other party may have the contract judiciallyenforced in accordance with the actual intent and originalunderstanding of the parties. Courts frequently exercise the powerto correct a clerical mistake when the available proof leaves nodoubt that the real contract was meant to be something quite atvariance with what appears in the writing.

2. Unilateral Mistake

"One party to a contract can not void the contract simply byshowing it erred or by claiming ignorance of what it promised ordid." This rule applies and the contract will be enforced as writtenif there has been no misrepresentation; if there is no ambiguity in theterms of a contract; and if the other party had no timely notice of themistake and itself acted in good faith. Subject to certain exceptions,a party must exercise ordinary diligence. The court will not relievea party of the consequences of its own carelessness or poorjudgement, no matter how unfortunate.

3. Errors Discovered by the Contractor



Contracts typically require a contractor to report immediately anyerror discovered in the contract document or in any data furnished.Any further work done on the affected part before you can issueinstructions regarding what is to be done in the matter will besubject to correction at the contractor's expense.

Disclosure Requirements

1. Intentional Misrepresentation

A contract may be invalid if it has been prepared and signed undercircumstances that are considered to be fraudulent.

An intentionally false statement of a past or existing fact may be abasis for a claim of fraud. However, such a representation ofpurported fact must be distinguished from a simple expression ofopinion about the future.

Where fraud or material misrepresentation exists in the formation ofa contract, the party to the contract that is the victim of this fraudmay void the contract if:

• A reckless or intentional misstatement of a materialfact exists

• The contract was prepared with intent to deceive

• The contract was prepared in such a fashion as tomislead the innocent party to enter into the contract toits detriment

2. Unintentional Misrepresentation

A misrepresentation that is made in innocence falls short of fraud.However, if the misrepresentation constituted a materialinducement, it may still render a contract subject to void.



3. Full Disclosure

It must be kept in mind that a misrepresentation may be created justas effectively by concealment or suppression of material facts as byaffirmative misstatement. This means that in preparing a contract(or amendment), you are bound to disclose any and all informationavailable to it which is of a pertinent or significant contractualnature. Any bidder who is requested to submit proposals shouldhave access to and full awareness of the same information availableto the other party.

Performance Requirements

Inherent in every valid contract is the obligation to perform. Except forunreasonably extended nonpayment and true "impossibility," there is seldomany valid excuse for a contractor to refuse to perform. In the real world,however, "contract performance" is not an absolute term and even"impossibility" may have shades of meaning. The following will provide someinsights into how "performance" is construed in practical application:

1. Substantial Performance

Substantial performance may be defined as the accomplishment ofall things essential to the fulfillment of the purpose of the contract.In the case of a construction contract for example, the facility wouldbe capable of being fully occupied and utilized in the mannerintended by the contract.

While the performance of a contract must be strictly in accordancewith its terms and a party cannot be required to accept performancethat is less than that for which it bargained, nevertheless there is adefinite trend apparent from recent judicial decisions requiringmerely "substantial performance" in lieu of absolute literal and totalcompliance with precise contract requirements. The equitabledoctrine of substantial performance stems from a desire of thecourts to protect those who have faithfully and honestly endeavoredto perform their contractual duties and to preserve the right of suchpersons to compensation despite minor variations or omissions inthe performance involved.

It is often difficult, of course, to determine what constitutessubstantial performance in a given situation. It should beemphasized that the concept is not intended to confer on one partythe right to deviate freely from its contract or to substitute somematerial or type of operation that it may regard as just as good aswhat is actually called for in the agreement. Moreover, for any



deviation from contract requirements which is willful or made inbad faith, the offending party is not entitled to recover at all. Onlywhen defects are purely unintentional and not so extensive as toprevent the other party from receiving substantially all that itbargained for does the principle of substantial performance comeinto play.

In the event of deviations which permit the intended use of thefacility, but which do not comply in all respects with therequirements of the contract, a reduction in the contract price ascompensation for the work not in complete compliance may beappropriate.

2. Impossibility of Performance

Contractors will sometimes use "impossibility" as an excuse fornonperformance. They also may try to use it as a basis foradditional compensation, or a time extension, or both.

The expression "impossibility" when used in connection withexcuses for nonperformance of contractual obligations refers notonly to the literal impossibility of doing the work, but also to theimpracticability owing to extreme difficulties encountered.However, it is necessary to distinguish carefully between"commercial impracticability" (which may operate as an excuse fornonperformance) and mere hardship or severe inconvenience whichis never really a valid excuse. This is not always an easydistinction.

"Commercial impracticability" exists when performance wouldcause such extreme and unreasonable difficulty and expense thatperformance is not practical within the existing commercialcircumstances and basic terms of the contract. However, hardshipor greater costs than anticipated do not necessarily constitute"commercial impracticability."

By contrast, a test usually applied for literal impossibility is anobjective one. That is, to be considered an excuse fornonperformance, the impossibility must be such that no contractorcould perform, not just the one under the contract.

Although the courts have delivered some comparatively liberaldecisions, these decisions all have in common the recognition that arelease from a contractual obligation by reason of impossibility isnecessarily subject to qualifications.



First, the impossibility involved must be bona fide and not simply aquestion of hardship or inconvenience. Second, the contractorseeking to be excused must not have assumed the risk ofimpossibility. Third, the performance will not be excused if theimpossibility stems even to a limited extent from negligence or lackof diligence on the part of the contractor.

Generally, relief will not be allowed if:

a. The contractor initiated or was responsible for the design

b. At the time of contracting the risk of impossibility wasobvious to the contractor

c. Performance specifications were involved

d. The contractor had, or represented that it had, superiorknowledge regarding the feasibility of performance

Courts have held that a contractor who unconditionally obligatesitself to a certain performance will not be excused by a subsequentimpossibility brought on by an act of God or other unforeseeableemergency. In other words, by failing to perform the "impossible"which it contracted to do, the contractor has breached its obligationand is therefore liable for the damages incurred by the company orthe customer as a result of the failure. Generally speaking,therefore, where one of two innocent parties must sustain a loss, thelaw will leave the burden where the contract placed it.

While the doctrine of "impossibility of performance" is clear andwell established, the difficulty arises in determining whether thecircumstances involved constitute such impossibility as to providean excuse at law for nonperformance or the basis of a claim.

3. Hardship or Inconvenience

Hardship or severe inconvenience is not an excuse on the basis of"impossibility of performance." It is entirely plausible for acontractor to unequivocally contract to do a difficult piece of workin a certain fashion. The fact that the undertaking proves moreburdensome than anticipated will not make the contract invalid orrelieve the contractor of its obligation. Almost every contract



involves at least some measure of risk and in many instances,unforeseen difficulties or expense can result in a considerable lossfor one party and perhaps for both.

Breach of Contract

It may be stated as a general proposition that where contractual promises havebeen exchanged one for the other, the material breach on the part of one partywill (unless occasioned by misconduct of the other party) clearly justify theother's refusal to perform and will entitle the injured party to any provabledamages resulting from the breach. However, the breach must bematerial/substantial if it is to result in excusing subsequent nonperformanceby the injured party. For example, when "time is of the essence" is a term inthe contract, failure to complete the undertaking within the period specified isa material breach. Also, unjustified refusal to pay can be a material breach.

Undoubtedly, the most common remedy for breach of a contract is therecovery of a sum of money awarded (often in court) as compensatorydamages. In ascertaining the proper measure of such damages, a fundamentalconsideration is to place the innocent party in the position it would haveoccupied had the contract been performed according to its terms. In thedetermination of compensatory damages, the party in breach of contract hasthe right to expect that the adverse party will do everything reasonablypossible to mitigate (minimize) damages, and the latter party cannot recoverwith respect to the portion of the loss which it could readily have avoided oncethe breach became known to that party.

Probably the most important thing to remember about breaches of contract isthat such claims must be avoided if at all possible. Construction contractlitigation is one of the most expensive types of litigation there is. Not onlymust lawyers, consultants, and experts be paid for the vast amount of timerequired in preparing the mass of law and detail involved in such litigation,but the time of the contractor's and company's personnel must be consumed indigging out facts from records, correspondence, interviews withknowledgeable personnel, etc. Needless to say, every attempt should first bemade to bring the claim within one of the provisions of the contract permittingan equitable settlement.

Termination

A contract may be brought to an end in a variety of ways. Full andsatisfactory performance by both sides is the usual mode. On occasion, acontract may also be terminated by any of the following:

1. Your Breach of Contract



Failure to make prescribed payments to the contractor or causingunreasonable suspension of the project are probably the mostcommon breaches. In such circumstances, the contractor is entitledto damages caused by your failure to carry out your responsibilitiesunder the contract.

2. Breach of Contract by Contractor

Default or failure to perform under the contract are the usualbreaches committed by contractors. Examples of material defaultby the contractor that convey to you a right of action against thecontractor are nonperformance, continued uncorrected faultyperformance, failure to show reasonable progress, failure to meetfinancial obligations, or persistent disregard of applicable laws.(Reference Special Topics, Section 7.12 "Terminations".)

3. Mutual Agreement

A third way in which a contract can be terminated is by mutualagreement of both parties. This is not common in the constructionindustry, although this has occurred in some cases. For example, itsometimes happens that the contractor experiences unanticipatedcircumstances such as financial reverses, labor troubles, or loss ofkey personnel that make its proper performance under the contract amatter of considerable doubt. Under such circumstances bothparties may agree to terminate the contract and to engage anothercontractor. When little or no work has yet been done, termination ofthe contract by mutual consent can sometimes be a viable option.

4. Termination for Convenience

This is the type of termination with which we are most likely to beinvolved. Termination for convenience is accomplished through an"Optional Termination" clause in the contract. It must beunderstood that this is an option that is open for the convenience ofyou but not for the contractor. Under this clause the contractoragrees to waive any claims for damages, including loss ofanticipated profits, and agrees that its sole remedy is to receive thepayment specified.



The payment specified is the contract price corresponding to workperformed, and includes reimbursement for all in-process work andmaterials, plus such expenses as may be incurred by it in cancelingits orders and demobilizing the work and also a reasonable profit forthe effort associated with terminating the work.

A typical clause provides that:

"You may, at your option, terminate for convenience any workunder the contract in whole, or from time to time, in part, at anytime by written notice...."

Careful consideration should be given to utilizing this clause as anoption to prolonged or indefinite suspension, especially when thecontractor's performance and/or cooperation has left something tobe desired. (Reference Special Topics, Section 7.12"Terminations".)

5. Impossibility of Performance

A contract may be rescinded because of Impossibility ofperformance under circumstances beyond the control of either party.For instance, unexpected site conditions may be found that make itimpossible to carry out the construction described by the contract.However, the doctrine of legal impossibility does not demand ashowing of actual or literal impossibility. Impossibility ofperformance has been applied to cases in which, even ifperformance were technically possible, the cost of performancewould have been so disproportionate to that reasonablycontemplated by the contracting parties as to make the contracttotally impractical in a commercial sense. The deciding factor wasthat an unanticipated circumstance made performance of thecontract vitally different from what was reasonably to be expected.

6. Operation of Law

A contract may be terminated through operation of law as forexample, when one party becomes bankrupt.

7.2 BASIS FOR CLAIMSSECTION 7. SPECIAL TOPICS Page 12 of 67

7.2 BASIS FOR CLAIMS

The following is a discussion of various contract clauses which contractorsoften rely upon as the basis for claims. [Note: Refer to Section 4.6"Claims".]

1. Differing Site Conditions

To discourage bidders from adding high contingency factors to their pricesto protect themselves against unusual conditions, most constructioncontracts contain a "Changed Conditions" or "Differing Site Conditions"clause. A typical clause reads as follows:

"Contractor shall promptly notify you in writing before proceeding withany work which Contractor believes constitutes a differing site conditionwith respect to: (1) subsurface or latent physical conditions at theJobsite differing materially from those indicated in this Contract, or (2)previously unknown physical conditions at the Jobsite, of an unusualnature, differing materially from those ordinarily encountered andgenerally recognized as inherent in work of the character provided for inthis Contract. You will, then investigate such conditions and make adetermination. If you determine that such conditions do materially sodiffer and cause an increase or decrease in Contractor's cost of or thetime required for performance of the Work under this Contract, anequitable adjustment will be made pursuant to the General Conditionstilted “Changes”. No claim of Contractor under this clause will beallowed unless Contractor has given the required notice."

This clause covers two types of special situations. It deals first with thesubsurface and latent physical conditions at the site of the work whichdiffer materially from those stated in the contract. Essentially, what thismeans is that if the data shown in the test borings or specifications are inerror, and if the contractor has thereby been misled, there will be anequitable adjustment made for any change in the contractor's costs and/ortime for performance.

The second part of the clause deals with a physical condition at the worksite, of an unusual nature, differing materially from that which acontractor would ordinarily expect to encounter. No misrepresentation onyour part is required.

Should the contractor believe it has encountered either of these situations,it must give notice to enable you to investigate the conditions. If thecontractor fails to give the notice, its claim can be jeopardized becauseyou have a right to investigate the condition before it is changed or iscovered up. Of course, if you are already on notice of such condition, orif there is an emergency or urgent necessity (as in a case where steel ribshave to be installed to protect a tunnel from collapsing), failure by thecontractor to give immediate notice will not bar its claim.

7 SPECIAL TOPICS


7.2 BASIS FOR CLAIMSSECTION 7. SPECIAL TOPICS December 1995 , Revision 2 Page 14 of 67

The conditions contemplated by the first part of the clause are physical innature. Also, they are either below the surface or latent, meaning hidden,dormant, or not manifest; they must be at the site and they must differfrom what is described in the contract documents. The entitlement canresult from errors in surveying or exploratory drilling of the site, fromincomplete presentation of drilling logs, from omission of subsurfacewater information or omissions from the drawings. It can even arise fromconditions inferred from equipment or methods indicated in the plans orspecifications.

However, it is incumbent upon the contractor to examine the site of thework carefully, and if there are cores available for inspection, it shouldexamine them. In fact, every representation made to the contractor mustbe carefully documented so that a determination can be made whether theactual conditions encountered are materially different from thoserepresented. Most of the problem areas involve grossly inaccurateestimated quantities, inaccurate portrayal of subsurface water or rockconditions, misrepresentation of soil conditions, borrow pits, contourlines, or failure to show accurately existing utility lines.

To come under the second part of the clause, the condition must have beenunknown when the parties entered into the contract. Furthermore, if areasonable investigation would have disclosed the condition, this could befatal to the contractor's claim. For example, if a contractor is workingnear the Rocky Mountains, its general experience should give it theknowledge that there will likely be subsurface rocks or boulders.Likewise, if the contractor is working in some parts of Florida, it iscertainly aware of the nearness of the water table to the surface. Thus,the contractor cannot successfully claim that it has encountered an"unknown" condition of unusual and not to be expected character.

Refer to Special Topics Section 7.2 "Basis for Claims" p. 21 and Section7.11 "Differing Site Conditions."

