ASTU

EGETA DERESE

FAYERA ABERA

FIKADU FEYISA
The construction company org chart is a graphical depiction of the roles and structure
of the organization. Using an org chart, staffs and stakeholders can clearly recognize the
operational relationships, so that; how do the company work.

Generally, a construction company contains basic function units including: HR,

Purchasing, Project, Engineering, Financial, and Marketing department
Below are specific roles and responsibilities of each department:

The financial department is responsible for management of the company’s cash

flow and ensuring there are sufficient funds available to meet the day to day payments.

The H&R department is responsible for staff recruitment and training, record keeping,
compensation and benefits, insurance, and employee relations
 Purchasing department’s main role is purchasing supplies and materials used in
the projects and company daily needs. They need to compare among different suppliers
and finding the items with correct prices and qualities.

Project department is responsible for scheduling and managing for each project.
The project manager needs to decide the budget, assign employees and their duties to
complete the job, oversee the safety of workers. They need to make sure the
construction work can be well completed according to the contract.

In general, the engineering department is responsible for the planning of the

construction project. This includes conducting surveys, engaging in research, analyzing
results, planning the construction and supporting all technical issues during the project.

The marketing department is responsible for market research, marketing strategy,

sales, advertising, promotion, pricing, product development, and public relations
activities.
Open tendering is the main tendering procedures employed by both the government and
private sector. The client advertises the tender offer in the local newspaper. Giving
detail and key information about the proposed works and inviting interested contractor
to tender. In the legal sense such tender notices constitute invitation to treat, a mere
request by the employer for suitable contractor to submit their bids or offers.
▪ If the pre-requisite to tendering on the form of possession of the necessary registration
has been identified in the tender notice, then the advertisement is directed to only that
particular class of the public having the said qualifications. In order to reduce number
of enquirers, earnest money is deposited (for private project). Until the receipt of a bone
fide tender selected then it will be returned. Although price is very important in the
decision on which tender or bid to accept, it is not the only factor taken into account.
Client does not bind to accept the lowest or any offer.

◾ It allows any interested contractor to tender. Therefore, it gives opportunity for an

unknown contractor to compete for the work.

◾ The tender list can be long as too many contractors tendering for one job.

◾ Allowing the tender list to be made without bias. Client will obtain the bargain
possible. No favoritism in selecting contractors.

◾ Uneconomic use of source.

◾ Ensuring good competition not obliged to accept any offers.

◾ Public accountability may be questioned if the lowest offer is not accepted.

◾ Traditional method of tendering, familiar to all sector of the engineering and

construction industry.

◾ Does not attract reputable and established contractor unless they are forced to, due
to lack of work.
 Selective tendering is the one alternative developed to address the limitations of
the open tendering procedure. In this method, a short list of contractors is drawn up
and they are invited to submit tenders.

The purpose of the elective tendering is to improve the quality of the bids
received, to ensure that contractors with the necessary experience and competence are
given the opportunity to submit the necessary bids, due to urgency work involved, for
specific reasons of the employer, e.g. security reasons in government projects, Etc.
and to make the tendering procedure more manageable and less a burden on the parties
involved.

Such list may be prepared through recommendation from the Client’s professional
adviser whom have knowledge of the Contractors undertaking the work in the past or
advertisement through the newspaper (pre-qualification).

◾ Only the competent contractors were invited to tender, then the lowest can be
accepted.

◾ Reduces the availability of work for other contractors especially new contractors.

◾ It reduced the cost of tendering (economic use of resources, reduced tender

documentation, shorter tender periods, better management of the tender process,
etc.)

◾ Tender Price may invariably higher than would have been in open tendering.

◾ Greater chance of collusion.

◾ Tendering period longer because it involved two distinct stages.

◾ Favoritism’s may occur in the short listing.

A problem with both open and selective tendering is that a contractor’s circumstances can change after he has
submitted his tender. He can make losses on other contracts which affect his financial stability; or may be so successful
at tendering that he does not have enough skilled staff or men to deal with all the work he wins. Neither method of
tendering nor any other means of procuring works can therefore guarantee avoidance of troubles.
Negotiation tendering is extensively used in the engineering and construction industry
commencing from tendering till dispute resolutions, i.e. under the styles of pre-contract
negotiations and post contract negotiations. Usually with single contractor but may be
up to three contractors.
Negotiation process involves:

◾ Identification by the employer of a suitable contractor to negotiate with.

◾ The contractor can be selected either from the employer’s own list of preferences or on the
advice of the professional team.

◾ The contractor being apprised of the work scope.

The selected contractor is issued with details such as the scope of work involved, relevant drawings,
design and /or information to enable him to appreciate the extents of obligations and the employer’s
actual needs. Some employers prepare and issue to the contractor proper tender documents inclusive of
a nominated bill of quantities to assist contractor in pricing the works for the forthcoming
negotiations.

