A
Allowance
Definition: in construction, an allowance refers to a specific amount of money included in the budget for an item or work scope that has not been finalized or specified in detail. It serves as a temporary placeholder to accommodate future decisions or selections.
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As similar as it may sound, there is a distinct difference between Allowance and Contingency:
an Allowance is typically an estimated provision for a known but yet-to-be-determined cost
a Contingency is a provision for unforeseen events or risks that may occur during the course of a project.
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Examples of Allowance Usage:
Fixture Allowance: allocating a budget for light fixtures before the specific fixtures have been selected or their costs determined.
Finish Allowance: setting aside funds for interior finishes (e.g., flooring, paint, or cabinetry) when the exact selections are yet to be made.
Alternative Dispute Resolution (ADR)
Definition: refers to a set of methods and processes used to resolve conflicts and disputes outside of traditional courtroom litigation. ADR provides parties involved in disputes, such as those in construction contracts, with effective and efficient alternatives to resolve issues, often saving time and costs.
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In the construction industry, where disputes can arise due to project delays, design changes, or payment issues, ADR methods like mediation, arbitration, and negotiation offer constructive ways to find resolutions. These processes encourage open communication, allowing parties to collaboratively address concerns and reach mutually acceptable outcome
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ADR promotes faster dispute resolution, reduces legal expenses, and helps maintain working relationships among project stakeholders. It empowers parties to have more control over the resolution process and often results in creative solutions that satisfy both sides.
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By incorporating ADR into construction contracts, project owners, contractors, and subcontractors can proactively address disputes, fostering a smoother construction process and successful project outcomes.
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Bid Documents
Definition: refer to a comprehensive set of documents provided to potential bidders by the project owner or client. These documents outline the project's requirements, specifications, drawings, and other essential information necessary for contractors and subcontractors to prepare accurate bids for a construction project.
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In the construction of a new office building, the bid documents would include architectural drawings, engineering specifications, project schedules, material requirements, and any special instructions related to the project. These documents allow contractors to understand the scope of work and submit competitive bids based on the project's requirements.
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Bid documents are distributed to interested contractors during the bidding phase of a construction project. Contractors review these documents to determine the project's scope, technical requirements, and other factors that impact their bid pricing and proposals.
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When reviewing bid documents, it's crucial to pay careful attention to every detail and seek clarification if anything is unclear. Ensure that your bid accurately reflects the requirements outlined in the documents. Thoroughly understanding the scope of work and the project's objectives will enable you to submit a competitive and accurate bid that aligns with the client's expectations.
Bidding Requirements
Definition: a crucial component of the construction procurement process. These documents furnish essential information and lay down the procedures and conditions that contractors, subcontractors, and suppliers must follow when submitting bids for a construction project.
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Invitation to bid: a formal announcement or advertisement that informs potential bidders about the project's existence and the opportunity to bid on it
Instructions to Bidders: detailed guidelines outlining how bids should be prepared, submitted, and what documentation is required
Invitation to Bid: the official document inviting interested parties to submit bids for a specific project, outlining the scope of work, project details, and bid submission deadlines
Sample Forms: pre-defined templates and forms that bidders can use to prepare and submit their bids in a standardized format
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Bidding requirements ensure a fair, transparent, and competitive bidding process. They serve as a vital communication tool between project owners and bidders, helping to minimize misunderstandings and ensure that bids are consistent and compliant with project specifications.
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Understanding and adhering to bidding requirements is essential for contractors and suppliers aiming to participate in the construction industry. It ensures that bids are submitted correctly and that all parties operate on a level playing field, promoting integrity and efficiency in the procurement process.
Budget
Definition: refers to the financial plan that outlines the estimated costs for a project, including expenses for materials, labor, equipment, and other associated items, agreed upon by all the parties for the project. It serves as a guideline to ensure the project remains within the allocated funds.