2. Added Work

Additional quantities ordered during the progress of the work generallyentitle a contractor to claim extra compensation on a lump sum job.

While additional quantities of work added during the course ofconstruction may not entitle a contractor to claim for additionalcompensation on a unit price contract, this would be subject tointerpretation as to whether the work added is of the same "nature andcharacter" as the work contemplated in the original unit item of thecontract. The work added under unit prices need not be exactly the sameas under the original contract; however, there should be a reasonablecompatibility. Furthermore, the contractor may in fact agree to accept



unit prices even if the work is not compatible as long as the contractorfeels the unit price compensation is adequate.

3. Reduction of Work

A reduction in the quantity of work may be a proper basis for a priceadjustment (increase) for the units of work actually performed under aunit price contract. The rationale is that the contractor has spread thefixed components of cost over the estimated quantities. A significantquantity underrun results in under-recovery of the fixed costs. It isgenerally considered that an increase or decrease in the volume of work tobe performed not exceeding plus or minus 20% of an item of work whosetotal value is less than 5% of the contract amount will have no substantialimpact on the contractor. Conversely, if the quantity of an item whichexceeds 5% of the contract is varied by more than plus or minus 20%,there may be significant impact on the contractor's financial position dueto its inability to recover its fixed costs. Therefore, it is desirable that thecontract should state the permissible variation in quantities. Such astatement will go a long way to avoid disputes.

A typical clause dealing with variation in quantities would read asfollows:

“The Contractor's proposal is to be based upon the estimated quantitiesshown in the “Schedule of Prices.” Inasmuch as the quantities may beaffected by conditions encountered in the performance of the work or bywritten instructions to be issued as the work progresses, the quantity ofwork done under this Schedule of Prices may vary considerably from theestimated quantities. Payment for the actual quantity of work performedshall be made to the Contractor at the contract unit prices. However, ifthe quantity of any particular pay item which amounts to more than 5%of the total contract varies in its final quantity by more than plus orminus 20% from the estimated quantities shown in the contractdocuments, there may be (a) an equitable adjustment of the unit pricesfor the units in excess of 120% of the estimated quantities or, (b) anequitable adjustment to the price (based solely on the effect of thequantity reduction) for all units if the actual quantity is less than 80% ofthe estimated quantity."

Note that this language provides relief for the contractor solely as a resultof a quantity variation; it does not provide relief in the event the contractorsimply failed to meet its estimated levels of productivity.

4. Increased Difficulty of Performance

Whether the work is increased in quantity or not, unanticipated difficultieswhich interfere with performance (the risk of which was not assigned tothe contractor under the terms of the contract), may be a proper cause forthe contractor to claim extra compensation. This may be true when the



work to be performed is found to be more difficult than that called for byor identified in the contract. For example, the contractor may be entitledto additional compensation if the contract documents are misleading as tothe schedule, scope, or conditions of the work. (Reference Special TopicsSection 7.1 "Contract Law" pg. 11.)

5. Delays

Time is money. This is probably an overworked phrase but it never istruer than in the context of this subject. Delay is generally acknowledgedto be the most common, costly and complex problem encountered onconstruction projects. Because of the overriding importance of time bothto you, in terms of performance and to the contractor in terms of money, itis the source of frequent disputes, claims, and law suits. To control thissituation insofar as possible, the contract is formulated to identify known,potential delay situations in advance and to define and fix obligations inorder to preclude controversies. A substantial number of the contractclauses address this subject in one way or another.

It is not required that a delay extends contract performance beyond thecontract completion date to establish entitlement. A contractor maycomplete the work ahead of schedule but still receive additionalcompensation if it could have finished earlier had it not been for yourdelay. The law does, however, require that the contractor establish adirect cause-and-effect relationship between your breach of a contractualobligation and the delay. In addition, the contractor has the burden ofestablishing that its costs increased as a result of the delay.

You will find in practice that not everything in the contract can be taken atface value and applied in cookbook fashion. Circumstances play a largepart in determining which clause or clauses will be applied to a particulardelay claim. Also, contract law encompasses concepts of reasonablenessand fair dealing, implied obligations and warranties, etc. A good generalunderstanding of the principles involved and the operation of theapplicable clauses is essential to make appropriate decisions and to takethe proper action in delay situations. (Reference Special Topics Section7.8 "Delays and Extensions of Time.")

Types of delays are many and varied but they can be grouped in fourbroad classifications according to how they operate contractually. Theyare:

A. NON-EXCUSABLE DELAYS

B. EXCUSABLE DELAYS

C. COMPENSABLE DELAYS

D. CONCURRENT DELAYS



Generally, whether a delay is excusable or non-excusable is determined bythe provisions of the contract. Do not assume you know the differencewithout reading the full contract.A. Non-excusable Delays

Non-excusable delays are delays the contractor causes or delays forwhich the contractor assumes the risk. They are within the controlof the contractor or are foreseeable; it is not necessary, however,that they be both.

These non-excusable delays can be the results of underestimates ofproductivity, inadequate scheduling or management, constructionmistakes, (normal) weather , equipment breakdowns, or just plainbad luck. Such delays which could have been foreseen oravoided by due care of the contractor are inherently thecontractor's responsibility and no time extensions are allowed.

There is no question that in a large and complex undertaking, therewill necessarily have to be a certain amount of give and take amongthe diverse elements battling for the same time and space. We mustavoid diverting time, energy, and money from building the job topursuing claims and disputes over minor delays,disruptions, and interferences. Accordingly, the General Conditionstypically contain clauses that put the contractor on notice to plan forcertain events and that reasonable delays that occur as a result ofthese events are non-excusable delays. One example is thefollowing:

Cooperation With Others

“Owner, other Contractors and other Subcontractors may beworking at the Jobsite during performance of this Contract andContractor's work, or use of certain facilities, may be interferedwith as a result of such concurrent activities. You reserve the rightto require Contractor to schedule the order of performance of itswork in such a manner as will minimize interference with the workof any of the parties involved."

This is a gray area because the amount of give and take cannot beprecisely defined and the element of reasonableness which is statedor implied in the controlling contract clauses must be interpreted inthe light of the facts in every case. An unreasonable delay, even inthe case of an event the contractor was advised to anticipate, canchange a non-excusable delay to a compensable delay. Examplesare:

• Failure to provide timely inspection of completed work

• Failure to competently coordinate the work of separatecontractors



B. Excusable Delays

When a delay is caused by factors that are not foreseeable and arebeyond the contractor's reasonable control, it may be "excusable".This term has the implied meaning that neither party is at faultunder the terms of the contract and have agreed to share the risk andconsequences when "excusable" events occur. The contractor willnot receive compensation for the cost of the delay, but it will beentitled to additional time to complete its work (and relief from anycontractually imposed liquidated damages for the period of delay).You are not entitled to the earlier completion date, but also are notobligated to the contractor for the contractor's delay costs.

Excusable delays are typically provided for by the "Delays andExtensions of Time" clause in the General Conditions. A typicalprovision reads as follows:

"If Contractor's performance of this Contract is prevented ordelayed by any unforeseeable cause existing or future, which isbeyond the reasonable control of the parties and without the faultor negligence of Contractor, Contractor shall, within twenty-fourhours of the commencement of any such delay, give written noticethereof and within seven (7) calendar days of commencement ofthe delay, a written description of the anticipated impact of thedelay on performance of work. Delays attributable to and withinthe control of the Contractor’s suppliers or subcontractors of anytier shall be deemed delays within the control of Contractor.Within seven (7) calendar days after the termination of anyexcusable delay, Contractor shall file a written notice specifyingthe actual duration of the delay. Failure to give any of the abovenotices shall be sufficient ground for denial of an extension oftime. If you determine that the delay was unforeseeable, beyondthe control and without the fault or negligence of Contractor, youwill determine the duration of the delay and will extend the time ofperformance of this Contract by modifying the SpecialConditions. Such extension shall be the sole remedy for thedelay."

The general intent of this clause is to free the contractor fromliability for the effect of a superior force that cannot be anticipated or controlled, sometimes referred to as Force Majeure. This wouldtypically include:

(1) Acts of God (e.g., flood, earthquakes)(2) Strikes(3) Unusually severe weather(4) Fire



(5) Unusual delays in transportation

Some contracts specifically identify the events or types of eventsthat will constitute excusable delay. This may serve to limit thecontractor's relief to the listed events. A typical clause, however,merely requires that the delay meet the following three criteria:

(1) Beyond the contractor's control; and(2) without contractor's fault or negligence; and(3) not foreseeable.

C. Compensable Delays

In addition to compensable delays that result from contract changes,there are compensable delays that can arise in other ways. Suchcompensable delays are delays, suspensions, or interruptions to allor part of the work caused by an act or failure to act resulting fromyour breach of an obligation, stated or implied, in the contract. Ifthe delay is compensable, the contractor is entitled not only to anextension of time but also to an adjustment for any increase in costscaused by the delay.

Generally contracts will authorize an extension of time for delaysbeyond the contractor's reasonable control, but are silent regardingcompensation for your delay. Your right to control carries with itthe obligation to control with reasonable diligence and competence.Inherent in construction contracts is an implied obligation on your part not to unreasonably delay, interfere with, or hinder thecontractor's performance of its contract.

Accordingly, it is necessary to be aware that your actions orinactions that result in unreasonably delaying or disrupting thecontractor could expose you to a claim for additional time or moneyor both. Some examples are:

(1) Failure to properly and timely perform certain workwhich necessarily precedes the work of a contractor.

(2) Interfering with a contractor's schedule and orderingit to proceed under conditions (e.g., inclementweather) which the contractor felt precluded itssatisfactory performance.

(3) Supplying erroneous information, not patently orobviously erroneous, which misleads and disrupts thecontractor in its performance.

(4) Failure to disclose information necessary to thecontractor's satisfactory performance.

(5) Failure to provide timely inspection of completedwork.



(6) Improperly assuming the direction or execution offield operations which are the responsibility of thecontractor.

(7) Requiring the contractor to perform by one particularmethod when the contract does not specify anyparticular method.

(8) Failure to competently coordinate the work ofseparate contractors.

(9) Failure to timely process invoices, change orders oramendments, and contractor submittals.

Contracts specifically address some potentially compensable delaysand provide for equitable adjustments. The usual equitableadjustment clauses that apply to delay are:

(1) Changes and(2) Differing Site Conditions

(3) Suspension

A typical Changes clause provides for equitable adjustments as follows:

1. Changes

“You may, at any time, without notice to the sureties, if any,by written Change Notice unilaterally make any change inthe Work within the general scope of this Contract,including but not limited to changes:

(a) in the drawings, designs or specifications;

(b) in the method, manner or sequence of Contractor'swork;

(c) in Owner or your furnished facilities, equipment,materials, services or site(s);

(d) directing acceleration or deceleration inperformance of the work.

(e) modifying the Contract Schedule or the ContractMilestones

“...If at any time Contractor believes that acts oromissions of Owner or you constitute a change to the Worknot covered by a Change Notice, Contractor shall withinten (10) calendar days of discovery of such act or omissionsubmit a written Change Notice Request explaining indetail the basis for the request. You will either issue aChange Notice or deny the request in writing.



If any change under this clause directly or indirectly causesan increase or decrease in the cost of, or the time requiredfor, the performance of any part of the Work under thiscontract whether or not changed by any order, an equitableadjustment shall be made and the contract modifiedaccordingly ..."

The clause recognizes that changes in the work or changes inthe method, manner or sequence of performance may requirechanges in the schedule or milestones and could necessitaterevisions in activity durations, sequence of work items, orinterrelationships of various tasks. The change may have adirect impact on the schedule, as where a change in methodrequires a greater or lesser period of performance. Also, itseffects may be more subtle, as where the change merelyrearranges priorities. Note that in addition to a timeextension, the contract clause provides for compensation forany delay resulting from a contract change by allowingpayment for the increased cost of the performance of thework caused by the change.

2. Differing Site Conditions

The portion of the clause addressing cost/time adjustmentsfor differing site conditions provides:

"If ... such conditions do materially so differ and cause anincrease or decrease in the Contractor's cost of or the timerequired for performance of the Work under this Contract,an equitable adjustment will be made pursuant to theGeneral Conditions titled “Changes”. No claim ofContractor under this clause will be allowed unlessContractor has given the required notice."

The intent is to leave the contractor neither damaged norenriched because of the resultant delay.

The Differing Site Conditions clause must not be confusedwith the "Site Conditions" clause.

Reference Special Topics Section 7.2 "Basis for Claims"Pgs. 12-13 and Section 7.11 "Differing SiteConditions" for additional information on this subject.



f3. Suspension

“The Company may by written notice to Contractor,suspend at any time the performance of all or any portionof the Work to be performed under the contract...

If Contractor intends to assert a claim for equitableadjustment under this clause, it must pursuant to theGeneral Condition titled “Changes” and within ten (10)calendar days after receipt of notice to resume work,submit the required written notification of claim and withintwenty (20) calendar days thereafter its written proposalsetting forth the impact of such claim.”

From time to time during the course of the work, it may benecessary or desirable to suspend all or part of the work. Inthis eventuality, the contractor is required to take the actionsenumerated in the provision. In order to establish a claimfor an equitable adjustment, the contractor must show thatthe suspension was in no way caused by its own wrongdoingor fault.

D. Concurrent Delays

Concurrent delay occurs when both you and the contractor areresponsible for the delay. Generally, if the delays are inextricablyintertwined, the contractor cannot be faulted for delay (forced toaccelerate, or be liable for liquidated damages) nor can it recoverdelay damages against you in such circumstances. (ReferenceSpecial Topics Section 7.8 "Delays and Extensions of Time.")

Until the development of CPM schedule analysis, there was noreliable method available to distinguish the impact of contractordelays from the impact of your delay. With the sophisticatedcomputerized techniques now available, however, it has becomepossible sometimes to accurately segregate the impacts ofapparently concurrent delays.

If there is some basis for doing so, a court will apportion the faultand allocate delay damages accordingly. However, delays on thecritical path cannot be offset by delays on a float path, and therights of the parties will be determined solely in accordance with thecritical path delays.

The critical path is commonly defined as the longest chain (in termsof time) of interrelated activities through the project (from beginningto end). Because this chain of activities takes the longest time tocomplete, it is "critical" to completion of the project. If one of thecritical activities is delayed by one day and no pressure is applied to



the schedule or critical activity by resequencing, additionalmanloading or acceleration, the project completion date will bedelayed by that one day. Delay involving work not on the criticalpath generally has no impact on the eventual completion date of theproject.

It is vitally important that whenever a contractor asserts a claim foran extension of time and related costs, you determine whether therewere any concurrent contractor-caused delays. You must alwaysask whether the contractor was in fact prepared to proceedaccording to schedule but for the owner (or your) delay or whetherthe contractor would have been delayed anyway for reasons withinits own scope of responsibility or contractual assumption of risk.

