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State Government of Victoria, Australia, Department of Health

Construction Contract Administration

1.ContractAdministrationIssues

Thefollowingkeyissuesaretobeaddressedduringtheconstructionphase.

HealthService/AgencyPM(LiaisonOfficer)
WhenaHealthserviceoragencyisthePrincipal,theyshouldappointanagencyprojectmanagerwhowillact
asaliaisonofficer.Thispersonwillbetheprincipalpointofcontactforthecontractor/builderand
Superintendentandassistinprogramming,scheduling,dealingwithissuesofmaintaininghealthservice
deliverywhereworksareoccurringincludingaccessissues,commissioning,decanting,visits,openingsand
furnitureandequipmentselection.
Forlargeand/orcomplexprojects,particularlywherefacilitieswillneedtoremainfunctioningandoccupiedby
thePrincipalduringtheconstructionperiod,theliaisonofficermayneedtobeafulltimeappointment.

ConstructionInsurance
Itisessentialthattherelevantpartiesarecoveredbyinsuranceforbuildingaspectsduringtheconstruction
process,includingexistingbuildings,theworksandpublicliability.
Normally,theDepartmentarrangesPrincipalControlledInsuranceforthebuildingworks.Thestandardformof
contractAS21241992providestheoptionforthePrincipaltotakeoutsuchinsurance.Theinsuranceis
takenoutwiththeVictorianManagedInsuranceAuthority.
NotethatDepartmentalapprovalisrequiredpriortoanycapitalprojectdeviatingfromthenormalpracticeof
usingPrincipalControlledInsurance.
ThisPrincipalControlledInsurancecoverscontractworks,andpublicliability,includingallequipmentincludedin
thecontract.Thisextendstocomponentspreparedorassembledoffsite.Howeverthecoveragedoesnot
includeareasnotdesignatedinthePrincipalControlledInsurancepolicydocument,suchasthecontractors'
plantandvehicles,asbestosremoval,majordemolition,thecontractor'sandsubcontractor'spersonnel,tools
etc.TheBuilder/ContractoristorefertothePrincipalControlledInsurancepolicyfordetails,including
excessesandclaimsetc.
ThePrincipalortheSuperintendentshouldclearlyadvisetheContractorthattheexcessunderthePrincipal
ControlledInsurancearrangementsistotheaccountoftheContractor.RefertotheConstructionInsurance
Guidelineforfurtherdetails.

ProvisionalSums&Quantities
Thefinalcostofaconstructioncontractmaybeinfluencedbyprovisionalsumsandquantities.Aprovisional
sumisanominatedamountofmoney,usuallyestimatedbyaQuantitySurveyor,wheretheexactscopeand
costofspecificworkcannotbedeterminedatthestartofthecontract,suchasforremovalofrock.
Itisincludedintheoriginalcontractsum,butismonitoredcarefullysothatthesumcanbeadjustedas
required.Theprovisionalsummaybeusedforworkcarriedoutbysubcontractorsorformaterialsand
componentstobeprovidedbysuppliers,orforscheduleofratesworks,whereanagreedpriceratehasbeen
reached(e.g.$30/sqmforplasteringexistingdamagedwalls).Theseitemsareincludedwherenofirmprice
canbeobtainedorthefullextentoftheworkcannotbedeterminedatthetimethebuildingcontractislet.

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State Government of Victoria, Australia, Department of Health

Construction Contract Administration


Thefinaladjustedcontractsumwillvaryfromtheoriginalcontractsumwhentheexpenditureagainstthese
itemsdiffersfromthatnominatedinthecontractdocument.Provisionalsumsandquantitiesshouldbekeptto
aminimumtominimisebudgetvariations.

