1.There are six major options under NEC ECC and for every option the respective contractor of a construction project, there could be various risks either high or low (Baily 2017). The first and these significant options are lump sum priced contract with activity schedule, re-measurement priced contract with bill of quantities, target priced contract with activity schedule, target price contract with bill of quantities, cost reimbursable contract and management contract. Hence, it is possible to have target price contract under the options of NEC ECC (Masterman and Masterman 2013). There are two options of this particular aspect. They are as follows:
i) Target Price Contract with Activity Schedule: In this particular option, the contractor negotiates or tenders a target price with the help of activity schedule. Every activity is being priced as the lump sum and a specific fee is tendered as the percentage for the direct work of contractor and sub-contractor work (Nojavan et al. 2015). The starting target price can be referred to as the sum of the various activity prices as well as fees incurred.
ii) Target Price Contract with Bill of Quantities: The second option under NEC ECC for the possibility of having target price contract is with BOQ or bill of quantities. This particular option is quite similar to the option of activity schedule; however with the core difference of target price getting established with the help of bill of quantities and not with activity schedule (Turner 2017). Here, the target price is eventually adjusted for allowing for quantities’ changes and compensation events. Hence, there is always a high risk than activity schedule.
However, it is not possible under the option of JCT SBC or FIDIC Red Book contract since the main options are standard building contract, design and build, immediate contract, immediate contract with design, minor work, minor work with design, major project and framework, binding or non-binding.
This is mainly because NEC ECC is a formalized system that helps to obtain tenders and administer contract and hence it is required to check the target price contract in every aspect (Hughes, Champion and Murdoch 2015). On the other hand, JCT SBC or FIDIC Red Book Contract is majorly responsible for producing several standard contract forms, standard documentations for utilization within industry and guidance notes for the construction projects. Hence, the contracts that are being generated by them eventually represent a balanced risk allocation within parties.
The target price contract have a significant effect on the role of parties and contract administrator (Warner 2017). While completion of the contract, this target price is being adjusted for catering the subsequent compensation events, which are set out within the contract. The respective payment is then made based on the actual prices with incentive mechanisms for contractor for the core purpose of minimizing costs. The over runs as well as savings are being shared amongst the parties and the risk sharing within this target price approach reduces dispute occurrence (Phillips 2013). However, when this compared to the contract based on lump sum price or BOQ, there are higher risks since the employer would be carrying them while occurrence of compensation events.
2.The EOT or extension of time is one of the major and the most important and significant activity within the construction projects (Tai 2013). This eventually occurs when the standard contract forms are being applied and then it is being treated as the excusable delay within the ordinary construction contracts. The respective contract administrator of the contract then spends substantial time for the purpose of verification as well as assessment of such delays (Rendon and Rendon 2015). Several significant and noteworthy techniques are present that help in assessing such extension of time in a project. Since, delays in the project could subsequently bring major losses and the contract administrators are being penalized and even could be forced for paying LAD or liquidated damages amount as per agreement within the contract (Eadie, McKeown and Anderson 2013). For the purpose of avoiding such losses, the respective contractors seek the opportunity of claiming for EOT or extension of time.
According to the construction project contracts, there are some of the most significant causes of the extensions of time and these are majorly assessed by the contract administrator as per NEC ECC and JCT SBC contract forms (Theodorakopoulos, Ram and Kakabadse 2015). The main causes of such time extensions in the projects with proper assessments are as follows:
i) Employer asking for Delayed Start: The first and the foremost cause of this type of extension of time in a project is employer asking for delayed start. This particular issue is extremely common for in all types of construction projects and hence it is quite important to remove this issue with proper effectiveness (Harris and McCaffer 2013). This issue as per NEC ECC and JCT SBC contract could be assessed by discussions with the employer as soon as project is requested.
ii) Changes in Design: The second important and subsequent cause for extensions of time in construction project is the sudden change made in designs. If the client suddenly changes the design of the project, it becomes extremely difficult to complete the project within time and hence extension is required (Burke 2013). The contractor could discuss with his team and then assess that whether time extension is required or not.
iii) Delays in Payments: Another important and significant cause of getting extensions of time in any type of construction project is delays in the payments. If the client does not provide payments on time, it becomes extremely difficult for the contract administrator to complete project within deadline and thus extension is required majorly (Christopher 2016). As NEC ECC and JCT SBC contract, extensions are required in this case.
iv) Unrealistic Time Durations: The next subsequent cause of extension of time within construction project is the unrealistic time duration. When the client asks for a project delivery in unrealistic time duration, it is extremely problematic for the contract administration and thus they need extension (Heagney 2016). The contractor could assess the issue by considering the complexity of project delivery.