In analyzing a delay claim, an analysis based on a comparison of thecontractor's approved CPM schedule with the as-built CPMschedule should be performed to apportion properly responsibilityfor delay.

E. Delay Notice Requirements

Contracts typically require that a delay claim be submitted inwriting within 7 days from commencement of the delay. Further,within 7 days after the termination of any such delay, the contractoris required to file a written notice with the company specifying theactual duration of the delay. Failure to give either of the abovenotices is sufficient ground for denial of an extension of time. Byreceiving this notice, you are warned of the potential extra costs andhas a chance to take alternative action to avoid or reduce the costs.

However, delays do not always result from a single catastrophicevent. They frequently develop slowly during the course of thework. Minor delays are generally overlooked by contractors untilthe cumulative effect becomes financially burdensome. By the timea contractor recognizes that there is a problem, many differentparties and natural forces have contributed to the situation. As apractical matter, failure to comply with the notice requirements mayor may not defeat the claim. To avoid delay problems and potentialacceleration claims, it is best to:

• award time extensions timely;

• not order early (or inappropriate) completion;

• if Notice of Claim is given, respond timely andspecifically; and

• advise the contractor that you will extend its time ifjustified.

6. Breach of Implied Warranty

Typically, contracts contain clauses that provide the flexibility that you



need to manage jobs that extend over long periods of time and whichinvolve changing and sometimes unforeseeable circumstances. On theother hand, the contracts impose relatively few express obligations on youother than payment. However, there are a number of implied obligationsor implied warranties to which you are held.

Some of these were mentioned above in the paragraph on non-excusabledelays. We mentioned a gray area where overstepping the bounds ofreasonableness might change a non-excusable delay into a compensabledelay. The burden of proof, of course, as in any claim situation, would beon the party pressing the claim. Some other implied warranties wouldinclude:

(A) Sufficient Plans and Specifications: This is the most widelyrecognized implied warranty in a construction agreement. Inasmuchas all delays due to defective specifications are per se unreasonable,if you provide plans and specifications that are incomplete orambiguous and the contractor does not have sufficient time to seekand receive adequate clarification, the resulting delay iscompensable (unless there is concurrent contractor-caused delay).

(B) Timely Review of Shop Drawings, Payment Requests, andChange Notice Proposals: You must render a decision within theperiod of time specified in the contract. If no time limitation isstated, a standard of reasonableness is implied, typically two tothree weeks.

In issuing changes and making decisions, it is not unreasonable toconsume a reasonable period of time to process the change or toensure the correctness of the decision. The contractor should expectsome periods of time when it might halt work in a specific areawhile changes are being made, just as it expects bad weather,holidays and absenteeism. However, it is not anticipated that suchinterruptions will be for an unreasonable amount of time.

(C) Proper Coordination of the Work: With the advent of theconstruction management approach, this has become a growingsource of delay claims. When you have authority to coordinate andsequence the work, you have a duty to do so in a proper andefficient manner.

(D) Site Access: Courts disagree on the extent to which access to thejobsite is guaranteed. As a general rule, you must, at a minimum,do all that is reasonably possible to provide sufficient access. Adelay will be compensable if you cause the lack of access or knew inadvance that there would be an access problem and failed to divulgethis information to the contractor. The most common sources ofdelay claims in this area are: failure to provide initial access to the



work site; failure to release a work area to a contractor on time; ordirecting a contractor to surrender a work area for an unreasonableperiod.

(E) Timely Performance: In addition to reviewing shop drawingsubmittals, you must provide necessary information and make allnecessary decisions in a timely manner. If no time period is stated inthe contract, a reasonable period is implied.

(F) Acceleration and Disruption: Strictly speaking, these are notdelays. However, they are forms of interference in the progress ofthe work and as such they are compensable. Disruption usuallyoccurs when you order a change in the sequence of the work, butcan also result from excessive changes, rescheduling and stop-and-go situations. Acceleration can occur when you order the contractorto increase its pace. This implies that an earlier completion date isrequired. However, acceleration can develop constructively withouta change in completion date, if a contractor has an excusable delayand is not timely granted a time extension. (Reference Section 7.8,"Delays and Extensions of Time.")

7. Constructive Acceleration

If a contractor is entitled to a time extension, but the project schedulerequirements determine that a time extension is unacceptable, thecontractor may be directed to hold the original schedule despite anexcusable delay. Such direction may constitute "ConstructiveAcceleration." (Reference Special Topics, Section 7.9 "Acceleration.")

8. Ripple or Impact Effect

Where Change Notices have been issued so frequently, making suchdrastic changes that it soon becomes a matter of "changes on changes,"the courts have considered that this can have a "ripple or impact" effectupon the changed (and unchanged) portions of the work, thereby entitlingthe contractor to its increased costs. This is probably one of the mostcomplex forms of claims and requires a detailed analysis of each changeand its cost and schedule impact.

Ripple or impact claims are generally based on the cumulative effect ofchanges and other events under your control. Such claims are frequentlylarger in dollar value than the value of the changes themselves. Forexample, assume a $1,000,000 contract has had 65 changes issued, with atotal value of $400,000. In addition, there have been 625 Requests forInformation necessary due to incomplete information in the contractdocuments. At the end of the contract, the contractor may submit animpact claim of $800,000 for its increased costs of performance, based onthe effect of the changes (and the RFI's) on the unchanged (base contract)



work as well as the effect of the changes on one another.

Because of the magnitude of such claims, and because there is nostraightforward method by which such claims can be valued, it isparticularly important that ripple or impact claims be avoided whereverpossible. The most successful method of avoiding these claims is toinclude in all settlements for changes the full effect of the change and to sostate in the Change Order that resolves the equitable adjustment for thechange. The following is an example of appropriate release language:

“The price adjustment and time extension (if any) granted underthis Change Order constitute payment in full for the work coveredby this Change Order, including without limitation, all directcosts; indirect costs; overhead costs; general and administrativeexpenses; profit; and all effects (direct, indirect, andconsequential, including impacts and "ripple effects") of the workcovered by this Change Order on all contract work, whether or notchanged by this Change Order."

To be certain that this language will be binding on the contractors, itis important to note in the negotiation minutes that impact wasdiscussed and included in the settlement.

9. Loss of Productivity Claims

One of the more difficult contractor claims for the contractor toprove and for you to analyze and respond to are claims for lostproductivity or inefficiency. A variety of methods of calculationhave been developed and accepted by the boards and courts. Whilethere is no set method for calculating loss of labor efficiency, theboards and courts are suspect of methods of proof which do notcompare the contractor’s normal labor productivity to actualproductivity as affected by the claim event. A great variety offactors can contribute to an overall loss such that it is impossibleto isolate and quantify an individual factor.

In addition, a contractor claim may involve other types of delay anddisruption damages which need separate analysis and proof of causation.Consequently, the following analyses have evolved to provide such acomparison.

There are two different techniques used to calculate lostproductivity claims; one is to measure the loss and the other is toestimate the loss.



One measures the amount of lost productivity by making acomparison of similar work activities in the same project. Thisanalysis compares identical activities on an impacted and non-impacted basis. It constitutes the most accepted calculation forlost labor productivity and is generally known as a “measured-mile.” The key to a measured-mile analysis is demonstrating thatthe period selected to represent the non-impacted performance issubstantial enough to serve as a baseline against which theimpacted period is then compared.

Estimating the inefficiency almost always includes a comparison ofthe productivity rates (or performance factors) for the inefficientperiod and a reasonable estimate of the anticipated productivityrate (i.e., what the productivity rate would have been absent theefficiency loss). Estimating the anticipated productivity rate is themost difficult item of proof because of the uncertainty involved. Asatisfactory settlement of the claim will depend in large part onhow well this item is established. Such estimates are commonlybased on one or more of the following:

• other similar contracts • industry standards • project productivity studies • estimated labor costs • expert analysis • bid comparisons

One thing to keep in mind in analyzing/evaluating loss of productivityclaims is that the burden of proof is on the contractor. Do not be swayedby volumes of cost records showing contractor losses. The issue for thecontractor is to show the link to an event or circumstance for which youare responsible.

Exculpatory Clauses

Many contracts contain exculpatory clauses which attempt to shift the risk ofunknowns to the contractor. These clauses disclaim responsibility for thecompleteness or accuracy of the data provided and place responsibility on thecontractor for any problems that might result from relying on such data shouldit prove to be defective or misleading. The concept is that the contractor is



warned to either seek confirmation of the information provided or to include acontingency for some reasonable variation from the information provided as itmay affect the cost/time to perform the work.

Court decisions include numerous examples where an owner's exculpatoryclauses did not protect it when the case went to court. The requirement forfull disclosure has been emphasized earlier. In fact, the contract shoulddisclose all relevant facts affecting cost of performance which you knew orshould have known. Failure to do so could impose liability formisrepresentation.

We cannot be assured of absolute protection by exculpatory clauses.Although the validity of the clauses has been generally upheld, circumstancesare all important. When problems arise from these provisions, they areusually of serious magnitude and require careful study and evaluation.

Liens

A lien is a claim against property. Generally, in construction when a laboreror a contractor does work on real property or a supplier furnishes materialwhich is incorporated into the work on the real property, the person providingthe labor or material can place a lien on the real property if the person is notpaid. In the case of a laborer or a contractor or a subcontractor who doeswork on the real property, the lien is known as a mechanic's lien. In the caseof the supplier of materials, the lien is known as a materialman's lien.

When work is performed on U.S. Government property, there are no propertylien rights available. Consequently, the Government requires its primecontractors to provide a special bond (Miller Act bond) against which liensmay be filed.

Of course, one important step to take without fail is to obtain a Certificate ofPayment prior to paying any invoices. Be aware that if a contractor is paid itsinvoice, but the contractor does not pay one of its subcontractors, thatsubcontractor can file a lien and you can end up paying for the same worktwice.

So far as the construction industry is concerned, the rights, limitations, scope,procedures, and nearly all other considerations regarding these liensare set forth in the statutes of each of the fifty states. No general statementscan be made regarding these liens other than to make it clear that statutes inevery state are different. Consequently, when a lien problem arises, it isalways necessary to determine how the problem must be handled under thelaws of the particular state involved. (The specific procedural requirementsset forth in the state laws must be strictly adhered to.)



Reference Section 3.6 "Insurance and Bonds" pgs. 30-32.

7.3 NEGOTIATIONSECTION 7. SPECIAL TOPICS Page 29 of 67.

��SPECIAL TOPICS 7.3 NEGOTIATION

7.3.1 Purpose Negotiation is essentially communication of ideas by the parties in an effort toreach an agreement which will maximize the benefits of all parties. Ethicalnegotiations serve the needs of both contracting parties.

The objective of negotiations is not simply for one party to convince anotherparty that it is right or wrong. The objective of negotiations is to find acombination of issues and price(s) that is acceptable to both parties. This isfirst a process of education, then a process of persuasion.

The key principles for successful negotiation are:

� Preparation - Know the issues and the participants' needs

� Internal Accord - Achieve consensus among your team membersbefore entering negotiations

� Composure - Take issues seriously, but not personally; the toneof all team participants should be controlled withthis in mind

� Confidence - Let the other side know you are comfortable withyour position and with your grasp of theirposition

� Receptiveness - Be fair, reasonable and honest -- it puts pressureon the other side to do the same

� Flexibility - Be willing to compromise on an issue that isimportant for the other side to win, even if theymay not be right -- take the long view

Attempting to negotiate by coercion is generally ineffective and oftencounterproductive. Coercion provokes polarization and makes it very difficultfor the coerced party to offer concessions or accept compromise.

Successful negotiation requires a knowledge of facts (to educate) and aknowledge of people (to persuade).


7.3 NEGOTIATIONSECTION 7. SPECIAL TOPICS Page 30 of 67

7.3.2 LeadNegotiatorRole andResponsibility

Selection of Negotiator

The Lead Negotiator's experience and capability should fit the expectedcomplexity of the negotiations. The Lead Negotiator must be knowledgeableof various negotiation techniques and must be familiar with Company policiesconcerning negotiation. The most important criteria for the negotiator arefamiliarity with the contract, familiarity with the issue(s), and negotiatingexperience.

Negotiating Strategy

The Lead Negotiator should clearly understand the policy philosophy and theaims and objectives of the negotiating team. A pre-negotiation plan is to bedeveloped on all matters to be discussed. The team members should rely ontheir experience in researching and developing the pre-negotiation plan. TheLead Negotiator should coordinate negotiation objectives with the Site orProject Manager to make sure that the customer's and the project goals areachieved. For all negotiations involving a potential commitment in excess of$1 million (and other commitments when approval is at all in doubt),appropriate commitment authority should be obtained in advance ofnegotiations to avoid having to renege on negotiated points.

Create a consensus among the negotiating team to provide a united front. Nonegotiation should be started before the full agreement of all members of theteam is assured.

Negotiation Session

If negotiations seem to be breaking down, the Lead Negotiator should requesta caucus to discuss what direction should be taken to resolve the issues and tocomplete the negotiations. The negotiating team may agree that the other teamis not interested in resolution and may recommend termination of negotiations.

7.4 INTERFACE COORDINATIONSECTION 7. SPECIAL TOPICS Page 35 of 67

7.4 INTERFACE COORDINATION

7.4.1 Purpose The designated contracts representative has the primary responsibility toensure that the contractor performs in accordance with the contract. It isimportant to realize that although assigned only specific contracts, thisindividual plays a major role in the total project team effort to construct aquality project within the schedule and budget. To be successful in thisobjective, the various contracts representatives must work in closeconjunction and harmony with each other as well as with others on theproject team to minimize or eliminate interface problems.

The contracts representative is involved in a wide variety of activities most ifnot all of which require some type of coordination. Coordination is requirednot only between the contractor and you or interfacing contractors but alsowherever the various supporting project entities (e.g., technical inspectors,Procurement, technical specialists, Project Engineering, Field Engineering)are involved with the contract in some way or other. It is important that allofficial contact and communication with the contractor be coordinatedthrough the person(s) designated in the Division of Responsibilities (DOR)matrix (reference Section 2.1 "Assignment of Tasks" of this Manual). Thiseliminates possible misunderstandings with the contractor and keeps the lineof communication clear.

7.4.2 Initial Steps Keep in mind that the contractor has been living with the contract for a longtime before it was even awarded. You will be at a definite disadvantage ifyou wait until the contractor arrives at the site to "come up to speed." Thefirst step is to be thoroughly familiar with the contract documents.Remember to "RTFC — Read the Full Contract." You should be thoroughlyfamiliar with the contract before the work begins. The formation of acompany contract is a lengthy process involving participation byEngineering, Construction, Contracts, Procurement, Legal, Project Controlsand sometimes the customer. The process is structured and provides severalopportunities for the contracts representative to participate in the pre-awardactivities:

• The Project Team review of the proposed bid package

• The Pre-Bid Meeting

• The Pre-Award Meeting

If it is not possible to attend all of these meetings, the agenda and minutes ofthe meetings located in the contract files should be reviewed. The bidtabulation, the recommendation to the customer and other bid periodcorrespondence are important sources of background information.