PreferredSubContractors/Suppliers
TheDepartmentPolicy
TominimiserisktothePrincipal,theDepartmentrecommendsthatallsubcontracts,includingmechanicaland
electricalthatcanoftenrepresentalmosthalfoftheprojectsbudget,betenderedasacomponentofthemain
contract.Nominatedsubcontractsarenotrecommendedastheyblurrisks,liabilitiesandresponsibilitiesand
shouldbeavoidedwhereverpossible.
ConsiderationwillnotnormallybegivenbytheDepartmentfortheinclusionofnominatedorrecommended
subcontractors/suppliers.
ArecommendationcanbemadetotheDepartmentutilisingthismethodofsubcontractinghoweveritmust
clearlydemonstratewithdocumentedreasonsshowingthattheprojectwillbenefitgreatlyandthatthe
proposalissupportedbythePrincipal/agencyandSuperintendent.Exceptionswillgenerallybeconsidered
onlyif:
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Thereisaclearindicationthattheequipment/tradebeingspecifiedcanonlybesuppliedbythe
nominatedcompanies.
Sitespecificconsiderationssuchasintegrationofspecialistworkswithsafety/firesystems.

ContractPosition
IfapprovedbytheDepartment,theSuperintendentmayproposetonominateparticularsubcontractorsor
suppliers,wheresuchworkorproductsarerecommendedtobeincorporatedinthebuilding.However,the
Governmentsupplypolicyrequirementsmustalwaysbeconsidered.Thismeansthattheselectionand
approvalofsubcontractorsorsuppliersshouldbemadeonacontestablebasis,allpartiesaretreatedfairly
anddecisionsbebasedonusingassessmentcriteriasuchasfitforpurposeandbestvalueapplicabletoall
submissions.
TheContractormaycalltendersorobtainquotationsforsubcontractsandsupplies.Whereexistingservice
providershavesufficientexpertiseandcapacity,theyshouldbegiventheopportunitytotenderforsub
contractwork.
TheSuperintendentmakesrecommendationstotheSteeringCommittee/PCGforendorsementofthe
recommendedsubcontractor/supplier.TherecommendationisnormallybasedontheContractor's
recommendation.ThisisbecausetheContractorisultimatelyresponsibleforworkandmaterialsorproducts
ofallthesubcontractors&/orsuppliers.
Options
Thereareoptionsforengaging&appointingsubcontractors/suppliers.
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AseparatetenderisinvitedandthesuccessfultendererisnominatedtotheBuilderforinclusioninthe
Contract.Inthisinstance,thefirmisaNominated'SubcontractortotheContractor.
Alistofapprovedsubcontractors/suppliersisincludedinthetenderdocumentsadvisingtheBuilderthat
theyareresponsibleforobtainingquotationsfromtheapprovedorequivalentfirms.Inthisinstancethe
firmisselectedbytheBuilder.

TheDepartmenthasnoobjectiontotheengagementofselectedsubcontractors/suppliers.Experiencehas
shownthattheuseofselectedsubcontractors/suppliersislesslikelytoleadtocontractualdisputes.

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State Government of Victoria, Australia, Department of Health

Construction Contract Administration


Inspection/SiteMeetings
Inspection
ItistheContractor'sresponsibilityandobligationtoundertaketheconstructionofaprojectinaccordance
withcontractdocuments.Thecontractormustensurethattheconstructionmeetsalltime,cost,qualityand
statutoryrequirements.Thisincludestheinspectionandsupervisionofallsubcontractorsanddaylabour.
NOTE:ConsulttheseparateOccupationalHealth&SafetyCDGforspecificsafetyrequirements.
TheContractorisissuedwitha"PossessionofSite"noticebytheSuperintendent,onbehalfofthePrincipal,
andfromthedateofpossessionofsiteisresponsibleforallpersonswhovisitthesite,whethertoperform
workofservices,toundertakeinspections,toassistwithcoordinationorattendmeetings.Allpersonsvisiting
thesitemustreportinitiallytothesiteoffice,andareusuallyrequiredtoundertakeasiteinductionarranged
bytheContractor,andaretobeescortedbythecontractoratalltimes.
Forsmallerprojects,theContractor'sforemangenerallyexercisescoordinationandsupervisionduties.On
largerprojects,supervisionandcoordinationisexercisedthroughtheContractor'steamwhichmayincludea
separateProjectManager,WorksProgrammer,SafetySupervisor,GeneralForemanandTradesForemenetc.
TheSuperintendent,ortheSuperintendent'sRepresentative(SR),isresponsibleforoverseeingthatthe
constructionworksconformtotherequirementsofthecontractandforgivingtheContractoranynecessary
instructionsorclarifications/interpretationsofthecontractdocumentsbeingusedtoconstructthefacility.
TheSuperintendentortheSRisalsoresponsibleforcoordinatingcommunicationwiththePrincipaland
Consultantsoncontractorbuildingconstructionrelatedissues.
ItistheContractor'sresponsibilitytoarrangeforthenecessaryinspections(bythecontractor,relevant
authoritiesandsubconsultants)andtokeeprecordsofthoseinspections.
TheContractormustalsoensurethatallsafetyrequirementsaremaintainedonthesiteduringconstruction.
TheContractorperformstheOH&SroleofPrincipalContractor'.
SiteMeetings
RegularSiteMeetingsshouldbeheldattheconstructionsite(sitemeetings)e.g.fortnightly.Thesemeetings
shouldbeattendedbytheContractor,Superintendent,Superintendent'srepresentative,consultantsas
requiredandaPrincipal'srepresentative(theClient).Theyshouldideallybechairedandminutedbythe
Contractor.Minutesshouldbedistributedwithinfourworkingdaysofthemeeting.Theyshouldrecordpoints
discussed,outcomes,actionstobetaken,andbywhom,andasummaryofproposed/approvedvariations.
Theminutesareagoodwayofkeepingtrackoftheprogressoftheprojectanditisusualforthe
SuperintendenttoissuecopiestotheProjectControlGroup.
Itisgoodpracticetocheckminutesforcompleteness&accuracypriortoacceptanceandincludephotographic
recordsoftheprojectwiththeminutesforreportingtothePCG.

