• Internal Code :
  • Subject Code : V14113 / BCME15)
  • University : Holmesglen
  • Subject Name : construction

Construction Management

1. A contact can be said as an agreement which is signed between two parties (or more) to legally enforce the laws, when execution of a task related to both the parties takes place. Contracts ought to always be venture specific and should reflect the understanding between both the parties. Contracts are the main part of any business and clearly a key piece. It is in this manner basic that all the parties involved should be in an agreement with the contact and have clearly have comprehended the terms and conditions incorporated into an agreement. Every contract must fulfil or have the following part:

  1. Offer- what is presented to the contactor from the hired party; 

  2. Consideration- factors that are considered while settling the contact;

  3. Acceptance- on what negotiation and term the deals close down;

A contact is just as important in the construction process as procurement of materials and building the design strategy plans are. Even if the construction work is as small as building a room, it is important to formally document a contact. 

The Kwik Develop Pty Ltd ('KD') company wants to develop a 10-storey apartment in Melbourne, Australia, this construction requires a proper contact before the construction work by the hired construction firm starts. Here since the total estimated cost of the construction is greater than $500,000, a cost-plus contact can be used to legally settle down the term and condition of the process. During the construction process cost can be varied as the resources cost can fluctuate over the time period. Hence a cost-plus contract can be formed as in the contact there is no limit on the final price. In this situation it is agreed between the parties that the owner will cover all costs and in addition to it will give agreed margin for overheads. Full and final cost of the project can be known only on the completion of the project. In this contract , a contractor is given reimbursement for all the additional expenses other than the fixed cost. It is different from the fixed-price contract as in that, the contractor is paid a negotiated amount irrespective of the incurred expense.

Reflection

Since construction management is a profession that utilizes project management skills that helps to plan, design and construct a project, dealing with this question has helped me to gain the knowledge of how important contract formation is and what all factors needs to be included in the contract. Building a contract is as important as the execution of the plan, and if anyhow discrepancy occurs in the contract, the project is going to face problems with time for sure. This knowledge can be used when working as a project manager to apply the plan into proper process, legally and in accordance with what is stated in the contract. 

2. Latent conditions or inert conditions are the physical conditions which are either on the site, under it or contiguous a site. They cannot be discovered during the regular site inspection and can are only visible when the significant effort is made otherwise they may stay covered up even after a small site inspection is made depending upon the data given at the time when the contact is signed. 

According to Reason (2019), what establishes a latent condition will fluctuate contingent on the site being referred to. Instances of dormant conditions you may experience on a site incorporate shrouded utility administrations, for example, power and seepage lines (if not appeared delicate records), mines and soil sullying.  The term 'latent condition' can strike anxiety in the core of the most solidified developer or sub-contractual worker, particularly when the term is gone before by the words 'surprising' or 'unanticipated'. 

Contingent upon what the latent condition is and the cost associated with correcting any issues that emerge because of the dormant condition, the presence and consequent disclosure of a formerly unanticipated site condition can be the contrast between turning a benefit on an employment and losing a lot of cash. Contractor is the one who usually bear the cost of the latent condition, until it is not specified in the contract. unknown faults like soil contamination, human error or power failure cost needs to be mentioned in the contact to cope up with the latent conditions. 

Reflection

Latent condition becomes unavoidable because the human error or emergency breakdown can never be reduced after a certain limit. After studying and gathering knowledge about the latent conditions, it becomes as a project manager (in the future) to mention these details in the contract. Otherwise problems and dispute between the contractor and the owner will occur. Working as a project manager in the future and having this knowledge, will help to quickly respond to such problems or eliminate them completely.

3. Any project can face delays and disruption especially when a complex or a mega construction project is ongoing. Proving delay or disruption is not easy and also it is a time consuming process specially during the construction project, as construction process involves many activities, huge detail work and involvement of the  stakeholders. This in the turn causes cost hikes and fluctuation from the cost incorporated in the contract. When any degree of complexity in the project is examined, it becomes more difficult for the project team to record the delays and disruption events properly because they are always busy dealing with the site issues and other project pressures (Pistal 2017). KD constructions can utilize different methods to stay on the decided budget, in order for the construction to be successful. A time extension claim or disruption claims should be mentioned in the contract that can satisfactorily set up causation and obligation that helps with exhibiting the reach out of time-related harms experienced as an immediate aftereffect of the postpone occasions. The way toward account the deferrals and interruption is a dynamic procedure and requirements consistent inclusion from the arranging group with the help from every single other division. Providing with the LAD (Liquidated and Ascertained Damages) clauses in construction, KD construction company can keep the small contractors on budget and with project time schedules. 

Reflection

Any project can face budget overrun, when faces a time or liquidity damage. It is uttermost important for a construction company to mention the LAD (Liquidated and Ascertained Damages) clause in the contract with the owner, to avoid losses in the future. After gaining the exact knowledge on this topic, I am able to gain the importance of this clause and after getting the project manager post, it would become my duty to avoid such claims made by the owner on my company when discrepancy will occur during the project. There are many example that have taken place in Australia, in which the contacted have gone bank corrupt due to non-fulfilment of the budget or time constraint. 

4.Sce there is a limited amount of time to deal with the claim, in order to avoid time, overrun, KD, or the superintendent appointed, should follow should follow 9 steps before settling down the month’s payment and amount of $2 million. This is in accordance with the Building and Construction industry security of payment act 2002 (Masson 2019): 

  1. Make a system to ensure that when any claim arrives, it should be brought in attention of the person responsible for clearing the amount. 

  2. Determine when is the payment is due. The payment needs to be settled down within the next 10 working days. 

  3. Consider and prepare how to send the response to the claim and where it needs to be sent. Emails, Dropbox, or other website portal are not effective to respond to the claim quickly. If failing to fulfil the claim in the next 10 working days, gives the claimant the right to get the entire amount of payment as a dept. 

  4. To make sure that the claimed amount is valid, and if not, the claimant needs to be informed. Onsight inspection of the work completed, calculation of the cost incurred, etc., needs to be done. 

  5. Validate whether full amount asked, is even claimable or not. Reasons should be specified if any chance of fraud payment occurs.

  6. Include every detail- (1) the payment claim date (2) the payment amount (3) the payment time.

  7. If not in an intention to pay the full amount, form a detail document the amount released and the amount hold. 

  8. See that the payment reaches the right person. 

  9. Documentation and evidence of payment should be kept safely. 

Reflection

To avoid cost and time overrun, it is important to release the payment at regular intervals. When the payment is received under Building and Construction Industry Security of Payment Act 2002 (Vic), it becomes important to schedule the payment on time as limited time is available to prepare a payment schedule. After gaining knowledge on how the Building and Construction Industry Security of Payment Act works, what all steps are required to be taken to settles the payment is derived. I think that payment settling part is a delicate part and a separate department should be formed to handle the payments. After being a project manager, and having the relevant knowledge of this area, will give me the extra edge to even manage the finance part of the project. I can easily identify where the issues will arrive and how the payment claims should be settled. 

References

Masson, B. 2019. How to respond to a payment claim under security of payment in Victoria. Available [online] at: https://www.turtons.com/blog/how-to-respond-to-a-payment-claim-under-security-of-payment-in-victoria 

Pistalo, S. 2017. Liquidated damages in the contract on construction. Pravo - teorija i praksa. 

Reason, J. 2019. Human error: models and management.

Tesoriero. M. 2016.  What you need to know about building contracts. Available [online] at:  https://www.aussie.com.au/blog/need-know-building-contracts/

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