7 SPECIAL TOPICS

CONTRACTS/SUBCONTRACT MANAGEMENT MANUAL


Before the contract work can start, two preliminaries remain:

Preconstruction Kick-Off Meeting

The "Agenda for the Preconstruction Kick-Off Meeting" (reference Section3.3.2 and Exhibit 3.3.2-A) is a good checklist of the areas where the activeparticipation by the contracts representative as coordinator may be required.

This meeting is where the ground rules for working with the contractorshould be discussed and the last level of detail established. At this time it isparticularly important to note two basic provisions of the Contract GeneralConditions which typically appear in contracts. They are:

1. "Independent Contractor...

Contractor represents that it is fully experienced, properly qualified,registered, licensed, equipped, organized, and financed to perform theWork under this contract. Contractor shall act as an independentcontractor and not as the agent for you or Owner in performing thiscontract, maintaining complete control over its employees and all of itssuppliers and subcontractors. Nothing contained in this contract or anypurchase order or subcontract awarded by Contractor shall create anycontractual relationship between any such supplier or subcontractorand either you or Owner. Contractor shall perform its work hereunderin accordance with its own methods subject to compliance with thecontract."

2. "Authorized Representatives ...

Before starting work, Contractor shall designate in writing anauthorized representative acceptable to you to represent and act forContractor and shall specify any limitations of such representative'sauthority. Such representative shall be present or be represented at theJobsite at all times when work is in progress, and shall be empowered toreceive communications in accordance with this contract on behalf ofContractor. During periods when the work is suspended, arrangementsshall be made for an authorized representative acceptable to Companyfor any emergency work that may be required. All communicationsgiven to the authorized representative by you in accordance with thiscontract shall be binding upon Contractor. You shall designate inwriting one or more representatives to represent and act for you and toreceive communications from Contractor. Notification of changes ofauthorized representatives for either you or Contractor shall beprovided in advance, in writing to the other party.

These clauses establish that the contractor is solely responsible for all itswork and operations and establishes the channel of communicationthrough which interface coordination problems are resolved.



The company shall designate in writing one or more representatives torepresent and act for the company and to receive communications fromcontractor. Notification of changes of authorized representatives for eitherthe company or contractor shall be provided in advance, in writing, to theother party.

Notice of Site Mobilization

Preliminary to site mobilization, the contracts representative alerts all jobsitedepartments that a new contractor is arriving at the jobsite. This isaccomplished by issuing a "Notice of Site Mobilization." (Refer to Section3.3.2 and Exhibit 3.3.2-C.) This should be done as early as possible but atleast two weeks before the required starting date to allow advancepreparation, if required.

By this time, individual contractor work areas, access routes, storage andlay-down areas and priority of work operations have been established. Manyfront end problems can be avoided through the foresight and activeinvolvement of the contracts representative at this stage.

Some things that need to be considered are:

• Is the contractor mobilizing as scheduled?

• Are there areas available to start work in?

• Is there adequate lead time for the contractor to erect officebuildings, warehouses and shop facilities, if applicable?

• Is fabrication on schedule?

• Will enough material be onsite to support field activity?

• Are materials, facilities, or equipment to be furnished by othersgoing to be available?

If the answer to any of these questions is negative, there will be problems.Now is the time to start working to avoid or resolve them.

Before any work requiring third party authorization or approval is permitted,the contract representative should ensure that necessary permits are obtainedby either you, the customer, or the contractor according to responsibilitiesspecified in the contract and in accordance with the Division ofResponsibility Matrix.

In addition, a contractor cannot commence work onsite without first havingthe required Certificates of Insurance on file.



7.4.3 ConstructionCoordination

The contracts representative is the key player in overall coordination andcontrol. This individual must be kept aware of all problems, potentialproblems, and the status and daily progress of the contract. This isaccomplished through daily communications with other contractrepresentatives, review of the Daily Reports, and monitoring jobsiteactivities. The Construction Manager should be kept fully informed andadvised of contract status and schedule through established jobsite channels.

A primary function of the contracts representative is to coordinate theconstruction efforts of a contractor with other contractors, or companyforces, or both. This person must see to it that the contractor conducts itsoperations in cooperation with all others in the vicinity and avoidsinterference with others' work. The basic contract provision which typicallyenables the contracts representative to do this is the General Condition titledCooperation With Others. This clause states:

"You, the Owner and other contractors may be working at the siteduring the performance of this Contract, and Contractor's work, oruse of certain facilities, may be interfered with as a result of suchconcurrent activities. You reserve the right to require Contractor toschedule the order of performance of its work in such manner aswill minimize interference with the work of any of the partiesinvolved."

Bear in mind that this provision is part of each interfacing contract andtherefore applies equally to all contractors. The key words are "minimizeinterference with the work of any of the parties involved."

As a matter of practical fact, each contractor will probably tend to interpretthis to mean the other contractors are supposed to stay out the way. You onthe other hand may have a tendency to regard this as a license to do what isbest for the project. This is an extremely important area of attention andfraught with potential for "impact" claims or claims based on alleged delays,interferences, and disruptions.

By being fair and reasonable, using good judgment, and thinking andplanning ahead, the contracts representative can minimize potential for suchclaims.

Whenever possible, a detailed schedule or plan of operation with respect toaccess, occupancy or work area, storage area, precedence of workoperations, etc. should be developed in advance.



The contracts representative must take appropriate steps to foresee probableconflicts and interferences, and to arrange in advance for scheduling of thework by the contractor to avoid, or at least minimize, all such difficulties.To exercise this responsibility, the contracts representative must bethoroughly familiar with the contractor's work under its contract, particularlyas it relates to the contractor's schedule and project.

Coordination problems may involve several contractors. In such instances,the responsible contracts representative should arrange a meeting between thecontractors to encourage a solution of all difficulties by mutual cooperationdirectly between the contractors.

Coordination problems may also involve a contractor and your direct-hireoperations. The basic approach is the same. Get the parties to the problemtogether and work it out. The key to a successful and unstrained operation isgood communication. It is most important to communicate completely andaccurately with all parties involved, keeping them apprised of such things aswhere work is in progress, work planned in other areas and dates, interfaces,interferences, holds, craft densities, anticipated problem areas, etc. An effortto agree on methods of correction of problems needs to be made as early aspossible to avoid any delays. All parties need to realize the urgency of eachothers' activities related to schedule and be ready to have a hands-on attitudefor whatever is best for the project, even though it may not necessarily be intheir own best interests. This is the acid test for coordination. Agreementsshall be documented.

The astute observer may have noticed that there is a gray area here.Whatever is best for the project may stretch the limits of cooperation beyondwhat was intended by the contract. The contracts representative willfrequently be operating in gray areas. How well those situations are handledwill be the true measure of this person's stature and worth to the project. If acontractor is fairly entitled to additional compensation or time as a result of a"coordination" decision, the contracts representative should be prepared tosupport and justify an appropriate contract change.

7.4.4 Interfaces Probably the most troublesome problem in managing major contracts incongested areas is "interferences." As a general rule, two objects cannotoccupy the same space. An HVAC duct cannot be installed in its allottedspace if someone else installed a pipe or support or a cable tray first. Thebest solution of course is to know the drawings. However, because much ofthe work is field routed and, also, because field changes occur, you need tokeep in touch with what is going on generally. Communicate with yourdirect-hire superintendents and other contracts representatives monitoringcontracts in the same area. If a space is allotted for a particular contractor'swork, make sure it stays open and thereby avoid an expensive "fix."



Another common interference problem is access. There may be room for acontractor's work but the access to the space has been obstructed(two-blocked) temporarily by other crafts, scaffolding, etc., or permanentlyby other permanent plant equipment or materials. The solution is again thesame as outlined above. Sometimes the best solution is to get there first.The sooner an item is put in place, the fewer interferences there will be forthat item. However, do not rush ahead and ignore a rationale priority.Allowing "your" contractor to two-block another contractor just defers aproblem. It does not solve the problem. Try to get work scheduled for themost advantageous installation. Sometimes it may even pay off to installcertain items in congested areas with temporary hangers or fastenings tosimplify access problems or to nail down the space.

When interferences do occur, as they surely will, be ready to discuss theproblem with the others on the project team, including the craft supervisorresponsible for the interference in case of a company interference and/or thecontracts representative assigned to the interfacing contractor to resolve theproblem. Jointly analyze the problem and decide which work would be mostdesirable to change in terms of time and money and whether or notengineering must be involved. If a contractor is asked to change its methodor sequence, ask how it proposes to do the change. Remember, thecontractor has the expertise, but the final decision is yours. Do not let thecontractor load the change with cost just for the sake of making its contractmore profitable.

Whatever the decision is, make it in a timely manner. In most cases, thisdecision can and should be made the same day the interference occurs. It isimportant to document fully these kinds of agreements, clearly stating eachparty's responsibilities. If they are of relatively minor significance theyshould, as a minimum, be noted in the "Daily Report."

7.4.5 ScheduleCoordination

Because Project Controls plays a major role in the successful management ofthe project, it is vital that each contracts representative works in closeconjunction with the scheduler.

The Project Controls Manager is responsible to the Construction Managerfor the total project schedule. Therefore, it is imperative that ProjectControls is promptly given copies of all contractors' scheduling reports alongwith the contracts representatives' comments.

Project Controls evaluates the contractor's reports and plots the contractor'sprogress on the project master schedule. To manage the project successfullyand efficiently, it is mandatory that both the contracts representatives andProject Controls work closely together to foresee and eliminate possibleconflicts that would be cause for project schedule slippage.



This area of coordination becomes of utmost importance when majorupheavals take place such as slowdowns, or deferral of some work becauseof cash flow or other major problems. Important decisions need to be madeconcerning possible suspension, partial suspension, termination or partialtermination or merely significant schedule changes. The contractsrepresentative can make important contributions to such decisions because ofintimate knowledge of the status of contract activities, impending problemsand interface requirements. This individual is in the best position todetermine the impact of major schedule decisions on the contract and can aidin assessing the potential consequences and, if appropriate, recommendalternate solutions.

7.4.6 Coordination withProcurement

Many (but not all) major contracts include a provision in the SpecialConditions for you or the customer to furnish some or all of the equipment ormaterials. Procurement plays an important role in the total project effort inthat it is responsible for the issue and administration of purchase orders andthe receipt and issue of customer-furnished material and equipment.

Materials delivered too long before they are needed may adversely affect cashflow or create storage and handling problems. On the other hand, materialsor equipment delivered late are likely to delay not only a contractor but couldimpact and delay other contractors or even the total project and resultultimately in disputes or claims. Material purchase and delivery schedulesare initially coordinated with construction requirements. Consider expeditersto assist in obtaining a smooth flow of manufactured equipment andprefabricated materials, including contractor-furnished equipment andmaterials.

The contracts representative must keep fully informed of the progress of thevarious parts of the work and the status of related procurement activities toensure that all elements are in balance.

Purchase orders sometimes may require that a manufacturer's representativebe present during the installation of the equipment by a contractor. Whenthis occurs, the contracts representative, in monitoring the contractor'sprogress, will coordinate with the contractor and the manufacturer toestablish the required date for the manufacturer's representative to be onsite.

7.4.7 CoordinatingClean-Up andHousekeeping

The contractor is typically obligated by the terms of its contract to keep itswork areas in a neat, clean and safe condition.



Because work in and around a construction site can be confined and createvery close working conditions among contractors, daily cleanup is anabsolute necessity. Enforcement of this contract provision must be exercisedregularly and vigorously. A clean job is a safer job and most likely a moreefficient one.

If trash and debris are allowed to accumulate, it becomes impossible after afew days to identify the trash belonging to a particular contractor, resultingin each contractor refusing to accept the responsibility. Hence, cleanup andhousekeeping can also be an important interface coordination problem. Thecontracts representative must give particular attention during inspections tothe contractor's daily housekeeping practices. If there are any deficiencies,notice must be given by the contracts representative to the contractorinsisting that corrective action be taken. If the contractor fails to takeappropriate action, as a last resort, and with notice to the contractor, youmay arrange for the work to be done by your own forces or by others as abackcharge to the contractor (reference Section 4.7 "Backcharges") inaccordance with the terms and conditions of the contract.

7.4.8 OtherCoordinationInterfaces

It is immediately evident from a review of the General and SpecialConditions of the contract that the administration of all the provisions willrequire the involvement or assistance of numerous participants. The contractis likely to interface at some time or other with:

• Health and Safety• Security• Environmental• Labor Relations• Document Control• Field Engineering• Testing Laboratories• Resident Engineer (when assigned)• Surveyors• Project Engineering• Start-up• Project Controls• Controller• Customer• Local building code inspectors• Supervision

The knowledgeable attention and timely coordination effort in all of theseareas is a basic responsibility of the contracts representative who must bevery familiar with contract requirements.



7.4.9 Sub-TierSubcontractors

The contracts representative must not do any coordinating between acontractor and its subcontractors or subcontractors of different contractorsengaged on the project. This type of coordination is the function andresponsibility of the contractor(s). Subcontractors are not to be regarded asseparate contractual entities, but should be treated as part of the contractor'sforce. Conflicts between subcontractors should be brought to the attention ofthe contractor's field representative.

7.4.10 Conclusion Contractors are required by contract to cooperate with other contractors.Situations frequently occur that require the contracts representative tocoordinate the work of one contractor with that of other contractors and/orwith Supervision. The contract also gives rise to extensive and variedinterface coordination requirements.

The primary tools of the contracts representative in minimizing coordinationand interface problems are the approval of schedules and Progress ReviewMeetings. In addition, Contractors Coordination Meetings should be held asoften as necessary with all the major contractors. (Reference Section 4.3"Schedule" and Section 5.2 "Progress Review and Coordination Meetings.")The purpose of these meetings should be to expose and resolve potentialproblems and to promote an easy working relationship between contractorsand your organization.

When the problem involves interface conflicts with two or more contractors,the meetings should be arranged between the contractors, with you actingonly as a moderator and encouraging solutions directly between thecontractors by mutual cooperation.

In executing coordination responsibilities, the contracts representative mustbe careful not to render decisions that might lead to claims against you andyour customer. No decisions that impact others or have significant impact onthe project should be made in any case without the involvement and approvalof the responsible supervisory personnel in the field.

7.5 LABOR AND INDUSTRIAL RELATIONSSECTION 7. SPECIAL TOPICS Page 44 of 67

7.5 LABOR AND INDUSTRIAL RELATIONS

7.5.1 Purpose Your responsibilities relating to the labor and industrial relations obligationsof contractors will be dependent upon whether the project is being performedon a union, open shop or merit shop basis. This guideline generally describeshow to monitor a contractor's conformance to site labor relationsrequirements on a union project, where this responsibility is within the scopeof your responsibilities.

It is vitally important to the overall success of any project to ensure thatlabor harmony exists between the different work forces on site. Thecontractor is nevertheless responsible for administering its own laborrelations.