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When drafting a budget for your project:
consider potential contingencies and unforeseen expenses when formulating the budget to mitigate financial risks;
review + analyze the budget to identify areas where cost savings can be achieved without compromising quality or safety;
communicate any significant budget changes or challenges to all parties involved to maintain transparency and manage expectations.
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A well-planned and diligently managed budget is essential for the success of construction projects.
Building Code
Definition: also known as building control or building regulations, comprises rules specifying construction standards for buildings and non-building structures. Compliance with these codes is mandatory to obtain planning permission, usually granted by local councils.
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Building codes primarily serve to protect public health, safety, and welfare related to construction and occupancy. For instance, codes in various countries may require engineers to consider factors like soil liquefaction while designing new buildings.
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These codes are essential for architects, engineers, constructors, and regulators. Additionally, they are utilized by safety inspectors, environmental scientists, real estate developers, subcontractors, and more. Codes govern the design and construction of structures where they are adopted into law.
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Building codes have historical origins, and today, major codes include the International Building Code or International Residential Code in the USA, and national model codes published by the National Research Council of Canada. In the United Kingdom, compliance with Building Regulations is monitored by building control bodies.
Building Permit
Definition: an official document issued by a local government or authority, granting legal permission to start construction or renovation on a specific property. It indicates that the proposed project complies with local building codes, zoning regulations, and safety standards.
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Building permits are essential in construction projects, ensuring that the work meets safety standards and is in line with local regulations. They are required for various activities, including new constructions, renovations, alterations, and even demolitions. The permit process typically involves plan reviews, inspections, and approvals.
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Building permits safeguard both property owners and the community. They guarantee that constructions are structurally sound and comply with safety codes. Additionally, permits help maintain property values, ensure proper land use, and contribute to the overall safety and aesthetics of neighborhoods. Securing a building permit is a crucial step in any construction endeavor.
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CCDC-5A + CCDC-5B Contracts
Definition: contracts that belong to the Canadian Construction Documents Committee (CCDC) suite. CCDC-5A involves advisory roles for construction managers during project design and construction. CCDC-5B encompasses comprehensive management, including direct work execution.
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CCDC-5A is apt when owners seek construction manager advisory services, ensuring efficient project coordination without self-performance. CCDC-5B is ideal for projects where construction managers handle both management and trade contracting, offering streamlined control from planning to execution.
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These contracts help establish clear roles and expectations among all parties, contributing to smoother project progress and successful outcomes in the dynamic field of construction management and administration.
Change Directive vs. Change Order
Change Directive: a written order issued by the architect or engineer, prior to agreement on adjustment of contract sum or time, authorizing a change in the work not otherwise addressed by the contract documents.
Change Order: a formal agreement between the owner and contractor that occurs after negotiations and requires mutual consent.
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A Change Directive is an order issued by the architect or engineer that authorizes immediate changes before a formal agreement is reached. It allows work to proceed promptly, addressing urgent modifications or unforeseen circumstances. Change Directives serve as interim measures while negotiations for a formal Change Order are ongoing.
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During construction, a client decides to add a floor—Change Order is needed to outline the new work, cost, and completion date;
A structural engineer identifies an issue in the design phase—Change Order to modify the foundation system.
An interior designer replaces specified flooring with a different material—Change Order with the new specifications.
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While both are related to modifications, there is a substantial difference. Understanding these distinctions is essential for effective contract management in the construction industry.
Ensure clear and concise communication by documenting all changes and obtaining written approval. This minimizes disputes and promotes transparency. Utilizing a Contract Administration Software such as #FIVE streamlines the Change Order process, allowing for efficient tracking and communication of changes throughout the project.
Commissioning
Definition: in the construction realm it signifies the meticulous process of ensuring that every aspect of a building, from its electrical systems to HVAC units, functions harmoniously and efficiently. It involves rigorous inspections, tests, and verifications, guaranteeing that the constructed structure aligns precisely with the owner’s operational requirements and specifications.
