Key Concepts

Key Concepts

Every elected leader engaged in public works must have a general understanding of the key legal elements that govern construction contracts. They should also have a working knowledge of the typical contract provisions that must be considered for inclusion in a public works construction contract.

Many public entities have developed their own "pet" construction documents (including unique General Conditions), as will be discussed later. They can develop as a slow process of accretion, where each new generation of project leaders and attorneys contribute a little bit of sand to an emerging jagged coastline of a prime contract. Unfortunately, the result can be more like a tangled mangrove swamp of provisions than a warm stretch of Malibu beach.

Furthermore, unless a contractor raises those troublesome contract issues during the bidding and addendum phase, there will be no adjustments of those clauses and the bidders can accept that language or decide not to bid the project. There is no negotiation of a project agreement after the project goes through lump sum bidding. Such negotiation would almost certainly be a reversible irregularity in a competitive environment, as it would favor the persuasive successful bidder over its straight forward competitors who took the contract at face value.

Construction contracts generally contain a bundle of various documents commonly referred to jointly as the "contract documents." These documents may consist of bidding documents, the owner-contractor agreement, general conditions, supplementary conditions and/or special conditions, drawings and technical specifications, standard specifications, reference specifications, addenda, and modifications. These individual documents cross-reference each other in order to form the contract.

The next few paragraphs briefly describe these contract documents.

1. Bidding Documents typically include an invitation to bid, instructions to the bidder (including an affidavit of non-collusion), and bid forms (the bidding process is discussed in detail in Chapter 12).
2. The Owner-Contractor Agreement consists of five elements, including the identity of the parties, description of the work to be performed, time for performance, contract price, and payment schedules.
3. The General Conditions provide additional scope and detail and expressly state the various responsibilities, rights, and duties of the parties. These conditions are usually standard provisions provided in all construction contracts and are not project specific. The Cal-Trans Standard Specifications for Public Works Construction (2005) and other standard contracts provide such general conditions.
4. Supplementary and/or Special Provisions are inserted for a variety of reasons, usually to provide for special circumstances or conditions unique to a particular project.
5. Drawings represent the actual layout, dimensions, and construction details of the project. They are utilized by the contractor to determine the quantity of material required for the project, as well as the cost of construction. More importantly, they are used by the contractor to construct the project and usually include architectural, structural, mechanical, and electrical drawings. The architect or engineer is responsible for preparing drawings or plans for the entire project.
6. Specifications are documents that supplement the drawings, providing detailed descriptions of various portions of the project. Technical specifications within the owner-contractor agreements provide further description of the engineering aspects of the project, as well as testing. Standard specifications include boilerplate written descriptions of steel, concrete, general conditions, materials, and so forth, which are common to almost every job. Reference specifications refer to accepted third-party specifications that are published by technical and engineering societies, public agencies, and other parties involved in numerous projects nationally. The engineer is typically responsible for preparing these specifications to conform to the project drawings.
7. Addenda are included as changes to the Special Provisions and are generally issued prior to the final bidding of the general contractor scope of work.
8. Modifications are any substantial written changes made after the execution of the owner-contractor agreement.

Several business terms must be kept in mind when drafting or choosing which provisions to include within a contract. A fixed-price or lump-sum contract anticipates a contractor agreeing to complete a project for a fixed price according to the contract documents. Unit-price contracts involve a fixed price per unit of material or quantity of work to be performed. Cost-plus or force-account contracts provide reimbursement for all costs of construction, plus a percentage amount to compensate for overhead and profit.

Public works contracts are interpreted in the same manner and under the same rules as are private contracts. More important, however, is the application of the parol evidence rule, which provides that if a written contract is a complete and final expression of the parties (complete integration), any contrary or inconsistent references, specifications or conflicting prior agreements or statements will be inadmissible to vary the terms of the written agreement.