7.5.2 Procedure Become familiar with applicable labor agreements and site work rules.

Monitor contractor compliance with and enforcement of applicable laboragreements to include, but not limited to:

• Craft work assignments• Late starts, early quits• Unauthorized breaks• Wage and fringe payment agreements• Compliance with Federal, state, and local laws• Certified Weekly Payroll Reports (if required)

Notify the contractor if improper administration of the applicable laboragreements or work rules is adversely affecting the project. Such notificationmay first be oral (documented on the Daily Report) and followed up withformal correspondence.

Follow up and close out open labor issues.

Immediately notify company management of any unauthorized work stoppages.

Monitor that contractor labor is paid in accordance with site laboragreements and other governing regulations such as for Davis-Bacon work.

7.5.3 Checklist Labor Relations Checklist (Exhibit 7.5.3)

7 SPECIAL TOPICS


7.5 LABOR AND INDUSTRIAL RELATIONSSECTION 7. SPECIAL TOPICS Page 45 of 67

Labor Relations Checklist (EXHIBIT 7.5.3)

Contract Number:______________________ Contractor:_______________________________

Contract Scope:

1. The contract requires a labor agreement. YES NO

Comments:

2. Company Labor Relations has been notified of contractor's scope, labor requirementsand mobilization schedule.

YES NO

Comments:

3. Potential labor issues have been identified and resolved. YES NO

Comments:

4. Contractor has received and acknowledged site work rules. YES NO

Comments:

5. Contractor's daily labor management is routinely monitored and deficiencies noted onDaily Reports.

YES NO

Comments:

6. When required, contractor submittals such as certified payrolls are available andsubmitted on time.

YES NO

Comments:

7. YES NO

Comments:

8. YES NO

Comments:

Name:________________________________ Date:_____________________________

SECTION 7. SPECIAL TOPICS 7.6 FORCE ACCOUNTS Page 46 of67

7.6 FORCE ACCOUNTS

7.6.1 Purpose This procedure describes the process for identifying, documenting, verifyingand dispositioning force accounts. Specific responsibilities for initiating suchaccounts, approving charges, tracking and closing-out such accounts must beassigned on a project basis between Field Engineering, Project Controls andContract Administration.

7.6.2 Discussion Several circumstances give rise to the need for force accounts which are anaccounting method for accumulating costs as incurred with concurrentapproval by you in the field. Typical applications are:

• New or modified tasks which are difficult or impractical toaccurately estimate, but for which costs can be reasonablysegregated during performance. "Inspect and repair as necessary"and "excavation in unknown conditions" are examples.

• Changes, warranty work or variations where estimated values are indispute.

• Work undertaken with incomplete design information or wheresignificant rework, disruption, interferences or revisions areanticipated.

Force accounts accumulate actual labor, material, and equipment chargesincurred by contractors and approved by you. They may also accumulateyour direct hire costs for similar purposes. Costs are tracked and reporteduntil dispositioned through Change Notice negotiations, backcharges, orcompletion of the task. It should be recognized that only direct costs can becoded to force accounts and that indirects, overheads, and impact costs onrelated work must be separately estimated when applicable.

7.6.3 Procedure Initiating Force Accounts -- A limited number of designated managementstaff (perhaps only the construction manager) should be authorized to initiate a force account.

A "not to exceed" funding limitation will be established and monitored. Acommitment authorization for this amount will be processed at the time theforce account is initiated.

Cost Accounting will assign a unique cost code with an appropriatedescriptive title and include it in the project reporting scheme.

7 SPECIAL TOPICS


7.6 FORCE ACCOUNTSSECTION 7. SPECIAL TOPICS Page 47 of 67

Each account will be assigned to a specific individual for authorization ofcharges. That individual will be responsible to ensure that labor, materialand equipment costs being charged to each account are:

• Reasonable• Necessary• Actual

Individual timesheets coded to the force account should be reviewed andsigned by the assigned individual.

Material and equipment costs must also be individually authorized.

Reporting -- The contractor will be required to submit for approval a DailyReport of Force Account Work (reference Exhibit 7.6.3). Periodic costreports must identify all open force account codes and summarizeexpenditures on as current a basis as possible. Funding limitations shall notbe exceeded, but may be increased with appropriate approval. Labor,equipment, and material charges should be differentiated.

Disposition -- In most cases, force accounts should only be used as aninterim measure to accumulate cost information. When sufficientdocumentation has been developed, lump sum changes should be negotiatedand the force account discontinued or closed. However, under the “Pricingof Adjustments” clause, you may direct payment on a cost reimbursablebasis.

If backcharges or warranty claims are involved, the final costs will be pricedin accordance with contract agreements or normal pricing practices andsubmitted for collection in accordance with project procedures.

When appropriate, costs may be transferred into standard accounts whendocumentation objectives have been accomplished.

7.6.4 Exhibit Daily Report of Force Account Work (Exhibit 7.6.3)

Daily Report of Force

CONTRACT NO.:

CONTRACTOR:

WORK DESCRIPTION:

LOCATION:

LABOR EQUIPMENT

CLASS. RATE HOURS RATE AMOUNTMENNO. EQUIP.

NO. DESCRIPTIONWAGESTOTAL

SUBSISTENCETOTALHOURS

ST OT

COMPANY:

JOB NO.:


CURRENCY:

BC NO.:

DATE:

Account Work


REMARKS

TOTAL OTHER

OTHER

TOTAL EQUIPMENTTOTAL LABOR

AMOUNTUNIT PRICEDESCRIPTIONQUANTITY

TITLETITLE

Expedition

03/30/1999

7.7 LIQUIDATED DAMAGESSECTION 7. SPECIAL TOPICS Page 49 of 67

7.7 LIQUIDATED DAMAGES

Many contracts provide for liquidated damages as the measure of damagescontractually agreed by the parties as just compensation for a party's failureto satisfy a term of the contract. Typically, liquidated damages are used toassess a party's liability on a daily basis for failure to meet schedulemilestones or the contract completion date. They are also sometimes appliedto a contractor's failure to meet specified performance criteria.

Parties to a contract may stipulate in their contract the amount of damages("liquidated damages") that will be paid where the harm which will becaused by the breach is difficult to assess accurately and the parties have ingood faith endeavored to make a reasonable estimate. Unless this conditionis met, Common Law courts (primarily in those nations deriving their legalsystem from England), will not enforce the parties’ agreement on the basisthat the law will not give effect to a "penalty." (Where the actual damagesturn out to be more or less than the stipulated liquidated damages, the courtswill nevertheless enforce the parties' original agreement.)

International Work: In Civil Law jurisdictions (the majority of non-Common Law states and specifically in the developed countries ofcontinental Europe and their former colonies) penalties are permitted.However, Civil Law courts will vary in determining their validity. Forexample, under the French code, penalties are normally strictly enforced,whereas the German code applies a reasonableness test. Although thisapproach permits greater flexibility in setting liquidated damages, applicationof these guidelines are also the best way to meet Civil Law requirements.

Provided the contract states that the liquidated sum represents thecontractor's entire liability for the identified performance failure, this will bethe sole measure of damages. In this case, liquidated damages serve as alimitation on a contractor's liability. In the absence of an agreementstipulating the liquidated damages or any other contractual limitation, thecontractor may be fully liable for all of the actual damages (includingindirect or consequential) resulting from its failure to perform. Where themeasure of damages has been agreed in advance (liquidated), the only realcontroversy will be whether damages are due (entitlement) and not theamount. However, realistically it may require litigation to recover damagesfrom the contractor to the extent the damages exceed retention or otheramounts owed to the contractor.

The inclusion of liquidated damages clauses in a contract makes it imperativethat the deliverables associated with the liquidated damages be carefullymonitored and damages collected when milestones are missed. There has tobe a clear understanding of what the deliverable is and when it is required.

7 SPECIAL TOPICS


7.7 LIQUIDATED DAMAGESSECTION 7. SPECIAL TOPICS Page 49a of 67

Enforcement of liquidated damages will require thorough documentation ofthe contractor's failure to achieve the pre-established milestone activity orperformance criteria. Changes and time extensions will generally requiremodification to the liquidated damages dates.

7.8 DELAYS AND EXTENSIONS OF TIMESECTION 7. SPECIAL TOPICS Page 50 of 67

7.8 DELAYS AND EXTENSIONS OF TIME

Often events outside of a contractor's control or conditions arise which causedelay (e.g., acts of God commonly referred to as "force majeure" events oryour delays) to the contractor’s completion schedule. The contract generallyprovides that when these events or conditions occur the contract completiondate can be extended. Some contracts specifically address whether thecontractor is also entitled to compensation to recover its costs incurred as aresult of certain delays. Once time extensions have been agreed with thecontractor, they must be incorporated into the contract by Change Order.

Analyzing delays and requests for extensions of time is frequently difficult.In most cases a clear analysis cannot be performed without having anapproved critical path schedule available as a baseline. Time extensions areonly to be provided when the schedule critical path is impacted.

The contractor is typically required to give written notice to you when anevent or condition occurs which has the potential to delay any portion of thework, even if it is uncertain whether the contract schedule will be extended ordelayed. If the contractor's delay or failure to give notice prejudices thecompany's ability to take alternative courses of action, this can be groundsfor denying the contractor additional time.

A contractor's notice of delay should be followed by the contractor's requestfor a specific extension of time. It is also the contractor's obligation tosupport any such request to your satisfaction.

Suggested response to a contractor request for time extension:

"The contractor, in accordance with article _______, has requested aschedule adjustment. The contractor shall submit a written schedule analysisillustrating the effect of the [change] [delay] [your request] on the currentcontract schedule completion date. The schedule analysis shall include anetwork analysis demonstrating how the contractor proposes to incorporatethe [change notice] [delay] [your request] into the contract schedule. Theanalysis shall demonstrate the time impact based on the date the change wasgiven to the contractor; use of float; the status of construction at that point intime; and the event time computation of all affected activities. The eventtimes used in the analysis shall be those included in the latest updated copy ofthe detailed progress schedule or as previously adjusted by mutualagreement.

7 SPECIAL TOPICS



If the request for an extension to the schedule is denied by you (e.g.,contractor-caused or controlled), the contractor is faced with three courses ofaction. First, the contractor can accept the decision and proceed. Second,the contractor can advise you that its wrongful refusal to grant an extensionof time will result in the project being completed later than originallyscheduled. Third, the contractor can treat your refusal to grant an extensionof time as a direction to accelerate the work to maintain the original schedule.If the contractor was actually entitled to a time extension, and if you deniedthis request and subsequently the contractor accelerated the work to maintainthe original contract schedule, the contractor may have grounds for costrecovery associated with the acceleration effort. If the contractor acceleratesthe work to meet the project schedule without first providing notice to yougiving you the option to have project completion extended or alternativelypay the acceleration costs, the contractor may be unable to recover itsacceleration costs.

One of the more difficult and complex aspects of delay analysis is theresolution of concurrent delays. If a critical path delay is caused by (or is theresponsibility of) one party, that party bears the responsibility for the delay.For example, if a delay on a fixed price project is a contractor-caused delay,in the absence of any other circumstances, the contractor would beresponsible for the additional costs necessary to make up for the delay (or beresponsible for you or your customer's actual damages or contractuallyspecified liquidated damages to the extent project completion is delayed).However, sometimes all or a portion of one delay may overlap or occurconcurrently with all or a portion of another delay. Such delays are referredto as "concurrent". Their implications for contract management areimportant to understand. (Refer to Special Topics Section 7.2 "Basis forClaims" pg. 22.)

If there are two delays (occurring simultaneously and with the same delay tothe critical path) and one is the responsibility of the contractor and the otheris the company's responsibility, each party must bear the financialconsequences of the delay but the contractor would typically be entitled to atime extension for the duration of the delay (i.e., an "excusable delay"equivalent to force majeure). If you were to refuse to grant a time extensionand the contractor was compelled to accelerate its work to meet the originalschedule, the additional costs incurred by the contractor would be to you oryour customer’s account (even though the contractor's delay was concurrentwith your’s).

Generally, the concept of concurrent delays applies to only those portions ofthe delays that actually overlap. Any preceding and succeeding portions ofeither delay are the responsibility of the party causing that delay. Obviously,concurrent delay analyses can be complicated. Therefore, the advice ofexperienced schedulers, claims analysts and legal professionals should be



sought when concurrent delay issues arise.

Contractor delays which are not excusable (i.e., are the fault or responsibilityof the contractor) must be overcome by the contractor by accelerating thework. Otherwise, you may be entitled to assess liquidated damages at aspecified amount per day of delay (if the contract so provides).Alternatively, if liquidated damages are not specified in the contract, youmay be entitled to actual damages sustained by you or your customerbecause of the contractor's inexcusable delays. Such damages may bewithheld from the contractor's retention or amounts otherwise due tocontractor.

A dispute may arise with respect to entitlement for an excusable delay. If anevent occurs that the company does not agree warrants an extension (but theproject is not disadvantaged by the contractor's delay), you may decide not todirect the contractor to complete on time and not to extend the schedulepending a complete schedule review. Depending on the circumstances, thecontractor may want to rely on its claimed entitlement and complete the workbased upon a schedule extended by the period of excusable delay.Alternatively, the contractor may accelerate the work and attempt to chargethe resulting costs of acceleration to you. (Refer to Special Topics, Section7.9 "Acceleration".)

Note: For additional discussion on delays, see Section 7.2 "Basis forClaims" pps. 15-23.

Float Ownership

Activity delays shall not automatically mean that an extension of the contractcompletion date is warranted or due the contractor. A Contract ChangeNotice or delay may not affect existing critical activities or cause non-criticalactivities to become critical. A Change Notice or delay may result in onlyabsorbing a part of the available total float that may exist within theschedule, thereby not causing any effect on any interim milestone date or thecontract completion date.

Total float is defined as the amount of time between the early start date andthe late start date, or between early finish date and the late finish date, foreach and every activity in the schedule. Float is not for the exclusive use orbenefit of either you or the contractor. Extensions of time to interimmilestone dates or the contract completion date under the contract will begranted only to the extent that equitable time adjustments to the activity oractivities affected by the Change Notice or delay exceeds the total float of theaffected activity or subsequent paths and extends any interim milestone dateor the contract completion date.

7.9 ACCELERATIONSECTION 7. SPECIAL TOPICS Page 53 of 67

��SPECIAL TOPICS 7.9 ACCELERATION

The contract Changes article in a typical contract establishes your right toaccelerate the work. Whether the contract contains an acceleration provision ornot, the contractor is entitled to an equitable adjustment for its acceleration costs ifyou order the contractor to accelerate the work, or does so indirectly by notgranting a time extension when the contractor is otherwise entitled to an extension. (The term "constructive acceleration" is sometimes used to describe the situationwhere a contractor is denied valid time extensions and is forced to accelerate itsefforts to meet the original schedule.) Certain steps must be followed, however,before entitlement is established.

