Construction Contracting : A Practical Guide to Company Management

1 THE CONSTRUCTION INDUSTRY 1.1 INTRODUCTION 1.2 THE CONSTRUCTION PROJECT 1.3 ECONOMIC IMPORTANCE 1.4 THE PEOPLE INVOLVED ON A CONSTRUCTION PROJECT 1.5 CONSTRUCTION CATEGORIES 1.6 PROJECT FINANCING 1.7 THE CONTRACT SYSTEM 1.8 PROJECT DELIVERY METHODS 1.9 TYPES OF CONSTRUCTION CONTRACTS 1.10 FORMS OF CONSTRUCTION CONTRACT AWARD 1.11 FORMS OF NEGOTIATED CONTRACTS 1.12 BASIC ELEMENTS OF AGREEMENT IN THE VARIOUS TYPES OF COST PLUS CONTRACTS 1.13 COMPETITIVE SEALED PROPOSALS 1.14 OTHER FORMS OF CONTRACTS 1.15 SMALL AND DISADVANTAGED BUSINESS ENTERPRISES 1.16 SEASONALITY IN CONSTRUCTION 1.17 LICENSING 1.18 LICENSE BONDS 1.19 BUILD1NG CODES 1.20  CONTRACTOR ORGANIZATIONS 1.21 MANAGEMENT PRACTICES IN CONSTRUCTION 1.22 BUSINESS FAILURES IN CONSTRUCTION 1.23 SUMMARY AND CONCLUSIONS 2 BUSINESS OWNERSHIP 2.1 INTRODUCTION 2.2 ALTERNATIVE FORMS 2.3 CONSTRUCTION CONTRACTING FIRMS 2.4 THE INDIVIDUAL PROPRIETORSHIP 2.5 THE GENERAL PARTNERSHIP 2.6 ESTABLISHING A PARTNERSHIP 2.7 LIABILITY OF A GENERAL PARTNER 2.8 DISSOLUTION OF A PARTNERSHIP 2.9 SUBPARTNERSHIP 2.10 THE LIMITED PARTNERSHIP 2.11 THE CORPORATION 2.12 THE FOREIGN CORPORATION 2.13 STOCKHOLDERS 2.14 CORPORATE DIRECTORS AND OFFICERS 2.15 THE S CORPORATION 2.16 EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) 2.17 LIMITED LIABILITY COMPANY (LLC) 2.18 THE JOINT VENTURE 2.19 SUMMARY AND CONCLUSIONS 3 COMPANY ORGANIZATION 3.1 INTRODUCTION 3.2 ORGANIZATION BASICS 3.3 GENERAL CONSIDERATIONS 3.4 PRINCIPLES OF ORGANIZATION 3.5 RESPONSIBILITY, AUTHORITY, AND DELEGATION 3.6 MAKING THE ORGANIZATION WORK 3.7 SUMMARY AND CONCLUSIONS 4 PROJECT DESIGN AND CONTRACT AND BID DOCUMENTS FOR A PROJECT 4.1 INTRODUCTION 4.2 THE ARCHITECT-ENGINEER 4.3 DESIGNERS’ PROFESSIONAL ASSOCIATIONS 4.4 SELECTION OF THE ARCHITECT-ENGINEER 4.5 SERVICES PROVIDED BY THE ARCHITECT-ENGINEER 4.6 FEE FOR DESIGN SERVICES 4.7 RESPONSIBILITY TO THE OWNER 4.8 LIABILITY TO THIRD PERSONS 4.9 STATUTES OF LIMITATIONS 4.10 CONTRACTOR INPUT INTO DESIGN 4.11 PROJECT DESCRIPTION—COMMUNICATING THE DESIGN 4.12 ANNOUNCING THE PROJECT TO CONTRACTORS 4.13 PROJECT MANUAL 4.14  BID DOCUMENTS 4.15  INSTRUCTIONS TO BIDDERS 4.16 CONTRACT DOCUMENTS 4.17 SUMMARY AND CONCLUSIONS 8 CONSTRUCTION INSURANCE 8.1 