Negotiations can be applied to the following:

◾ In Partnering type of contracts under the so-called win-win formula.

◾ Where the employer has a long-term business relationship with the contractor.

◾ In situations where the parties are in a relationship of holding and subsidiary

companies.

Where the contractor is involved in the financing of the project.

◾ In situations where the employer finds it advantages to employ the same contractor to
continue an initial or existing contract for the new works

◾ Where there is a pressing need to have a very early start of work on the site and to
complete the works on a fast tract basis.

◾ In special circumstances e.g. Security reasons, emergencies etc where it is expedient

to secure the services of a particular contractor only.

◾ Where there is only a single contractor who is the only one available or with ether the
special skill or resources to carry out the particular works.

◾ The employer’s resources are either limited or constrained thereby making the use of
the other tendering impractical.
 Selection of suitable contractor

◾ This involves the selection of a suitable contractor and the establishment of a level of
pricing for subsequent negotiations.

◾ The objective is to select suitable contractor as early as possible is to work together

with the professional team and to establish a level of pricing for subsequent negotiation.

◾ The criteria for short listing is normally confined to items such as technical and financial
capability, experience in similar works and extent of resources (manpower, plant and
equipment).

◾ The pricing document should be flexible enough to cater for adjustment of price
fluctuation for the period between two stages and the pricing of the second stage.

◾ In selecting a suitable candidate, a basis for pricing the subsequent second stage
should be established accordingly.

◾ Only reputable contractor is invited for negotiation.

◾ The cost work is likely higher than competitive tender.

◾ The Contractor can contribute his expertise during design stage.

◾ Reduces the availability of work for other contractors.

◾ Early Commencement of work on site. It shortens the period involved in appointing the
contractor.
 The construction industry impacts all towns, cities, provinces and states.
Although issues may vary from jurisdiction to jurisdiction, similar stakeholders are
involved throughout the construction process in varying places. Stakeholder relationship
management in the construction industry involves understanding the role of each
stakeholder and how different entities can work together on behalf of industry and their
clients.

CONTRACTORS

The contractors are essentially project managers. They direct the building
process from initial planning to final approval. A contractor may have its own staff,
consisting of skilled tradespeople, or it may hire sub-contractors. Contractors supervise
the project timeline, manage the budget and work with other stakeholders, such as
regulatory bodies, to ensure the completed building meets all code requirements.

CLIENTS

Clients are the eventual owners of the building and typical funding agent of the
project. However, some real estate developers fund the development of buildings and
then sell them; they may only hold the title of owner while the project is under
development. The client in a real estate project ranges from a young family building its
first home to major real estate and commercial builders developing malls, office towers
and condos. Clients direct the style, content and overall look and feel of the building in
conjunction with the budget, timeline and available resources.

GOVERNMENT

Government and industry are other stakeholders. Varying levels of government

are stakeholders in construction. Local government approves permits and gives the okay
for new developments. State and federal government bodies set standards for fire,
safety and other residential and commercial building codes.

UNIONS

Unionized labour may also play a role in construction projects. Some skilled
trades' contractors and sub-contracted employees may be unionized workers; the
contractor will work in consultation with the union and ensure project human resources
are managed in accordance with the policies and processes of the union.
 When a party files a suit claiming a breach of contract, the first question the judge
must answer is whether a contract existed between the parties. The complaining party must
prove four elements to show that a contract existed:

• the fundamental elements of contract.

• Capacity of the contracting parties;
• Consent of the contracting parties;
• Object of the contract; and
• Form of contract, if any;

Competence to enter in to a legally binding agreement.

Legal capacity is of two types.

Personal (Own)capacity; and

Representative (Agent)capacity;

• is a declared will of the individual to enter in to contract?

• It is the willingness of the parties to enter in to a legally binding relation.
• Consent of the intended contracting parties decomposes in to:-
• Offer; and
• Acceptance;
OFFER

One of the parties made a promise to do or refrain from doing some specified
action in the future.

ACCEPTANCE

- The offer was accepted unambiguously. Acceptance may be expressed through words,
deeds or performance as called for in the contract. Generally, the acceptance must
mirror the terms of the offer. If not, the acceptance is viewed as a rejection and
counteroffer.

If the contract involves a sale of goods (i.e. items that are movable) between merchants,
then the acceptance does not have to mirror the terms of the offer for a valid contract
to exist, unless:

✓ the terms of the acceptance significantly alter the original contract; or

✓ the offeror objects within a reasonable time.

• are the very obligations of the contracting parties?

• The possible objects, i.e. the obligations of the contracting parties, of contract
are: -
• obligation to do (perform);
• obligation not to do; or
• obligation to deliver;

• mean types of contract

• also mean the making of the contract orally or in writing.
• If the contract shall be made in writing, there are two possibilities:
• Preparing fully tailor-made contract to the project at hand;
(contract of consultation) or
• Using standard conditions of contract suitable for the project at
hand; (contract of adhesion)
The tender documents form the basis of the contractor’s offer to construct the works.