The steps which the contractor must follow to establish the basis for recovering itsacceleration costs are the following:

� The contractor must be properly entitled to an extension of time. (Forexample, where there was an excusable delay based on force majeure; oryour delays; or major changes are added to a contractor's scope and thecompany refuses to grant an extension of time.)

� The contractor must request a time extension, unless it would be uselessto do so (for example, if you have by your conduct or unreasonable delayin responding to the contractor's request made it clear that no extensionswould be granted). In this case, the contractor may be able to claim thatit has been constructively accelerated. (Reference Special Topics Section7.8 "Delays and Extensions of Time" and Section 7.2 "Basis for Claims"pg. 25.)

� Upon either express or implied (for example, passage of a reasonableperiod of time with no response) denial by you, the contractor must notifyyou that the denial (or lack of timely response to the request) will causethe contractor to accelerate the work and that the cost of doing so will befor your account.

� The contractor must then actually accelerate the work. (The accelerationeffort need not be entirely successful. A good faith and reasonableattempt is all that is required, yet all costs expended in good faith will becompensable.)

Unless these steps are carefully followed giving you the opportunity to decidewhether it is willing to extend completion of the project or alternatively whether itwill pay for the costs of acceleration, the contractor may not be able to recover itscosts for accelerating the work.

7.10 SUSPENSION OF WORKSECTION 7. SPECIAL TOPICS Page 54 of 67

7.10 SUSPENSION OF WORK

Occasions arise when it is necessary or desirable to suspend all or someportion of a contractor’s work without a known date for resumption. If theperiod of suspension is known with some certainty, then the Changes clauseis the proper authority to modify the contract period of performance.

Typical reasons for suspension include:

− Unsatisfactory or defective performance by the contractor requiringan indefinite period of time to fix the problem.

− project interface conflicts with others of uncertain duration.

− force majeure conditions where continued work would createunacceptable safety conditions of undetermined duration.

− changes or performance problems caused by the customer requiring

significant replanning before work can continue in a cost effectivemanner.

A typical suspension clause reads, in part:

“You may by written notice to Contractor, suspend at any time theperformance of all or any portion of the Work to be performed under thecontract...

If Contractor intends to assert a claim for equitable adjustment under thisclause it must, pursuant to the General Condition titled “Changes” andwithin ten (10) calendar days after receipt of notice to resume work, submitthe required written notification of claim and within twenty (20) calendardays thereafter its written proposal setting forth the impact of such claim.”

The suspension clause normally authorizes (1) complete or partialsuspension; (2) flexibility in the definition of what is to stop, what is tocontinue, and what preservation measures are to be taken; (3) fullcooperation and mitigation of impact by the contractor; (4) the obligation toresume as instructed; (5) contractor liability for suspensions required toremedy its own problems; and (6) equitable adjustment in price and schedulefor the unavoidable impact of suspensions on performance. Unlike somecontract clauses, which deny profit or suspension costs or disallowadjustments for impact on the cost of the work when resumed, the typical

7 SPECIAL TOPICS


7.10 SUSPENSION OF WORKSECTION 7. SPECIAL TOPICS Page 54a of 67

clause allows full equitable adjustment and must therefore be carefullycoordinated with the provisions of your prime contract. You do not want tounknowingly give a contractor a benefit that you do not have in your primecontract.

Suspension notices should be absolutely clear when issued to define the scopeof the suspension and any special instructions. Suspension caused bycontractor problems should cite the nature of contractual liability for suchproblems and should describe a course of action required to lift thesuspension. Any notice to suspend or to resume work must be in writingfrom your authorized representative.

7.11 DIFFERING SITE CONDITIONSSECTION 7. SPECIAL TOPICS Page 55 of 67 .

7.11 DIFFERING SITE CONDITIONS

One of the most common types of variation, as well as one of the mostcontentious, is the differing site condition. Contract clauses vary concerningentitlement, but most contain the same elements.

The typical Differing Site Conditions clause provides for additionalcompensation and time to the contractor if its costs increase or it is delayedas a result of conditions which differ from those indicated in the contract, orwhich are of an unusual nature and differ from those ordinarily encounteredand inherent in the type of work being performed under the contract.Although differing site conditions generally involve subsurface soilconditions, other conditions at the site different from those represented in thecontract or by the customer may be the basis for a claim for additional timeor money (e.g., a misrepresentation of the nature of a structure to bedemolished.)

The contractor must provide written notice of a differing site conditionimmediately after its discovery. There are two reasons for timelynotification. One, you must be given the opportunity to make its ownassessment of the conditions encountered before they are disturbed. Second,in the event you concur that there is a differing site condition but thecontractor has undertaken on its own a costly solution to deal with theconditions, you have been precluded from directing a more cost-effectiveapproach. Videotapes and photographs are useful ways to record theconditions which were encountered and the actions taken.

Even if the contract does not contain a Differing Site Conditions clause, thecontractor may still be able to recover the costs and time resulting fromthe differing site conditions which were encountered. If you havemisrepresented the conditions, or has withheld pertinent information from thecontractors bidding the project, the contractor may still have entitlement.

Note: Refer to Special Topics Section 7.2 "Basis for Claims" pgs. 12 & 13.

7 SPECIAL TOPICS

7.12 TERMINATIONSSECTION 7. SPECIAL TOPICS Page 56 of 67

7.12 TERMINATIONS

7.12.1 Purpose This procedure describes the process for terminating the services, in whole orin part, of contractors; either for default or for convenience (optionaltermination for you or your customer's convenience).

Termination for default is generally an act of desperation and isgenerally undertaken in the heat of battle. For these reasons (and others)reconsider carefully any threats or actions taken that will be perceived asprecursors to termination for default. This word of caution is not intended todissuade projects from liberal use of notice letters, e.g., pointing out items ofpotential concern (reference Exhibit 7.12.1 for a sample). Keeping acontractor on notice that schedule milestones must be met or that qualityconcerns must be resolved accomplishes two objectives. First, these noticesmaintain focus and attention on intermediate potential failures and help avoidan accumulation of such failures leading to significant schedule or qualityproblems. Second, should actual termination be necessary and appropriate,the intermediate notices assure you have not waived your rights by tacitacceptance of the intermediate failures.

7.12.2 Discussion Terminations have potentially significant, long range implications and musthave adequate management and legal review to ensure an understanding ofprobable liabilities and to evaluate direct hire or contracting alternatives toachieve project objectives.

Notices and instructions relating to terminations can be especially significantand contract provisions must be strictly followed. In addition, in atermination for default for which you expect the contractor's bondingcompany to be financially responsible, the bonding company must be:1) Copied when the Cure Notice is sent; 2) Copied when the DefaultNotification is sent; and 3) Given an opportunity to complete the work.

Wrongful or improper default termination procedures may result in the lossof contractual remedies and protection. Contract provisions are normallywritten to define specifically the administrative process and to describe orlimit the recovery of damages.

7.12.3 Procedure Termination for Convenience (Optional Termination)

Under many contracts, you have the right to terminate all or a portion of theincomplete work under a clause entitled "Termination for Convenience" or"Optional Termination." Although the Termination article may refer to theChanges article for determination of compensation, Termination for

7 SPECIAL TOPICS



Convenience clauses normally have specific provisions defining thecontractor's entitlement. For this reason, the Termination for Convenienceclause should be carefully examined to determine which costs (direct andindirect) the contractor would be entitled to recover upon termination.

Another mechanism to delete work from the contract is a deductive changeorder. Generally, the clause which is applicable depends upon the scope andmagnitude of the portion terminated/deleted. The decision whether a scopereduction is a deductive change or a convenience termination is not simpleand there are no clear guidelines for making such a determination. Typically,the adjustment for a deductive change is based on "what it would have cost"to perform the deleted work. The adjustment for a termination forconvenience is typically based on the contract price for the work terminated.Since the decision of which approach to take can have significant financialconsequences for you, it is important to calculate the adjustment using eachapproach and then to encourage settlement of the adjustment on terms mostadvantageous to you.

If in the best interests of the project it is desirable to terminate (in whole or inpart) a contractor's work for convenience, a plan explaining the benefits andrecommendation shall be prepared for review and approval by managementand, as appropriate, the customer.

Prepare a package describing the circumstances which prompt considerationof a contract termination for convenience (including why termination fordefault is not appropriate) and the contractual basis for this recommendation,a draft of the termination letter, a summary of current contract progress andstatus (cost, schedule, financial), and a contingency plan for completing thework (if work has not been deleted). Obtain required Management approvalsbefore notifying the contractor.

Notify the contractor (only once, no prior notice is required as no "cure" isdesired) stating exactly what is terminated and the effective date oftermination. Include any appropriate instructions such as those suggestedbelow. (Reference Exhibit 7.12.3-A for a sample Termination ForConvenience Letter.)

Schedule a discussion with the contractor to communicate the termination, toinitiate/review the contractor's demobilization plan, and to review thecontract close out procedures.

Request the contractor to submit a termination settlement claim in accordancewith the terms of the contract.



Prepare a Contract Amendment describing the terminated work,incorporating the negotiated settlement, and establishing the modified or finalcontract price and schedule (with appropriate release language).

Termination for Default (Termination for Cause)

Appropriate grounds for termination for default are normally set out in thecontract and include continued and uncorrected defective work, failure tocomplete, failure to make progress and insolvency. Termination for defaultrequires extensive Legal and management involvement. Prior to takingaction that leads directly to a termination for default, the following steps willbe taken:

If grounds for default appear to exist, a proposed scope and justificationtogether with an alternative source plan shall be prepared and reviewedand approved by you and, as appropriate, customer management. Theplan must provide for the contractually required notices and opportunityto cure the existing default.

Notify the contractor and its surety of the defect or non-performance andyour intent to partially or entirely terminate for default and provide areasonable opportunity in the notice for the contractor to remedy theproblems. (Refer to Exhibits 7.12.3-B.1, 7.12.3-B.2, and 7.12.3-B.3 forsample Cure Notice Letters.)

If the problems are not resolved, proceed with the following steps:

Prepare a brief document describing the circumstances which promptconsideration of a contract termination for contractor default and statethe contractual basis for this recommendation.

Include a chronology of events and correspondence and the current statusof the event(s) leading to the termination. It is important that thisdocument accurately and fairly reflect your position and the contractor'sposition.

Prepare a package containing the descriptive statement, a summary ofcurrent contract progress and status (cost, schedule, financial), and acontingency plan for completing the work, including an assessment of thelikelihood that the surety will elect to complete the work.

If the decision is to terminate for default, produce a second notice statingexactly what is terminated (refer to Exhibit 7.12.3-C for a sample



Default Termination Notice Letter) and the effective date of termination.Include any appropriate instructions regarding:

• Demobilization of personnel• Retention of equipment, tools and materials• Turnover or transition of work to others• Cancellation or assignment of purchase orders and

subcontracts• Protection of work in progress

Establish a force account for record purposes and accumulate costsincurred as a result of the default (including reprocurement) for futureclaims against the contractors or its surety.

Provide the surety a reasonable period to initiate completion of the work.

Arrange for inspections, inventory and documentation of progress at thetime of termination.

Proceed with the alternative plan as authorized by management.

Prepare a Contract Amendment describing the terminated work,incorporating the negotiated settlement of any termination claims orcounterclaims, and establishing the modified or final contract price andschedule.

7.12.4 Exhibits Notice Letter — Schedule Submittal Unacceptable [Sample] (Exhibit 7.12.1)Termination for Convenience Letter [Sample] (Exhibit 7.12.3-A)Cure Notices [Sample] (Exhibits 7.12.3-B.1; 7.12.3-B.2; and 7.12.3-B.3)Termination for Default Letter [Sample] (Exhibit 7.12.3-C)

7.12.5 Checklists Contract Termination Checklist/Termination for Convenience (Exhibit7.12.5-A)Contract Termination Checklist/Termination for Default (Cause) (Exhibit7.12.5-B)



Notice Letter — Schedule Submittal Unacceptable [SAMPLE] (EXHIBIT 7.12.1)

[Date]

[Contractor - Formal Notice Address]

Attention: [Contractor's Authorized Representative]

Reference: Schedule Submittal[Letter]/[Transmittal] No. ______, dated ________

Dear _______________:

The referenced submittal contains proposed schedule dates which do not meet the contract milestone dates.The proposed dates are not acceptable. Please take appropriate action to recover the schedule and submit,within five (5) days, a revised submittal which reflects completion of contract work in accordance with thecontract milestone dates.

Very truly yours,



Termination for Convenience Letter [SAMPLE] (EXHIBIT 7.12.3-A)

[Date]



Subject: Termination for Convenience

Dear _______________:

[Contractor's name] is hereby notified in accordance with the General Conditions, Article __, entitledOPTIONAL TERMINATION, that the contract is terminated for convenience. By copy of this letter,contractor's Surety is also advised of this Notice.*

[Provide specific instructions with respect to disposition of work in progress, sub-tier suppliers andsubcontractors, and similar direction, in accordance with the termination article.]

Very truly yours,

cc [Surety Bonding Company] registered letter

* If the contract has no performance bond, delete the reference to the bonding company and the cc.



Cure Notice — Refusal to Proceed [SAMPLE] (EXHIBIT 7.12.3-B.1)

[Date]



Reference: 1. [Company's Direction Letter]2. [Contractor's Refusal Letter]

Dear _______________:

Reference 1 directed [contractor's name] to take action to correct repeated quality deficiencies in its work,"whether or not contractor considered such action to be a change."

[Contractor's name] has indicated, [Reference 2, if refusal is by letter] [by its actions, if contractor justdeclines to accept work, but will not formally acknowledge its refusal] that it does not intend to proceedwith the direction in Reference 1.

The Contract General Conditions, Article __, entitled CONTRACT INTERPRETATION, provides, inpart: "At all times CONTRACTOR shall proceed in accordance with the work in accordance with thedeterminations, instructions, and clarifications of COMPANY."

The contract General Conditions, Article __, entitled TERMINATION FOR DEFAULT, provides, in part:"...CONTRACTOR shall be considered in default of its contractual obligations under this contract if itabandons or refuses to proceed with any or all work, including modifications directed pursuant to theclause entitled 'CHANGES'."

It is the company's determination that the reference direction is appropriate. This letter is formal notice that[contractor's name] is to demonstrate by its actions that it intends to comply immediately with the direction,and further, that [contractor's name] is to provide within three (3) days, written confirmation of its intent tocomply with the company's direction. By copy of this letter, contractor's Surety is also advised of thisNotice.*

Very truly yours


* If the contract has no performance bond, delete the reference to the bonding company and thecc.



Cure Notice — Schedule Performance Endangering Contract Milestones[SAMPLE] (EXHIBIT 7.12.3-B.2)

[Date]



Dear _______________:

The company has determined that [contractor's name]'s performance is endangering the contract milestonedates.