Payments
ContractSum
UndertheContractrequirementsofAS21241992,thePrincipalagreestopaytheContractorastated
amountorlumpsumforcompletionoftheworks,subjecttotheprovisionsofthecontract.Thislumpsumis
knownasthe'ContractSum'.
ChangestotheContractSummayoccurasaresultofvariations,arisingfromrequestsforamendments,

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State Government of Victoria, Australia, Department of Health

Construction Contract Administration


generallyfromthePrincipalorHealthService/Agency,leadingtoadditions,deletionsoralterationsduringthe
courseofconstructionorforrequiredadjustmentstothecontractdocuments.
ItiscriticalfortheHealthService/Agencyandconsultantstocontrolandrestrictthesechangestoanabsolute
minimuminordertoeffectivelymanagetheprojectwithintheapprovedbudgetandprogram.
Variationsareoftenacauseofcontractconflictsandmayleadtonegotiation,mediationorarbitration.The
Principal,ContractorandSuperintendentshouldcollectivelyseektoresolvesuchconflictsattheearliesttime
andintheleastexpensivewaywhereverpossible.
ProgressPayments
TheContractorispaidprogressivelyastheworkproceeds.TheSuperintendentissuesprogresscertificates
basedonanassessmentofthevalueofcompletedwork.TheProgresscertificatestatesthatacertainvalueof
workhasbeencompletedandthereforetheworkshouldbepaidfor.ForlargerorcomplexprojectsaQuantity
Surveyorisresponsibleforassessingthestatusofthecontract'sprogressandtheevaluationofthe
Contractor'sprogressclaim.
WhenaSecurityofPayment'claimisreceivedfromthecontractor,theSuperintendentistoensure
compliancewiththecurrentprovisionsoftheSecurityofPaymentAct.Contractconditionsstipulateaspecified
period(eg28days)forthepayment.Thisperiodshouldbestrictlyadheredto.
SecurityofPaymentlegislationhasbeenenactedtoensurethatcontractorsandsubcontractorsreceive
paymentsinatimelymanner.TheeasiestwaytoavoidactivatingtherequirementsoftheSOPActistoensure
thatpaymentschedulesareissuedwithinthedesignatedperiod,thatreasonsforreducingorwithholding
paymentareclearlyexplained,andthatpaymentsaremadeinatimelymanner.
ProgresspaymentsarebasedonaprogressclaimpreparedbytheContractoronamonthlybasis.Theclaim
outlinesthebreakdownofthetradeworkandthepercentageofworkcompletedagainsteachtrade.The
progressclaimalsousuallyshowsapprovedcontractvariationsandpercentagecompletionagainstthe
variations.
TheSuperintendentand/orQuantitySurveyorwillthenverifytheamountclaimedand,ifappropriate,
recommendthatthePrincipalmakeapayment(certifytheprogressclaim).Insomeinstancestheamount
claimedmaybemoreorlessthanthevalueofworksassessedascompleted.TheSuperintendentwilladjust
progresspaymentsaccordingly.Inmakinganyadjustment,theSuperintendentshouldbeawareofGST
requirementsandmustnotifythecontractorofthereasonsforvaryingtheclaimwithinthetimespecifiedin
thecontract.
ToobtainareimbursementfromtheGovernmentfortheprogresspayment,theHealthService/Agencymust
completetheapprovedDepartmentalclaimformandforwardthis,togetherwithacopyofcertifiedprogress
claim,totheDepartment.

