Charging foe engineering service, Lecture notes of Law

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LECTURE #3: Charging for Engineering Services,

Types of Contracts

OUTLINE

• Salary ranges of being a Civil Engineer: based on years of experience, work position/description
• Salary ranges of being a Civil Engineer: based on work specialization
• Types of Contracts
• Technical Terms
• Direct vs. Indirect Cost
• Overhead expense

SALARY RANGES OF CIVIL ENGINEER: based on work specialization deals with analyzing and designing the structure that could resist applied loads. These loads may include forces and stresses due to gravity loads as well as lateral forces. Structural Engineer works out material and sizes required for that particular structure that could make it durable, sustainable and constructable. brings the paperwork design to reality. Time, Cost, Quality are tangible parameters. Construction Engineer ensures the implementation of design and specifications at site. Construction engineer’s responsibility is to confirm availability of material, equipment and labor, identify any constraint and hazard, scope and trend, economical and safety aspect of a project. He schedules the cost and duration of a project and manages the execution throughout completion. deals with planning and design of infrastructure that could help in safe, efficient and quality movement from one place to another. It includes Highway Design Engineering, Bridges, Tunnels, Railways, Airport and Airways, Waterways, Canals and Pipelines study of fluid mechanics, hydraulics and water resource management. Water resource engineer study the natural cycle of water and work out methods to use it efficiently. They observe all the natural water reservoir and ways to preserve them. They design facilities for supply of water to localities. They also design irrigation water supply system. study of material properties used for construction purpose. A material engineer works out to bring innovative materials such as the addition of polymer and fabrics in reinforced concrete gives a high strength and flexible material. deals with the environmental feasibility of a project. Environmental engineering deals with energy efficient, environment friendly, sustainable and green building construction techniques. It aims to provide safe drinking water, pollution-free environment, recycling of water and waste material and renewable energy generation. All Civil Engineering specialization may start from minimum wage to salary range prior Executive work position. All varies upon years of experience, certifications, post-graduate studies finished, demand of work position, expertise on specific work, negotiation. concern with the properties of soil and rocks on which the foundation of any structure have to be laid down. Soil engineer experimentally workout soil types, bearing capacity, penetration tests, moisture content and shear capacities.

TYPES OF CONTRACTS

• Contract is an agreement between two parties, normally the contractor doing the construction and the person or company who hires them to do the work. It also sets the scope and terms of work for a construction project.
• Because no two construction projects are alike, there are many different types of construction contracts to satisfy the needs of all parties / people involved. Knowing which contracts suits the project best helps owners, contractors and suppliers manage risks and ensure the work and payment go smoothly as possible.

TYPES OF CONTRACTS

• Lump Sum contract
• also known as fixed price contracts
• most basic type of construction contracts
• outline one fixed price for all the work done ADVANTAGES
• Simplify bidding. Naming a total price rather than submitting multiple bids simplifies the selection process for the owner and contractor.
• Finishing under budget means high profit margins. Since the price for the project is set in stone, finishing under budget means you have the savings. DISADVANTAGES
• Miscalculations destroy margins. Unexpected setbacks or changes during a project cut directly into your profit margin.
• The bigger the project, the more room for loss. If you’re working with subs and suppliers, there is no room for error.

TYPES OF CONTRACTS

• Time and Materials Contracts
• work best for projects in which the scope of work is not well-defined
• time and materials contracts reimburse contractors for the cost of materials and establish an hourly or daily pay rate ADVANTAGES
• Agile. Since the customer reimburses the contractor for the cost of materials and pays an hourly wage, unexpected delays, roadblocks, and other changes to the scope of work are covered..
• Allow for simple negotiations. Setting rules for what materials will be covered and what the hourly wage will be is simple with time and materials contracts. DISADVANTAGES
• Tracking time and materials is time consuming. Logging each and every material cost on a project is no small task, and failure to provide an accurate number upon completion means lower profit margins.
• Efficiency isn’t rewarded. Since time and materials contracts pay by the hour or day, there’s no real incentive to finish a project early. ADVANTAGES
• Agile. Since the customer reimburses the contractor for the cost of materials and pays an hourly wage, unexpected delays, roadblocks, and other changes to the scope of work are covered..
• Allow for simple negotiations. Setting rules for what materials will be covered and what the hourly wage will be is simple with time and materials contracts. DISADVANTAGES
• Tracking time and materials is time consuming. Logging each and every material cost on a project is no small task, and failure to provide an accurate number upon completion means lower profit margins.
• Efficiency isn’t rewarded. Since time and materials contracts pay by the hour or day, there’s no real incentive to finish a project early.

TYPES OF CONTRACTS

• Cost-Plus Contracts ADVANTAGES
• Flexible. Cost-plus contracts allow owners to make design changes along the way, and contractors know they’ll be paid for the extra time or materials those changes incur.
• Miscalculations aren’t devastating. Since cost- plus contracts are flexible by nature, inaccuracies in the initial bid aren’t as detrimental as they are with lump sum contracts.. DISADVANTAGES
• Justifying some costs can be difficult. Cost- plus contracts require contractors to justify the costs on a given project. Sometimes those costs can be hard to account for, and owners can be resistant to reimbursing indirect costs like administrative expenses and mileage.
• Fronting the cost of materials can put contractors in a bind. Since cost-plus contracts operate through reimbursement, paying more than you expected for materials could mean you’re spread thin for the remainder of the project.

TYPES OF CONTRACTS

• Unit Price Contracts
• divide the total work required to complete a project into separate units
• also known as measurement contract measure and pay contract, measurement contract
• the contractor provides the owner with price estimates for each unit of work, rather than an estimate for the project as a whole

TYPES OF CONTRACTS

• GMP Contracts; Guaranteed Maximum Price
• establish a cap on the contract price
• the owner won’t exceed the contract price
• any material or labor costs above that price should be covered by the contractor ADVANTAGES`
• Make the projects quicker. Having a final contract price accelerates the bidding process, and it makes financing projects easier because lenders know the maximum amount a given project will cost early on.
• Incentivize savings. Having a fixed price overhead incentivizes contractors to reduce costs and finish ahead of schedule. Owners usually agree to share cost savings with their contractors. DISADVANTAGES
• Place risk on contractors. Force the party (contractors) doing the work to absorb cost overages in the event the contract price maximum is exceeded.
• Can take longer to review and negotiate. In order to protect themselves from exceeding the price cap, contractors may try to increase the maximum price of the contract. When this happens, the negotiation process is elongated and the project takes longer to start.

CONSTRUCTION CONTRACT TECHNICAL TERMS

• Direct vs. Indirect Cost
• categorizing these two costs is important to properly allocate and project expense, savings in a project