INTRODUCTION 8.2 RISK MANAGEMENT 8.3 CONSTRUCTION RISKS 8.4 THE INSURANCE POLICY 8.5 CONTRACT REQUIREMENTS 8.6 LEGAL REQUIREMENTS 8.7 ANALYSIS OF INSURABLE RISKS 8.8 CONSTRUCTION INSURANCE CHECKLIST 8.9 PROJECT PROPERTY INSURANCE 8.10 BUILDER’S RISK INSURANCE 8.11 ALL-RISK BUILDER’S RISK INSURANCE 8.12 NAMED-PERIL BUILDER’S RISK INSURANCE 8.13  BUILDER’S RISK POLICY PREMIUMS 8.14 PROVISION OF BUILDER’S RISK INSURANCE BY THE OWNER 8.15 SUBROGATION 8.16 TERMINATION OF BUILDER’S RISK INSURANCE 8.17 CONTRACTOR’S EQUIPMENT FLOATER POLICY 8.18 PROPERTY INSURANCE 8.19 CRIME INSURANCE 8.20 LIABILITY INSURANCE 8.21 COMMERCIAL GENERAL LIABILITY INSURANCE 8.22 BODILY INJURY AND PROPERTY DAMAGE LIABILITY INSURANCE 8.23 CONTRACTOR’S PROTECTIVE PUBLIC AND PROPERTY DAMAGE LIABILITY INSURANCE 8.24 COMPLETED-OPERATIONS LIABILITY INSURANCE 8.25 CONTRACTUAL LIABILITY INSURANCE 8.26 THIRD-PARTY BENEFICIARY CLAUSES 8.27 PERSONAL INJURY 8.28 EXCLUSIONS FROM COMMERCIAL GENERAL LIABILITY POLICY 8.29 PROPERTY DAMAGE LIABILITY EXCLUSIONS 8.30 AUTOMOBILE INSURANCE 8.31 PROFESSIONAL LIABILITY INSURANCE 8.32 UMBRELLA EXCESS LIABILITY INSURANCE 8.33 WRAP-UP INSURANCE 8.34 OWNER’S LIABILITY INSURANCE 8.35 SUBCONTRACTORS’ INSURANCE 8.36 GROUP INSURANCE PLANS 8.37 EMPLOYEE BENEFIT INSURANCE 8.38 CERTIFICATES OF INSURANCE 8.39 THE PRINCIPLES OF WORKERS’ COMPENSATION 8.40 WORKERS’ COMPENSATION LAWS 8.41 ADMINISTRATION OF WORKERS’ COMPENSATION LAWS 8.42 WORKERS’ COMPENSATION BENEFITS 8.43 ADDITIONAL PROVISIONS OF WORKERS’ COMPENSATION LAWS 8.44 WORKERS’ COMPENSATION INSURANCE 8.45 WORKERS’ COMPENSATION INSURANCE RATES 8.46 WORKERS’ COMPENSATION DEDUCTIBLE PLAN 8.47 WORKERS’ COMPENSATION SELF-INSURANCE 8.48 EMPLOYER’S LIABILITY INSURANCE 8.49 NONOCCUPATIONAL DISABILITY INSURANCE 8.50 UNEMPLOYMENT INSURANCE 8.51 INSURANCE CLAIMS 8.52 SOCIAL SECURITY 8.53 SUMMARY AND CONCLUSIONS 9 BUSINESS METHODS 9.1  INTRODUCTION 9.2  FINANCIAL RECORDS 9.3  ACCOUNTING METHODS 9.4  ACCOUNTING FOR LONG-TERM CONTRACTS 9.5  PERCENTAGE OF COMPLETION METHOD 9.6  PERCENTAGE OF COMPLETION-CAPITALIZED COST METHOD 9.7  COMPLETED CONTRACT METHOD 9.8  FINANCIAL STATEMENTS 9.9  THE INCOME STATEMENT 9.10 THE BALANCE SHEET 9.11 FINANCIAL RATIOS 9.12 SIGNIFICANCE OF RATIOS 9.13 CONSTRUCTION EQUIPMENT ACQUISITION 9.14 EQUIPMENT MANAGEMENT 