v) Issue in Supply of Materials: The issue in supply of materials is yet another vital and noteworthy cause of getting extension of time in the specific project. If the contractor does not get subsequent supply of materials, it is not possible for him or her to complete the project within deadline. According to NEC ECC and JCT SBC contract, the contract administrator should have a second alternative of vendor regarding supply of raw material.
vi) Unrealistic Imposed Contract: The unrealistic imposed contract is another significant cause for getting time extensions in projects (Marchewka 2014). The vendors and clients should discuss with the contract administrator regarding this issue.
vii) Changes in Drawings: When the drawings of the construction project gets changed, even in minor way, it affects the designing in extremely higher extent and hence time extension is required significantly. The contractor could discuss with his team and then assess that whether time extension is required or not according to NEC ECC and JCT SBC.
viii) Failure in Providing Relevant Information: If the client or the vendor does not provide relevant information regarding the project details, it becomes issue to complete on time and hence the contract administrator asks for extension (Antunes, Carreira and da Silva 2014). A proper project plan is to be made and hence there is a major role of the contract administrator in this particular purpose.
ix) Selection of Wrong Construction Methods: There are several methods of construction and thus when the wrong method is selected, it becomes extremely difficult for the contractor to complete the respective project on time and he or she demands for extension (Kiage 2013). According to NEC ECC and JCT SBC contract form, the contract administrator has an important role in this cause since he is responsible for selecting construction method.
3.There are several vital and noteworthy types of risks that are closely associated with the construction projects. These risks start from natural disasters such as fire, wind storms and man made risks like theft, arson and vandalism. Being a contractor, it becomes his or her responsibility to ensure that the project is completely protected with the correct and appropriate type of insurance coverage (Hong and Lee 2013). The all risk coverage of a contractor, also termed as risk coverage of a builder can be stated as the insurance, which has the subsequent responsibility of protecting the project while the construction is done. This is extremely helpful for the project since it provides protection against the losses and damages, which might eventually occur. The general contractor does not always obtains the coverage since the contract owner protects the interests. However, the contractors are often held responsible for all types of losses, which are occurring for the negligence of employees and contractor (Lee, Li and Xie 2013). Hence, it is an extremely important idea for having any form of liability insurance along with the all risks coverage of the contractor with correct endorsements like coverage of rented or leased equipment, tools and equipment of employee and liability protection.
The major types of construction insurance with examples in any kind of construction project are as follows:
i) Contractor Liability Insurance: The first and the foremost type of construction insurance is the contractor liability insurance. This particular insurance policy helps in protecting the project against the workers or any other accidents, injuries as well as property damages that are caused on the project (Chick and Handfield 2014). Hence, the organizational assets and employees are protected and the court related fees are also covered when any case is opened. An example of this construction insurance would be in a popular construction project, a major accident occurred and several employees were injured. However, since the project had contractor liability insurance policy, the contractor did not face any problem and issue was resolved.
ii) Builder’s Risk Insurance: It is a temporary policy, which requires to be taken out for the construction project duration. This type of insurance policy protects property structure as well as limited accident coverage. Natural disasters like fire, earthquake, hail, water damage and lighting are also covered in this policy (Kim and Netessine 2013). For example, in a construction project of residential building, there was fire in a floor due to short circuit. However, due to the presence of this policy, the builder did not face major problems.
iii) Compensation Insurance of Workers: Since the workers are working for making the project successful, it is quite important to make them safe and secured and for this purpose compensation insurance is required. The medical bills or wage losses are considered in this particular insurance type. The example of this insurance policy would be in one of the project, a worker fall off from height and was injured; however, due to compensation insurance, he did not face issue due to medical bill.
4.The major combination of behavioural as well as environmental factors eventually could lead to major construction disputes. The projects are generally long term transactions with higher complexities and uncertainties. Hence, it is absolutely impossible to resolve all types of details and foresee each and every contingency at the respective outset (Kerzner and Kerzner 2017). Thus, subsequent situations could arise, which are not at all clearly and properly addressed by that contract. The most basic factors, which could drive the entire development or growth of the construction project disputes are behaviour, contractual problems and finally uncertainty. The details of these three factors for project disputes are as follows:
i) Behavioural Issues: As contracts could not cater for all occurrences, issues might arise by either party having an interest to gain as much as they could obtain from the other party. These two parties might have different perception of the facts and it is quite common that any one of the parties might be having unrealistic expectations and hence affecting the ability for reaching out to the significant agreement (Walker 2015). Similarly, when any one party might be simply denying the responsibilities in any attempt of avoiding liability and thus due to the difference in individual behaviours, project potential disputes eventually occur.