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Commissioning is the cornerstone of a seamless transition from construction to occupancy. By meticulously testing and fine-tuning all building components, commissioning safeguards against potential issues, enhancing energy efficiency, and ensuring the longevity of systems. It prioritizes occupant comfort and safety while optimizing operational costs. Moreover, commissioning contributes significantly to environmental sustainability, minimizing resource wastage and reducing the carbon footprint of buildings.
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The commissioning process starts during the design phase, establishing detailed criteria, and continues through installation, testing, training, and ongoing monitoring. Rigorous documentation and systematic checks characterize this methodical approach, ensuring that the building operates at peak performance throughout its lifecycle.
Construction Cost
Definition: the actual cost of all elements of the Project, including labour, materials, equipment, permits, overhead expenses, and applicable taxes; but, excluding the applicable value added taxes, whether recoverable or not. It refers to the total expenses incurred in the process of building or renovating a structure, encompassing both direct and indirect costs.
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Labour: wages and salaries paid to workers involved in the construction process.
Materials: physical components required for construction, such as concrete, steel, wood, and electrical wiring.
Equipment: machinery and tools utilized for various construction activities.
Permits: legal authorizations and licenses necessary to commence and complete construction projects.
Overhead Expenses: indirect costs like insurance, utilities, and administrative charges.
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Construction cost is a vital consideration in project planning and budgeting, influencing the feasibility and profitability of a construction endeavour. Remember to account for construction costs meticulously, including applicable taxes, to ensure accurate financial planning and successful project execution.
Construction Insurance
Definition: also known as Builder’s Risk insurance, it is a crucial financial safety net in the construction industry. It offers protection against unforeseen circumstances that could lead to financial losses during a construction project. Key parties involved in construction insurance include the insurance company, owner, contractor, and named insured parties.
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Construction insurance provides peace of mind by covering various risks, including accidents, natural disasters, and theft. It ensures that financial losses are compensated, allowing projects to continue and parties involved to recover their losses.
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Contract administrators and consultants should collaborate with insurance specialists to review project-specific insurance requirements. The insurance landscape is ever-evolving, and staying informed about policy changes is essential to navigate the complexities of construction insurance effectively.
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Contractors Comprehensive General Liability Insurance:
Coverage for contractors against claims related to bodily injury or property damage that may occur during construction
Boiler and Pressure Vessel Insurance Policy:
Protection against damages or accidents involving boilers and pressure vessels commonly used in industrial construction
Property Insurance Policy:
Coverage for damage or loss to the physical structure of the construction project, including materials, equipment, and buildings
Wrap-Up Insurance Policy:
A policy that provides comprehensive coverage for the entire construction project, often used on large-scale projects where multiple contractors and subcontractors are involved
Owner's Total Insurance Policy:Insurance held by the project owner to protect their interests and investments in the construction project
These types of construction insurance policies serve to mitigate various risks and ensure financial protection for all parties involved in construction projects.
CCDC 21: For further insights into construction insurance, the CCDC 21 document provides valuable information and guidelines
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Balancing the types and amounts of insurance with the contract value is essential to provide reasonable protection for a project. Over-insurance can strain budgets, so a thoughtful assessment is necessary.
Construction insurance safeguards projects and stakeholders, offering a safety net in an industry marked by continuous change and unforeseen challenges.
Contigency
Definition: refers to budgeted funds set aside for unforeseen events or risks during a project, allowing flexibility and mitigating potential disruptions. It is an amount of money, included in the budget for building construction, without any pre-determined specific purpose.
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unexpected Site Conditions (e.g., hazardous materials, unstable soil);
weather-related Delays or Damages;
Design Changes or Errors;
Permitting and Regulatory Issues;
Material Price fluctuations.
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When it comes to setting aside contingency funds, it's always better to be safe than sorry. Unforeseen events can pop up out of nowhere, and having that extra cash cushion can save you from major headaches and delays.