9.15 EQUIPMENT DEPRECIATION 9.16 STRAIGHT-LINE DEPRECIATION 9.17 ACCELERATED DEPRECIATION 9.18 MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS) 9.19 PROCUREMENT 9.20 DISCOUNTS BY VENDORS AND SUPPLIERS 9.21 TITLE OF PURCHASES 9.22 A CONTRACTOR’S RIGHT CHECK ON PROJECT FINANCING 9.23 PAYMENT TO THE GENERAL CONTRACTOR 9.24 PAYMENT REQUESTS FOR LUMP-SUM CONTRACTS 9.25 PAYMENT REQUESTS FOR UNIT-PRICE CONTRACTS 9.26 PAYMENT REQUESTS FOR COST-PLUS CONTRACTS 9.27 FINAL PAYMENT 9.28 PAYMENTS TO SUBCONTRACTORS 9.29 DIRECT PAYMENT 9.30 BACKCHARGES 9.31 PAYMENTS TO MATERIAL SUPPLIERS 9.32 CASH FLOW 9.33 CASH FORECASTS 9.34 THE MECHANIC’S LIEN 9.35 RELEASE OF LIEN 9.36 ASSIGNMENT OF CONTRACTS 9.37 MARKETING 9.38 EMPLOYEE MOTIVATION 9.39 SUBSTANCE ABUSE PROGRAMS 9.40 JOBSITE CRIME 9.41 EMPLOYEE TRAINING PROGRAMS 9.42 SUMMARY AND CONCLUSIONS 10 PROJECT MANAGEMENT AND ADMINISTRATION 10.1 INTRODUCTION 10.2 PROJECT ORGANIZATION 10.3 THE PROJECT MANAGER 10.4 THE PROJECT SUPERINTENDENT 10.5 FIELD ENGINEER 10.6 OWNER PROJECT REPRESENTATIVE 10.7 JOBSITE COMPUTERS 10.8 ASPECTS OF PROJECT MANAGEMENT 10.9 FIELD PRODUCTIVITY 10.10 PROJECT ADMINISTRATION 10.11 PROJECT MEETINGS 10.12 SCHEDULE OF OWNER PAYMENTS 10.13 SHOP DRAWINGS 10.14 APPROVAL OF THE SHOP DRAWINGS 10.15 QUALITY CONTROL 10.16 TOTAL QUALITY MANAGEMENT 10.17 MATERIALS MANAGEMENT 10.18 EXPEDITING 10.19 DELIVERIES 10.20 RECEIVING 10.21 INSPECTION OF MATERIALS 10.22 SUBCONTRACTOR SCHEDULING 10.23 RECORD DRAWINGS 10.24 DISBURSEMENT CONTROLS 10.25 JOB RECORDS 10.26 THE DAILY JOB LOG 10.27 CLAIMS AND DISPUTES 10.28 CLAIMS IN THE CONSTRUCTION INDUSTRY 10.29 ALTERNATIVE DISPUTE RESOLUTION (ADR) 10.30 NATIONAL CONSTRUCTION DISPUTE RESOLUTION COMMITTEE (NCDRC) 10.31 ARBITRATION 10.32 ARBITRATION PROCEDURE 10.33 MEDIATION 10.34 MINI-TRIALS 10.35 DISPUTE REVIEW BOARDS 10.36 NEUTRAL EVALUATION 10.37 SETTLEMENT CONFERENCES 10.38 PARTNERING 10.39 LEAN CONSTRUCTION 10.40 SUMMARY AND CONCLUSIONS 11 PROJECT TIME MANAGEMENT 11.1 INTRODUCTION 11.2 THE CRITICAL PATH METHOD 11.3 GENERAL CONSIDERATIONS 11.4 PROJECT PLANNING 11.5 PRECEDENCE NOTATION 11.6 THE PRECEDENCE DIAGRAM 11.7 EXAMPLE PROBLEM 1 11.8 THE NETWORK FORMAT 11.9 PROJECT SCHEDULING 11.10 ACTIV1TY DURATIONS 11.11 TIME CONTINGENCY 11.12 EXAMPLE PROBLEM 2 11.13 NETWORK