ii) Contractual Problems: The second cause is the contractual problems between two parties of project. The standard forms of contract majorly describes the subsequent obligations and risks that each party has agreed to undertake in the project. These types of rigid agreements might not be correct for the long term transactions and could be carried out under specified conditions of uncertainty. There is no common factor for finding several amended contracts, which shift the obligations or risks of parties so that the party has capability to carry out every risk. However, where the amended terms or contracts are being utilized, the parties might be ambiguous and unclear (Heagney 2016). As a result, major differences might be arising within party perceptions of risk allocation under that specific contract. The respective contractor of the project has the responsibility of agreeing to the fact that major conditions are to be considered while being applicable to the contract law. This would help them in reducing the contractual problems eventually and are being refined in addressing newer issues.
iii) Uncertainty Issues: The third major cause of project disputes in construction projects is uncertainty issues. It is the core difference within amount of information that is needed to do any task as well as the amount of information that is available to the parties (Harris and McCaffer 2013). The amount of information needed eventually is dependent on the task complexities and performance measurements are measured in respect to budget or time. On the other hand, the available information amount is solely dependent on planning effectiveness and hence needs interpretation or collection of information for tasks. This type of uncertainties refer to the fact every detail of the project could be planned even before the work is started (burke 2013). As soon as uncertainty is higher, initial drawings and specifications would almost change and hence project members have to work hard for solving problems when work is proceeding when disputes should be avoided.
The contractor of the construction project, where disputed have taken place between two parties could be easily anticipated and managed with the help of few strategies under subsequent standard contract forms and these are as follows:
i) Preparation of Clear and Relevant Project Information: The first and the foremost strategy for such management is the proper preparation of clear as well as relevant project information. The consistent and unambiguous project information with defined release schedules.
ii) Proper Assessment of Risks: The second strategy for dispute resolution is the proper assessment of risks or issues (Christopher 2016). This type of assessment would be ensuring that there is no risk present and hence making the project proper and perfect.
iii) Selection of Correct Procurement Route: The third strategy for contractors is to select an appropriate procurement route for the project so that the two parties do not get scope for selecting their own routes; hence reducing behavioural conflicts.
iv) Management of Third Party Dependency: Another effective strategy for project dispute resolution is the proper management or control of third party dependencies.v) Minimization of Changes: A major issue arises due to changes in project and this could be minimized to a certain level for stopping disputes in projects by project contractor (Marchewka 2014).
vi) Adoption of Collaborative Working Practices: A proper adoption of collaborative working practices is yet another significant strategy to eradicate disputes between parties.
5.The change orders can be stated as the major and the most significant components of change management process, where several changes within the project are being agreed by the respective client, architect as well as contractor. This type of change order is the specific work, which is either added or deleted from the original scope of work of any contract that eventually alters the original contracting amount or date of completion (Tai 2013). This change might even force to start a completely new project for handling subsequent changes within the previously existing project. These are quite common to every construction project and especially on the larger projects. When the original contract is formed, the client might demand for some changes and this would be quite important for the project to get proper delivery.
The major causes of such changes within the construction contract are incorrect estimation of project work, discovering of obstacles by the project team or client for deviating from original plan, incapability or inefficiency in completion of required deliverables in budget, time or any other type of resource and many more (Turner 2017). The respective project manager then generates the change order, which describes a new work to be done as well as price that is to be paid for the new work. Hence, there is subsequent significance of such changes in the project as when the changes would be properly made, it is evident that the respective project would be successful without any type of issue. This is majorly because of the fact that there are some of the most significant features like revised scope of work, extreme weather conditions, pricing for the new work, signatures of both customers and contractors and relevant modifications to the rea contract (Warner 2017). Since, most of the construction project do not stay within budget, there is always a high chance that the change orders would be present in the construction industry. This change order is the distinct change to original contract that should be maintained in every aspect. Moreover, the contract amendments are also considered in this case and hence change orders are present eventually.
Voluntary changes are eventually done, made or even given without being paid and forced under any circumstance. In any type of construction project, the recall of products is termed as voluntary and hence these changes could be managed easily and promptly without much complexities (Baily 2017). The most common examples of such voluntary changes are change of schedule or time for project delivery, bringing changes in project designs and many others. These types of changes are mainly handled by the contract administrator and are eventually demanded by the client of that particular project. On the other hand, the involuntary changes are those changes that take place without any type of concern from the customers or contractors. These changes could not be dealt with ease and hence there is always an issue of project disputes or cancellation of the project (Christopher 2016). The most prominent examples of such changes in the construction project are major delays or exceeding of budget.
References
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Burke, R., 2013. Project management: planning and control techniques. New Jersey, USA.
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Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
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