The Contract Special Conditions, Article __, entitled COMMENCEMENT, PROGRESS ANDCOMPLETION OF THE WORK, provides in part: "If at any time, CONTRACTOR'S actual progress isinadequate to meet the requirements of this contract, COMPANY may notify CONTRACTOR to takesuch steps as may be necessary to improve its progress."

The Contract General Conditions, Article __, entitled TERMINATION FOR DEFAULT, provides, in part:"...CONTRACTOR shall be considered in default of its contractual obligations under this contract if it...fails to make progress so as to endanger performance of this contract."

The Contract Special Conditions, Article __, entitled COMMENCEMENT, PROGRESS ANDCOMPLETION OF THE WORK, provides, in part: ” If within a reasonable period as determined byCOMPANY, CONTRACTOR does not improve performance to meet the Contract Milestones ....COMPANY may require an increase in CONTRACTOR’S labor force, the number of shifts, overtimeoperations, additional days of work per week, expedited shipment(s) of equipment and materials, and anincrease in the amount of construction plant and equipment, all without additional cost to COMPANY."

[Contractor's name] is directed to take appropriate action to recover the schedule and to submit, withinthree (3) working days, a revised submittal which reflects completion of contract work in accordance withthe contract milestone dates. [Provide details whether contractor is specifically directed to increase itslabor force, the number of shifts, overtime operations, additional days of work per week and anincrease in the amount of construction plant as is necessary to achieve the contract milestone dates.]By copy of this letter, contractor's Surety is also advised of this Notice.*

Very truly yours





Cure Notice — Schedule Submittal with Unacceptable Milestones[SAMPLE] (EXHIBIT 7.12.3-B.3)

[Date]



Reference: Schedule Submittal[Letter]/[Transmittal] No. ______, dated ________

Dear _______________:

The referenced submittal contains proposed schedule dates which do not meet the contract milestone dates.The proposed dates are not acceptable.

The Contract Special Conditions, Article ____, entitled COMMENCEMENT, PROGRESS ANDCOMPLETION OF THE WORK, provides, in part: "If at any time, CONTRACTOR'S actual progress isinadequate to meet the requirements of this contract, COMPANY may notify CONTRACTOR to takesuch steps as may be necessary to improve its progress."

The Contract General Conditions, Article _____, entitled TERMINATION FOR DEFAULT, provides, inpart: "...CONTRACTOR shall be considered in default of its contractual obligations under this contract ifit...fails to make progress so as to endanger performance of this contract..."

[Contractor's name] is directed to take appropriate action to recover the schedule and to submit, withinthree (3) days, a revised submittal which reflects completion of contract work in accordance with thecontract milestone dates. By copy of this letter, contractor's Surety is also advised of this Notice.*

Very truly yours





Termination for Default Letter [SAMPLE] (EXHIBIT 7.12.3-C)

[Date]



Subject: Termination for Default

Reference: [Company's Cure Notice Letter]

Dear _______________:

The reference letter, copy attached, provided specific instructions and a schedule to cure a material breachof the contract. The period for curing the failure has lapsed. [Contractor's name] has not cured the failure,and is hereby notified in accordance with the General Conditions, Article __, TERMINATION FORDEFAULT that the contract is terminated.

By copy of this notice, contractor's Surety is also advised of this notification of termination for default.The Surety has ten (10) days from the date of receipt of this letter to respond with respect to its intentto complete the work.*

[Provide specific instructions with respect to disposition of work in progress, sub-tier suppliers andsubcontractors, and similar direction, in accordance with items (g) through (k) of the terminationarticle.]

Very truly yours





Contract Termination Checklist/Termination for Convenience (EXHIBIT 7.12.5-A)


Contract Scope:

This checklist is not for terminations for default

1. The contract terms for termination have been reviewed and are understood. YES NO

Comments:

2. Alternate work completion plan has been prepared and approved. YES NO

Comments:

3. A termination package has been prepared. YES NO

Comments:

4. The Site Manager has approved the contract termination package. YES NO

Comments:

5. Company management and Legal have approved the termination package. YES NO

Comments:

6. Other required approvals, if any have been obtained. YES NO

Comments:

7. YES NO

Comments:

8. YES NO

Comments:

Name:____________________________________________Date:________________________________________



Contract Termination Checklist/Termination for Default (Cause) (EXHIBIT 7.12.5-B)


Contract Scope:

This checklist is not for termination for convenience.

1. The contract terms for termination have been reviewed and are understood. YES NO

Comments:

2. The contractor has been given a Notice of Default with a reasonable period to "cure"the default.

YES NO

Comments:

3. A contingency plan has been prepared to deal with the results of the contracttermination addressing work completion.

YES NO

Comments:

4. A detailed description with adequate supporting back up of why the contract is beingterminated (termination package) has been prepared.

YES NO

Comments:

5. The Site Manager has approved the contract termination package. YES NO

Comments:

6. The Legal Department has reviewed the termination package. YES NO

Comments:

7. Company management has approved the termination package. YES NO

Comments:

8. Other required approvals have been obtained. YES NO

Comments:

9. Contractor's Surety has been contacted to determine when/whether it will completethe work.

YES NO

Comments:



Name:____________________________________________Date:________________________________________

7.13 PROJECT ENVIRONMENTAL CONTROLSSECTION 7. SPECIAL TOPICS Page 1 of 9

7.13 PROJECT ENVIRONMENTAL CONTROLS

7.13.1 Purpose The proliferation of federal, state, local, and international environmentalregulations and public concerns has increased the need for environmentalplanning for construction projects of all kinds.

Complicating the planning process is the multitude of agencies, organizationsand authorities that have cognizance over the various environmental aspectsof a project. Their overlapping and sometimes conflicting requirementsmust be factored into the early planning of a project.

Environmental planning and control goes beyond basic compliance withapplicable regulations. Selection of environmentally compatible constructionmaterials (such as aerosols, recyclable containers, and biodegradablematerials) will simplify disposal of construction debris and reduce the costof handling, as well as the potential of later cleanup costs. Constructabilityreviews of the design and planning of construction work methods caneffectively integrate the necessary personnel and processes forenvironmental compliance and reduce the production of waste products.

Failure to comply with environmental laws and regulations, even whereinadvertent, has the potential to expose both the company and its employeesto civil and or criminal liability, including fines, penalties and imprisonment.

7.13.2 Overview -StrategicPlanning

Environmental Controls planning begins during the project proposal or bidcycle. Working with your environmental specialists, the proposal andproject managers should review the Request for Proposal forenvironmental requirements. Research may be required to identifysignificant legislative or community requirements that may affect the projectbut which are not mentioned in the bid documents. The potential cost ofcompliance activities, the compatibility of the project location, design, andlayout with environmental requirements, and the time required to obtainpermits, agency reviews and other approvals are important elements inevaluating a prospective project.

Successful projects are based on early planning, followed by carefullymonitored implementation, as shown in the attached Matrix (Exhibit 7.13.2).

7.13.3 Phase I -Planning

The effectiveness of the initial planning will set the tone of the project.Clear understanding of the areas of responsibility and authority among thecustomer, the project designers, and the constructor is essential. TheProject Division of Responsibility, often reduced to a matrix for ease ofunderstanding, should include such topics as:

7 SPECIAL TOPICS



• Applicable Environmental Laws and RegulationsThe regulations and agencies that will be involved in a project should beidentified and the applicability and requirements of each thoroughlyunderstood. Those requirements should be considered in developingthe project cost and schedule . Agencies may have conflictingrequirements that should be addressed. These issues should beidentified and reconciled early in the project planning phase.

• Environmental ConstraintsOne of the early steps in project planning or development is theidentification of environmental constraints that may affect the project.Environmental requirements are reviewed to identify which, if any, havethe potential to have a significant impact on the project’s location,design, layout, cost, schedule, or viability. These environmental issuesor constraints are important to identify early to determine if any areincompatible with the project development basis, including feasibility,and to avoid unnecessary cost and schedule implications for you, thecustomer, or contractors.

• Permitting PlanThe final phase of the planning stage is a permitting plan or matrix,listing and scheduling applicable permits and licenses that must beobtained by you in the performance of its work. (Refer to Exhibit7.13.2). This information assists in the identification of those which thecustomer or Project will obtain, those you are responsible to obtain (ifany), and those which are to be included in the scope of contractors.

7.13.4 Phase II -Design

During the design phase of the project, the strategy for environmentalcompliance established in the planning phase can be integrated into theengineering activities.

• Environmental Compliance PlanThe Environmental Compliance Plan (ECP) establishes the deliverables,the schedule for the deliverables and responsibility for the preparationof the deliverables. Implementation of the ECP begins with design.

• Environmental Design CriteriaDuring initial stages of engineering, environmental design criteria shouldbe identified and incorporated into the design basis as appropriate tofacilitate later project review and approval by regulatory agencies.These design criteria are essential to complying with environmentalregulations, and in some cases, can avoid the need for certain permitsand other approvals. In developing the design criteria, it is important tomaintain appropriate interface between the customer, the design team,



construction and any contractors.

• Environmental Impact Assessments (EIA)Often the customer elects to develop, apply for and obtain approval ofthe project EIA, but will still require support from the project in the formof design details or other information. Early identification of theinformation and the dates by which it is required is essential infacilitating the EIA preparation and review process. If the company hasa contractor preparing an EIA, it is important to monitor design andschedule commitments made in the EIA and how they may affect cost.

• Permit and License AcquisitionThe acquisition of permits and other approvals for a project is generallyapportioned among the customer, you, other contractor(s) andsubcontractors. Regardless of who has responsibility for obtaining thepermits, the progress of permit acquisition should be monitored againstthe ECP. The design team also needs to stay current with designcommitments made in the permit applications and requirementsassociated with permit terms and conditions that must be met in thefinal design and construction of the facility. Such requirements alsoneed to be communicated to contractors, as appropriate.

• Constructability ReviewAs design evolves, environmental input to constructability reviews canassist in the development of a more effective and constructable design.Reviews will typically pinpoint areas of potential over-design, increasedease of assembly or installation, and improved maintenance of thecompleted facility. Environmental review may also identify regulatoryrequirements that may affect construction schedule, cost, access, ortechniques that should be addressed during construction planning.

• Material and Source SelectionIt is important to review the scope and design criteria of each facilityor construction element for materials that can effectively reduce costand construction duration yet comply with environmental restrictions.Disposal of hazardous waste is a major area of potential long-termliability. Selection of materials and processes should be done withattention to reducing the amount of hazardous waste generated.

• Trade and Labor Availability StudiesMarket and trade studies on the current availability of environmentallysound construction materials and the availability of environmentallytrained, qualified labor should be performed. In cases of actual oranticipated shortages that could affect the project, recommendationscan be provided for alternative methods or materials that would avoid



delays or increased costs of construction.

• Work Subcontract PackagingOften the sequencing of work will require the installation or use ofconstruction aids (such as temporary on-site storage of materials ordisposal of wastes). These can be most economically provided whencombined into manageable work releases or contract packages. Workpackaging will determine the most effective grouping of work elementsinto packages for bid and award using a phased construction approachto minimize the overall onsite duration of these special aids. It willestablish a sequenced schedule for finalizing increments of design andthe release of material/equipment acquisition that supports the overallproject schedule requirements.

7.13.5 Phase III -Pre-Construction

• Construction Environmental Control PlanPrior to the start of construction, it is important to identify regulatoryrequirements. The Project Manager is responsible for having the CECPprepared prior to site mobilization. The plan must be prepared, or at aminimum reviewed by your environmental specialists. Each contractorshould be provided a copy of the CECP, and advised that they mustcomply, at a minimum, with all requirements in it applicable to theirwork, as well as all other laws and regulations applicable to their work,which they are solely responsible for determining.

• Contracting PlanThe requirements for environmental compliance, including flowdown ofrequirements from the prime contract, must be included in all contractsand, in many cases, in material purchase orders. When the projectdevelops the construction contract terms and conditions it must includeenvironmental compliance, training and certification requirements.

• Preconstruction SurveysThe terms and conditions of a project’s permits may require project-specific preconstruction surveys to document the presence, extent, andcondition of environmental resources (e.g. sensitive plants, fish andwildlife, cultural resources). These surveys are often required duringspecific timeframes, may involve approved survey areas andtechniques, and often must be documented and submitted to anagency(ies) prior to start of construction. The need for andresponsibility for timing of such surveys should be communicated tocontractors in advance of construction mobilization to avoid initiation ofsite activities prior to satisfying these regulatory requirements.



• Asbestos Inspection and NotificationWhenever your scope of work or that of a contractor involvesdemolition or renovation, an asbestos inspection must be performed bya certified asbestos contractor prior to commencement of work. Boththe customer of the building and the “operator” of thedemolition/renovation are responsible for this activity. In preparingcontract documents, it is important to determine whether the customeris going to perform the inspection, or already has, and to make thatclear in the bid package/contract documents. If the customer is doingthe inspection, their survey/inspection report should be attached to thebid documents. If the customer is not conducting the inspection, thecompany should make it clear to the contractor in the bid documentsthat it is their responsibility to have a licensed asbestos consultantinspect before beginning any demolition or renovation activity. Oncethe inspection has been conducted, written notice is required to theEPA or designated state agency 10 days prior to (1) any demolition or(2) certain renovation activities where asbestos was found to exceedthe prescribed threshold levels.

• Permit or EIS-required Plans or SubmittalsOften a project is authorized to proceed with permit conditions thatrequire the preparation, submittal, and approval of additional project-specific environmental plans or documentation prior to the initiation ofproject construction. These requirements are binding on a project, andshould be carefully complied with by the customer, company, orcontractors, as appropriate, prior to initiation of site activities. Suchrequirements should be communicated to contractors so that they do notbegin activities before final agency authorizations are received.

• Personnel TrainingIn almost every aspect of construction, personnel must acquire specifictraining for performance of various aspects of the work. The selectionof contractors who can provide environmentally trained personnel iscritical. Appropriate training of customer, your or other projectpersonnel is of equal importance, not only at the inception of the projectbut on a continuous basis throughout the life of the project. Thedevelopment and implementation of an environmental training plan andtraining records may be a valuable asset to the project.

• Delineation of Required Exclusion AreasPermits and other regulatory approvals may require protection ofsensitive areas or resources through exclusion of specific or allconstruction activities. Any such exclusion areas should be carefully



delineated and marked (e.g. flagged, staked) prior to initiation ofconstruction activities, and the need to avoid such areas must becommunicated to all of your and the contractor field personnel.

7.13.6 Phase IV - Construction

The planning and process development actions taken during the planning,design and preconstruction phases of the project will be implemented at thework site. Contract management will include oversight that contractors areoperating in accordance with the project environmental controls. Siteactivities include a number of key elements as follows:

• Implementation of Construction Environmental Control Plan (CECP)The CECP prepared during the construction planning phase will beimplemented with the start of construction jobsite activities. The SiteManager is ultimately responsible for overseeing implementation of thecompany’s environmental compliance under the day-to-day direction ofthe Construction Environmental Coordinator designated in the CECP.