COMPUTATIONS 11.14 EARLY ACTIVITY TIMES 11.15 PROJECT DURATION 11.16 LATE ACTIVITY TIMES 11.17 TOTAL FLOAT 11.18 THE CRITICAL PATH 11.19 FREE FLOAT 11.20 LEAST-COST PROJECT SHORTENING 11.21 TIME-SCALED NETWORKS 11.22 SIGNIFICANCE OF FLOATS 11.23 THE EARLY-START SCHEDULE 11.24 BAR CHARTS 11.25 RESOURCE SCHEDULING 11.26 PROGRESS MONITORING 11.27 PROGRESS ANALYSIS 11.28 SCHEDULE UPDATING 11.29 FAST-TRACKING 11.30 COMPUTERS AND TIME MANAGEMENT 11.31 DELAY CLAIMS 11.32 SUMMARY AND CONCLUSIONS 12 PROJECT COST MANAGEMENT 12.1 INTRODUCTION 12.2 PROJECT COST CONTROL 12.3 DATA FOR ESTIMATING 12.4 ACCOUNTING CODES 12.5 JOB COST ACCOUNTS 12.6 MONTHLY COST REPORTS 12.7 PROJECT OVERHEAD 12.8 LABOR AND EQUIPMENT COSTS 12.9 COST ACCOUNTING 12.10 LABOR AND EQUIPMENT BUDGET 12.11 COST ACCOUNTING REPORTS 12.12 LABOR TIME CARDS 12.13 TIME CARD PREPARATION 12.14 MEASUREMENT OF WORK QUANTITIES 12.15 FORMS OF LABOR REPORTS 12.16 WEEKLY LABOR COST REPORTS 12.17 EQUIPMENT COST 12.18 EQUIPMENT TIME CARDS 12.19 EQUIPMENT COST REPORTS 12.20 OTHER EQUIPMENT CHARGES TO PROJECTS 12.21 COST INFORMATION AND FIELD SUPERVISORS 12.22 COST CONTROL 12.23 INFORMATION FOR ESTIMATING 12.24 COMPUTER APPLICATION 12.25 SUMMARY AND CONCLUSIONS 13 LABOR LAW 13.1 INTRODUCTION 13.2 HISTORY OF LAW OF LABOR RELATIONS 13.3 THE NORRIS-LAGUARDIA ACT 13.4 THE NATIONAL LABOR RELATIONS ACT 13.5 THE LABOR MANAGEMENT RELATIONS ACT 13.6 THE LABOR-MANAGEMENT REPORTING AND DISCLOSURE ACT 13.7 COVERAGE OF THE NATIONAL LABOR RELATIONS ACT 13.8 THE NATIONAL LABOR RELATIONS BOARD 13.9 REPRESENTATION ELECTIONS 13.10 EMPLOYER UNFAIR LABOR PRACTICES 13.11 UNION UNFAIR LABOR PRACTICES 13.12 CHARGES OF UNFAIR LABOR PRACTICES 13.13 REMEDIES 13.14 UNION-SHOP AGREEMENTS 13.15 PREHIRE AGREEMENTS 13.16 UNION HIRING HALLS 13.17 SECONDARY BOYCOTTS 13.18 COMMON SITUS PICKETING 13.19 SUBCONTRACTOR AGREEMENTS 13.20 PREFABRICATION CLAUSES 13.21 JURISDICTIONAL DISPUTES 13.22 NLRB JURISDICTIONAL SETTLEMENT 13.23 VOLUNTARY JURISDICTIONAL SETTLEMENT PLANS 13.24 PAYMENTS TO EMPLOYEE REPRESENTATIVES 13.25 POLITICAL CONTRIBUTIONS 13.26 THE CIVIL RIGHTS ACT OF 1964 13.27 EXECUTIVE ORDER 11246 13.28 THE AGE DISCRIMINATION IN EMPLOYMENT ACT 13.29 THE DAVIS-BACON ACT 13.30 DAVIS-BACON ADMINISTRATION 13.31 THE COPELAND ACT 13.32 THE FAIR LABOR STANDARDS