The tender documents are the means by which the employer’s design and/or works
requirements are communicated to the tendering contractors. These inform the
contractor of the scope and detail of the project, the conditions under which the work
will be executed, and they identify the rights and obligations of the various participants
under the proposed contract.

The tender documents enable contractors to price the works requirements and
submit an offer (bid) which, if accepted by the employer becomes a binding contract.
Some of the tender documents will, in turn, become contract documents. Many, if not
most, of the financial problems in building originate in inadequate or unclear tender
documents, culminating in disputes between employers and builders over what is
included in the price for the work.

It is important therefore, that quantity surveyors have a clear understanding of the

nature and purpose of the various documents used for tendering purposes.

It's important for parties entering into any significant economic transaction to
have written contracts. This is especially true for construction projects which are, by
their nature, complicated. A contract on a construction project sets forth the parties'
obligations to each other and determines how risks will be shared or divided on
the project.

A construction contract does not have to be reduced to written form for it to

exist or operate. Once two parties agree to have construction work performed and the
builder commences the work, there is a construction contract that exists, regardless of
whether the agreement has been reduced to writing and signed by both parties.
The key distinction between a contract that is in writing and one that is not is what
terms control or define the parties' agreement.
 In the case of a well-written contract, the written terms carefully and clearly
define the parties' agreement, their expectations, and their respective risks and
obligations. With a mere oral contract, there are no written terms and the terms that
control are defined by the parties' oral discussions or negotiation correspondence (and,
in the case of a dispute, the parties will invariably not agree on what those discussions
were), the course of performance of the contract (i.e., how have the parties performed
the project work prior to a dispute), and the limited default rights applicable by
operation of law.

One of the biggest problems encountered with non-written contracts is that each
party's respective memory of the agreement changes over time, especially if a dispute
arises. Similarly, people are sometimes simply dishonest about the terms of the
agreement when a dispute arises, large sums of money are at stake, and a recollection
different from (or not entirely consistent with) "the truth" will improve their position.
These problems can be mostly avoided with a written contract.

There are many additional benefits to having a written contract for a construction
project. Even if the parties "trust" each other, a written contract provides a clear road
map at the onset of the project of how the parties will proceed to carry out the work.
This helps to ensure that the project will run smoothly and diminishes the risk of
potentially fatal problems. Absent this written road map, each party may have certain
assumptions about what the agreement is or how the other will behave in a
certain situation. Those assumptions are often incorrect and can prove fatal to a
project.
Written contracts also help to guide—or even force—the parties to comply with
reasonable business procedures since those procedures will be specifically spelled out
in a well-written contract and become requirements of each party. This is referred to as
the "channeling function."

Another application of the channeling function is that a well-written construction

contract forces the parties to consider and agree on issues that they otherwise might
not even contemplate at the beginning of a project but that are commonly encountered
in the particular type of project and could very well become major issues during the
course of performance.

Finally, if the parties do have a dispute, particularly if that dispute ends up in

litigation, the more terms that have been reduced to a clear written statement the
fewer terms will be genuinely in dispute. This leads to a more efficient, or at least less
costly, resolution of the dispute since there will be fewer issues to legitimately fight
over.
There are some important points to consider before your company decides to tender
for building work.

OPPORTUNITY:

What is your current work load? How long before you run out of work? Do you have or
can access the appropriate human and other resources?

COMPETITION:

Who else is tendering? How desperate are you to secure the work ‘as the lowest
tenderer’ as opposed to being ‘the best tenderer’? If you are the lowest tenderer,
could you lose money and consequently deliver a job of poor quality leading to early
termination and a dispute?

TENDER DOCUMENTS:

Are your tender documents properly compiled to quote for the project? Is the
construction information complete?

BUILDING CONTRACT:

If there are any deviations from the standard JBCC building contract, are these listed in
the contract data or the Preliminary Bill of Quantities? Are there any unusual payment
conditions, or unusual guarantees or insurances called for? Will you have to work with as
yet unspecified nominated subcontractors and direct contractors?

SITE:

Have you inspected the site? If so, do the drawings and the description provided make
sense to you? Is there access to site, place for site huts, equipment and material
storage? Do you have to employ local staff and labour with unique payment conditions
and whose skills may be suspect?
EXISTING/ADJOINING BUILDINGS

If this is an existing building, has a professional engineer provided input regarding the
method of construction, precautions to be taken, etc?

RESTRICTIONS:

Are there building restrictions such as limited working hours, noise and dust limitations
that may influence the method and programming of your work? Will you have to complete
the excavations and foundations during the rainy season?