• Regulatory Reporting Two types of reporting to regulatory agencies may be necessary on aproject. First, routine reporting may be required under permit or otherapproval conditions (e.g. construction inspection reports, monitoring ofsensitive resources). Second, reporting may be required in response tonon-routine events on the jobsite (e.g. spills or releases of hazardoussubstances). Routine reporting requirements will be identified in theCECP and should be complied with by jobsite personnel. Reportingrequirements should also be communicated to contractors, asappropriate.

• Document Control and Records RetentionDocumenting the design, quality and construction performance is abasic project requirement. Added to these standard processes shouldbe the documentation of compliance with environmental regulations andthe heath and safety status of personnel engaged in the work. Theserequirements should be incorporated into the project document controlprogram to insure that the performance is recorded and maintained in acomplete and cost effective manner.

• Environmental Trends and Cost Control ProgramMaintain a schedule and cost tracking system that reflects theeffectiveness of the project’s environmental control program.Variances from the plan can then be quickly identified for promptaction.

7.13.7 Phase V - Project Completion

As construction of individual facilities or the overall project nearscompletion, a wide range of complex functions must be carried out to



demonstrate to the customer that the technical, financial and contractualrequirements of the constructed work have been completed in an integratedmanner. The information and documents gathered during the precedingphases of the project are utilized to close out the project smoothly andeffectively. Major components of the closeout phase include:

• Surplus Materials and Waste DisposalAs the construction site demobilizes, special care is required duringdisposal of surplus materials and construction waste and debris. Thesematerials must be disposed of in accordance with the ConstructionEnvironmental Control Plan. Disposal of solvents, used petroleumproducts, coolants, coatings and similar materials require specialhandling. Material requiring manifesting or disposal at a qualifiedlandfill require special documentation. Special regulatory requirementsapply to the transport and disposal of hazardous waste. Disposalrecords created by the project should be flagged for retention in theproject files in accordance with the document retention policy.

• Restoration or RevegetationRestoration and revegetation activities must be performed to meet allspecifications in project-approved plans and permits. Restoration andrevegetation plans and approval also may require documentation to,inspection by, and/or sign-off by agencies. These requirements will beidentified in the project’s CECP, and should be communicated tocontractors whose work may be affected by such requirements.

7.13.8 Exhibits

• Post-Construction or Startup MonitoringPermits and other regulatory approvals may include conditionsspecifically requiring monitoring during post-construction or startupactivities. These requirements must be satisfied as specified, andshould be included in contractor communications as applicable.

• Final Inspections and TurnoverAs part of project completion, the documented closeout ofenvironmental requirements plays an important role in reducing anyexposure of you or the customer to future costs or legal liability. Aseries of final inspections, acceptance of completed contractor work,and turnovers to the customer should be planned and implemented in asmooth sequence. Part of the final inspection process may involve sitevisits by responsible environmental agencies. These activities should, ifpossible, be scheduled well enough in advance of the plannedcompletion date so that unnecessary delays are avoided. Completedcontractor releases should be received before acceptance of thecontract.

INDEX Page 1 of 7

Acceleration of work, Section 7, pg 53Constructive Acceleration, Section 7, pg 24, 50, 52, 53

Acceptance, Section 6, pg 1, 6, 7Accidents (See Insurance)Action Checklists (See Checklists)Advance Payment

Bonds, Section 3, pg 30-31Credit Review, Section 3, pg 8

Amendments (See Changes)

Backcharges, Section 4, pg 58-63Backcharge Log, Section 4, pg 61Daily Summary of Backcharge Work, Section 4, pg 62Notice of Backcharge, Section 4, pg 60Notice of Backcharge Completion, Section 4, pg 63

Beneficial Occupancy, Section 6, pg 10-13, 15Punch List, Section 6, pg 19-22

Bid Clarification Meeting, Section 3, pg 1,2Bonds

Advance Payment Bonds, Section 3, pg 31Bid Bonds, returning, Section 3, pg 30Extra Work, Section 4, pg 5Lien Bonds, Section 3, pg 32Maintenance Bonds, Section 3, pg 32Payment Bonds, Section 3, pg 30-32Performance Bonds, Section 3, pg 30-32Warranty Bonds, Section 3, pg 32

Breach of Contract, Section 7, pg 9, 10Breach of Implied Warranty, Section 7, pg 22-24

INDEX


INDEX Page 2 of 7

Certificate of Acceptance, Partial, Section 6, pg 1, 6Certificate of Final Acceptance, Section 6, pg 1, 7Certificate of Final Payment (See Closeout)Certificate of Payment, Section 5, pg 13,16Changes, Section 4, pg 1-26

AmendmentsAmendment Form, Section 4, pg 17, 18Definition, Section 4, pg 1Log, Section 4, pg 19

Change NoticeChange Notice Form, Section 4, pg 11,12Definition, Section 4, pg 1,2Log, Section 4, pg 13Procedure, Section 4, pg 6-7

Change OrderChange Order Form, Section 4, pg 15-16Definition, Section 4, pg 2Log, Section 4, pg 19Procedure, Section 4, pg 6, 7

Commitment Approvals (See Commitment Approvals)Company Initiated, Section 4, pg 3, 4Contractor Initiated, Section 4, pg 4, 5Cost Records For Changes, Section 4, pg 10Daily Summary of Time and Material Work, Section 4, pg 21Directive to Proceed, Section 4, pg 2, 20Equitable Adjustments, Section 4, pg 7-10, 23Extra Work (See Extra Work)Flowchart, Section 4, pg 23Impact/Ripple, Section 7, pg 24-25Log, Section 4, pg 4-5, 13, 16-19Negotiations, Section 4, pg 5, Section 7, pg 29-34Price Adjustment, Section 4, pg 7-9Proposals Log, Section 4, pg 14Release Language, Section 7, pg 25RFI's Not To Be Used For Changes, Section 4, pg 40Schedule Adjustment, Section 4, pg 7


INDEX Page 3 of 7

ChecklistsContract Amendment, Section 4, pg 23Contract Change Notice, Section 4, pg 24Contract Change Order, Section 4Contract Closeout, Section 6, pg 5Contractor Proposals, Section 4, pg 26Contractor Demobilization Checklist, Section 6, pg 4Coordination Meeting, Section 5, pg 10Cost Commitment, Section 4, pg 29Daily Report, Section 5, pg 6Environmental, Section 5, pg 33Insurance and Bonds, Section 3, pg 38Invoice Processing, Section 5, pg 20Labor Relations, Section 7, pg 45Mobilization Payment, Section 5, pg 19Pre-Award Action, Section 3, pg 7Pre-Bid and Site Inspection Visit, Section 3, pg 5Pre-Construction Meeting, Section 3, pg 18Progress Review Meeting, Section 5, pg 9Safety & Health, Section 5, pg 30Schedule, Section 5, pg 11Technical Transmittals, Section 4, pg 46Termination For Convenience, Section 7, pg 66Termination For Default (Cause), Section 7, pg 67

Claims, Section 4, pg 47-57Basis For, Section 7, pg 12-28Flowchart, Section 4, pg 56Log, Section 4, pg 14, 49

Closeout, Section 6, pg 1-9Certificate of Final Acceptance, Section 6, pg 1, 7Checklist, Section 6, pg 1, 5Demobilization (See Demobilization)Files, Section 3, pg 20Inspection (See Inspection)Lien, Release of, (See Release and Certificate of Final Payment)Partial Release and Certificate of Payment, Section 6, pg 1, 8aPunch List (See Punch List)Records Retention, Section 3, pg 20; Section 6, pg 5Release and Certificate of Final Payment, Section 6, pg 1, 8Substantial Completion (See Substantial Completion)

Completion, Acceptance (See Closeout)Commitment Approvals, Section 4, pg 27-36Commitment Authorization, Section 4, pg 27-36Commitment Register, (See PTS Commitment Register)Concurrent Delay (See Delay)Contract Law, Section 7, pg 1-11Convenience Termination (See Termination)Coordination, Section 7, pg 35-43

Meeting, Section 5, pg 8, 10


INDEX Page 4 of 7

CorrespondenceAction Items, Section 3, pg 25, 26Control, Section 3, pg 25, 26

Logs, Section 3, pg 27, 28Closeout, Section 3, pg 25Effective Correspondence, Section 3, pg 25,26Filing System, Section 3, pg 19-24

Contract Administration Filing Index, Section 3, pg 22-24Point of Contact, Section 3, pg 15,16,26Records Retention, Section 3, pg 20

Credit Review, Section 3, pg 8Critical Path (See Schedule)Cure Note (See Termination)

Daily Reports, Section 5, pg 1-6Default (See Termination)Delays

Changes Leading To, Section 7, pg 19,20Compensable Delay, Section 7, pg 18-21Concurrent Delay, Section 7, pg 21,22,51Delays and Extensions of Time, Section 7, pg 15-24, 50-52Excusable Delay, Section 7, pg 16-18, 52Float Ownership, Section 7, pg 52Non-Excusable Delay, Section 7, pg 16, 51

Demobilization, Section 6, pg 1, 4Checklist, Section 6, pg 1, 4

Differing Site Conditions, Section 7, pg 12-13, 20, 55Difficulty of Performance, Section 7, pg 11, 15Disputes, Section 4, pg 54Division of Responsibilities (DOR) Matrix, Section 2, pg 1-11Documentation (See Filing)

Transfer, Section 3, pg 8Drawings, Section 4, pg 37-38, 44-46

Bid Drawings, Section 3, pg 2Review, Issued for Construction, Section 3, pg 2

Environmental, Section 5, pg 31-33Project Environmental Controls Matrix, Section 7.13, pgs 1-9

Equitable Adjustments (See Changes)Excusable Delays (See Delays)Exhibits (See Forms)Extension Of Time (See Delays)Extra Work, Section 4, pg 2, 3, 5, 6


INDEX Page 5 of 7

Fact Sheet, Section 6, pg 9Filing

Index, Section 3, pg 22-24Flowchart of Changes/Claims, Section 4, pg 23System, Section 3, pg 19-24

Float Ownership, Section 7, pg 52Force Accounts, Section 4, pg 9; Section 7, pg 46-48Force Majeure (See Delays, Excusable)Forms (See Forms Index behind Forms Tab)

Hazardous Materials, (See Environmental)Health (See Safety & Health)Historical Fact Sheet (See Fact Sheet)Housekeeping/Clean-up, Section 7, pg 41-42

Impact/Ripple, Section 7, pg 24, 25Impossibility of Performance, Section 7, pg 11, 15Inspection, Section 6, pg 1, 3, 10, 14, 16, 18-22Insurance, Section 3, pg 30-38

Certificates, Section 3, pg 7, 30, 33-35Register, Section 3, pg 30,37

Interferences, Section 7, pg 39-40Interpretation, Section 7, pg 1-5Invoice

Concurrence Sheet, Section 5, pg 13, 17Progress Payment, Section 5, pg 14, 15

KickoffLetter, Section 3, pg 14-16Meeting, Section 3, pg 9-18; Section 7, pg 36-37

Labor Relations, Section 7, pg 44, 45Liens, Section 7, pg 27-28

Bonds to Avoid, Section 3, pg 30-32Liquidated Damages, Section 7, pg 49

Relief From, Section 7, pg 16-18, 51Logs (See Correspondence)


INDEX Page 6 of 7

MeetingsCoordination, Section 5, pg 8, 10-11Minutes/Action Lists, Section 3, pg 1Pre-Award, Section 3, pg 1-3, 6, 7Pre-Bid, Section 3, pg 1-2, 4-5Pre-Construction, Section 3, pg 3, 9-18Progress Review, Section 5, pg 7, 9Site Visit, Section 3, pg 1-2, 4-5

MobilizationNotice of, Section 3, pg 10, 17; Section 7, pg 37Payment, Section 5, pg 12

MSDS (Material Safety Data Sheet, see Environmental)

Negotiation, Section 4, pg 5-6; Section 7, pg 29-34Notices (See Individual Topics)

Payment Procedures, Section 5, pg 12-20Pre-Award Meeting, Section 3, pg 1-3, 6, 7Pre-Bid Meeting, Section 3, pg 1-2, 4-5Pre-Bid Site Visit, Section 3, pg 1-2, 4-5Pre-Construction Meeting, Section 3, pg 3, 9-18Pre-Job Conference, Section 3, pg 12Procurement Transfer Package, Section 3, pg 8Project Environmental Controls Matrix, Section 7.13, pgs 1-9Progress Measurement and Payments, Section 5, pg 12-20Progress Measurement Procedure (Sample), Section 5, pg 18Progress Payments, Section 5, pg 12-20Progress Review Meeting, Section 5, pg 7-9PTS Commitment Register, Section 4, 28, 35Punch List, Section 6, pg 19-22

Beneficial Occupancy, Section 6, pg 11Substantial Completion, Section 6, pg 14-15

Quality Surveillance, Section 5, pg 21

Reports (See Daily Reports)Request for Information (RFI), Section 4, pg 38-43

Log, Section 4, pg 43Responsibilities

Division of Responsibility (DOR) Matrix, Section 2, pg 1-11Retention

Release, Section 6, pg 1Release and Bonds (See Bonds, Lien)


INDEX Page 7 of 7

Safety and Health, Section 5, pg 22-30Citations, Section 5, pg 24Confirmation of Non-Compliance, Section 5, pg 23, 29History, Section 5, pg 23, 25-28aProgram, Section 5, pg 22Violation, Section 5, pg 22-24

Schedule, Section 4, pg 37; Section 5, pg 7-11; Section 7, pg 40-41Acceleration, Section 7, pg 53Changes, Section 4, pg 7Critical Path, Section 7, pg 21Delays and Extensions of Time, Section 7, pg 50-52Extension vs. Acceleration, Section 7, pg 50-52Float Ownership, Section 7, pg 52Submittal Requirements, Section 3, pg 37; Section 4, pg 30; Section 5, pg 7

Site Conditions (See Differing Site Conditions)Site Mobilization, Section 3, pg 10, 17Site Visit, Pre-Bid, Section 3, pg 1-2, 4-5Substantial Completion, Section 6, pg 14-18 (See also Closeout)

Certificate, Section 6, pg 15, 18Punch List, Section 6, pg 19-22

Suspension of Work, Section 7, pg 54

Technical Transmittals, Section 4, pg 44-46Comments Requiring Change Notice, Section 4, pg 44

Termination, Section 7, pg 9-11, 56-67Time and Materials Work, Section 4, pg 9, 21Transfer Documentation, Section 3, pg 8

Unit Price Quantity Variation, Section 7, pg 14-15

Waiver and Liens, Release of, (See Closeout)Warranty, Section 6, pg 23-27

Backcharge, Section 6, pg 24Bonds, Section 3, pg 30-31Correction, Section 6, pg 27Evergreen, Section 6, pg 24Full Wrap, Section 6, pg 24Log, Section 6, pg 26Subtier Work, Section 6, pg 26

Written Communication (See Correspondence)