ACT 13.33 THE CONTRACT WORK HOURS AND SAFETY STANDARDS ACT 13.34 THE HOBBS ACT 13.35 IMMIGRATION REFORM AND CONTROL ACT 13.36 THE NATIONAL APPRENTICESHIP ACT 13.37 THE DRUG-FREE WORKPLACE ACT 13.38 FAMILY AND MEDICAL LEAVE ACT 13.39 AMERICANS WITH DISABILITIES ACT (ADA) 13.40 ERISA 13.41 SUMMARY AND CONCLUSIONS 14 LABOR RELATIONS 14.1 THE CONSTRUCTION WORKER 14.2 EMPLOYMENT IN THE CONSTRUCTION INDUSTRY 14.3 EMPLOYEE BENEFITS 14.4 THE UNION CONTRACTOR 14.5 THE ROLE OF THE UNIONS 14.6 UNION HISTORY 14.7 CONSTRUCTION UNIONS 14.8 THE LOCAL UNION 14.9 LOCAL UNION AUTONOMY 14.10 UNION WORK RULES 14.11 THE BUSINESS AGENT 14.12 COLLECTIVE BARGAINING 14.13 PATTERNS OF BARGAINING 14.14 WITHDRAWAL FROM BARGAINING UNIT 14.15 THE BARGAINING PROCESS 14.16 LABOR AGREEMENTS 14.17 GEOGRAPHICAL COVERAGE OF AGREEMENTS 14.18 PROJECT AGREEMENTS 14.19 NATIONAL AGREEMENTS 14.20 THE FEDERAL MEDIATION AND CONCILIATION SERVICE 14.21 EMPLOYER LOCKOUTS 14.22 WAGES AND HOURS 14.23 ADMINISTRATION OF THE LABOR CONTRACT 14.24 DAMAGE SUITS 14.25 PREJOB CONFERENCES 14.26 THE MERIT-SHOP CONTRACTOR 14.27 SOURCES OF OPEN-SHOP LABOR 14.28 APPRENTICESHIP PROGRAMS 14.29 NONAPPRENTICESHIP TRAINING PROGRAMS 14.30 SUPERVISORY TRAINING 14.31 PRESENT CONSTRUCTION INDUSTRY STATUS 14.32 DUAL-SHOP OPERATION 14.33 UNION REACTION TO OPEN SHOP 14.34 SUMMARY AND CONCLUSIONS 15 PROJECT SAFETY 15.1 INTRODUCTION 15.2 THE COST OF CONSTRUCTION ACCIDENTS 15.3 SAFETY LEGISLATION 15.4 STATE SAFETY CODES 15.5 FEDERAL HEALTH AND SAFETY ACTS 15.6 THE OCCUPATIONAL SAFETY AND HEALTH ACT (OSHA) 15.7 SITE INSPECTIONS BY OSHA 15.8 PENALTIES UNDER OSHA 15.9 OSHA HAZARD COMMUNICATION STANDARD 15.10 MULTIEMPLOYER WORKSITES 15.11 CONTRACT SAFETY REQUIREMENTS 15.12 WORK INJURY AND ILLNESS RECORDING 15.13 WORK INJURY AND ILLNESS RATES 15.14 OSHA AND INDUSTRY TRADE ASSOCIATIONS, CONSTRUCTION COMPANIES, AND INDIVIDUAL WORKERS ARE MAKING A DIFFERENCE 15.15 ECONOMIC BENEFITS OF SAFETY 15.16 SAFETY SERVICES OF CONTRACTOR ASSOCIATIONS 15.17 THE ROLE OF MANAGEMENT IN SAFETY 15.18 THE COMPANY SAFETY PROGRAM 15.19 THE PROJECT SAFETY PLAN 15.20 OWNERS’ REQUIREMENTS REGARDING SAFETY POLICIES AND PLANS 15.21 THE FIELD SUPERVISOR 15.22 ACCIDENT RECORDS 15.23 PROTECTION OF THE PUBLIC 15.24 THE COST OF A SAFETY PROGRAM 15.25 SUMMARY AND CONCLUSIONS