COMPLETION:

Does the work have to be completed in sections or as a whole? Are the intended dates
for practical completion realistic? Are the specified materials and goods readily
available?

RISKS:

Do you know the client – and have you had any ‘bad’ experience with this client? Have
you worked with the project consultants before?

Perhaps the most important point to consider before tendering is if awarded the tender,
would you be able to complete the project on time to the specified standard – and make
a fair profit to remain in business.

“To bid, or not to bid, that is the question.” It isn’t exactly Shakespeare, but the
decision to bid on a project shouldn’t be taken lightly. You invest a great deal of time
and resources into putting together a bid, so it’s important to make sure you are
carefully identifying the right projects to go after. One way to do this is by conducting a
thorough bid/no-bid analysis that meets your company’s goals and is in line with your
long-term strategy.

In order to make the bid/no-bid decision, there are a number of factors to consider in
order to make an objective, rather than subjective, decision.
Profitability

The bottom line is if you can’t make a profit on a project, you have no business bidding
on it in the first place. Make sure you have an accurate and comprehensive account of
your annual labour and equipment costs so you can correctly estimate your job costs.
When calculating labour costs, be sure to include taxes, insurance, workers’ comp,
vacation pay, tools and equipment and any and all additional benefits you provide to your
employees.

Once you determine what it will cost you to complete the project, you need to consider
other variables like location, contract requirement, planned method of construction, etc.
and determine if the job will be profitable should you submit the winning bid.

Capability

Okay, now that you’ve determined that you can make some money on the project, you
need to determine if your company is capable of doing the work. Review your current
backlog of upcoming projects to make sure you can provide the manpower, equipment,
staff and other resources to commit to the project when construction is expected to
commence and complete it within the required timeline.

You also need to ensure your company is financially capable of completing the project,
meaning you have the bonding capacity and adequate cash flow to perform the work
without jeopardizing any of your other obligations. There is such a thing as having too
much work. Know your limits so you don’t extend beyond what you are capable of
performing.

Historical Analysis

In order to submit better bids and win more work, you should keep records on all your
bids, both the successful ones and the ones you didn’t win. It’s important to have a
clear understanding of what caused you to lost out on a bid whether it was a lack of
experience or if you simply weren’t low enough on price. Don’t be afraid to ask the
client for feedback after the bidding process is complete.

You should also take a look at your performance on the projects you did win and
complete. Did you underperform or were you able to successfully manage the project or
identify areas to improve productivity to complete the project under budget? By
analysing historical data, you can better identify which bids you should be going after.

Long-term Strategy

Consider whether or not the project you are looking to bid on fits in with the long-term
strategy and goals of your company. Are you looking to maintain your current level or
are you trying to grow your business? Are you looking to expand into new geographic
locations or new markets? Maybe you want to start tackling more private work or you
want to start taking on larger projects like hotels or hospitals.

Regardless of what your company’s long-term strategy is, make sure you are identifying
and going after projects that align with those goals.

Risk Assessment

Before deciding to bid a project, you should carefully identify all the potential risks that
could arise on the project. Review the bidding documents, plans and specifications for
the project and rely on historical data from similar projects you’ve completed to identify
risks. Common risks include incomplete construction documents, unknown site
conditions, accelerated timelines, safety concerns, etc.

Prioritize the risks, taking into account how much time, money and work each risk will
require to manage effectively. If you’ve identified a large number of high impacts, high
probability risks it might be time to walk away and move on to your next opportunity.

Other factors to consider when making your bid/no-bid decision include project location,
duration, size and scope, competition, client and designer. Once you’ve determined
which factors and criteria are most important to your company you need to create a
grading matrix and a threshold score for making the decision to bid or not. By taking a
data-driven approach, you will be able to make smart, informed decision on what
projects to pursue in the future.
The owner-contractor agreement

• stipulates contract conditions—cost of construction, project schedule, and

scope of the work—between the owner and the contractor.

The general conditions to the contract

• set forth the rights, responsibilities, and relationships of the owner, contractor,
and architect.
• also define procedural requirements that will apply throughout the construction
period.
• These include provisions for payments, modifications to the contract, insurance,
and correction of defective work.

supplementary conditions to the contract

• provide project-specific modifications to the general conditions.

• supplementary conditions are customized to meet the needs of each project,

Specification

• identify, in narrative form, the qualitative, performance, and installation

requirements for products, materials, and workmanship, as well as the
administrative procedures that govern each trade.

Contract Drawing

• are the graphic illustration of the project. They show the size, form, and
representation of materials and systems, and the relationships between them.
Detail drawings

A Detailed cost estimate of the project can be prepared during this stage

 Determine method of Construction

 Preparation of Drawing Specifications
 Decide Project Cost from drawing & specifications (cost break down)
 Develop project summary (sub and supper structure)

Addenda

• The documents may need to be modified during the procurement period. These
modifications are issued as addenda.