Page 234 - Urban Construction Project Management

Contracts

9 (Tough negotiations.)

WHAT IS A CONTRACT?

A contract binds two parties together with each party having certain obligations to the
other. The construction manager/general contractor (CM/GC) has an obligation to com-
plete a project within a certain period, with good quality, and at a definitive cost. The
owner has the obligation to provide technical documents, the site, permits (in certain
cases), adjacent property approvals, and to pay the contractor in an expeditious manner
when invoices are submitted (on a regular basis). The objective of the owner when con-
structing a facility is to obtain quality workmanship at the lowest possible price. The
secondary objective is to have the facility completed within a satisfactory period.

Many forms of contracts are used to make sure that the owner’s objectives are achieved.
The American Institute of Architects’ (AIA) documents are used extensively through-
out the construction industry. Other types of contract forms are available from trade
organizations such as the Associated General Contractors of America and the Contractors
Association of America. Whatever forms are used, it is important to understand that
they are only a starting point and the CM/GC’s lawyers must review them for potential
risks and applicability to the project at hand. In addition to the base contract, two other
sections of the contract form the total contract. These are the general conditions and
supplemental conditions. They are the real “teeth” of the contract.

The project manager (PM) must also review and understand all construction contracts
and the associated general conditions and supplemental conditions. Many sections of
the contract have a profound impact on the direction and completion of a project. In
most cases, the contract is not looked at again. When a contract is initially read, not all
of the elements are understood. Therefore, it behooves all PMs to read the contract sev-
eral times. However, when a problem arises, the first document to come out is the con-
tract (see Exhibit 9-1, contract flowchart).

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