Variations
AvariationcanbestbedefinedasThechangeormodificationofthedesign,qualityorquantityoftheworks
ortheadditionoromissionorsubstitutionofanywork,materialsorgoods'.
VariationscanonlybeimplementediftheSuperintendentissuesaninstructioninwriting.Variationsmayoccur
becauseof:
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CorrectionoferrorsandomissionsintheContractdocuments
Site/buildingconditionsdifferingfromthosedescribedintheContractdocuments
ChangerequestedbythePrincipal(theseshouldbekepttoanabsoluteminimum).

Somevariationsentailcostand/ortimeadjustmentstothecontract.Suchvariationsshouldbepricedbythe

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State Government of Victoria, Australia, Department of Health

Construction Contract Administration


Contractor,valuedbytheQuantitySurveyorandacceptedifsatisfactorybytheSuperintendentpriortobeing
implemented.
TheextenttowhichavariationtotheworksisreflectedinanadjustmenttotheContractSumisdetermined
bythevaluation'ofthevariation.Afteravariationhasbeenvaluedandagreed,anadjustmentcanbemade
totheContractSum.
Thedepartmentrequiresthattheprocessforapprovingvariationsismanagedinamannerthatisrigorous
andconsistentandatemplatehasbeendevelopedformanagingthevariationofacontractseesampleform
attachedinAppendix7.
RefertoGovernanceguidelinesondelegationsregardingapprovalsofvariationsandfinancialpowers.

ContractSumAdjustments
AContractSumadjustmentisamonetaryadjustmenttotheinitialContractSum,duringthecourseofthe
contract.
ThefinalContractSum,afterContractSumadjustment,maybeforahigherorloweramountthantheoriginal
ContractSum',dependingonthenatureoftheadjustment.
SomeContractSumadjustmentsmayoccurasaresultof:
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Approvedvariations
Superintendent'sinstructions,orlackofthem
DiscrepanciesarisingfromquantitiesspecifiedinthecontractortheBillofQuantities
ChangestoAuthoritylevies
Unexpectedsiteconditions(latentconditions)or
Provisionalsumsincludedinthecontractbeinginsufficientorexcessivefortheactualcostofthechosen
productorworkactivity

Variationsmaycauseareductionorincreasetotheoriginalscopeofthecontract.

ContingencySum
Acontingencyamountshouldnormallybeallowedinthebudgetfornewandrefurbishmentworks.The
SteeringCommittee/PCGcansetaseparateamountdependingonthespecificsoftheproject.Theamount
shouldneverbedisclosedorstatedinthetenderorcontractdocumentsnorshouldthisinformationbe
providedtopartieswhomaycommunicatewiththeContractor.ThissumisavailablesolelyforthePrincipalto
managerisksandisintendedtocoverthecostofunknownsorunforseenmattersthatmayariseand
adjustmentsfordiscrepanciesinthedocuments.Theamountisnotavailableforincreasesinthescopeofthe
project.
ContingencyisakeyelementtobeestablishedandmanagedbytheSteeringCommittee/PCGtoensurethe
projectisconstructedappropriatelyandwithintheallocationprovidedbytheDepartmentofTreasury&
Finance.
TheprojectbudgetincludescontingenciesthataretobeapprovedbytheDepartmentfollowingendorsement
bytheSteeringCommittee/PCGwhoshouldassesstheneedtousethecontingenciesbasedona
recommendationfromtheSuperintendent.

WorksProgramming
TheContractorisresponsiblefortheprogrammingoftheworkstoachievecompletionwithinthecontract
period.Theconstructionprogramsequencescontractactivitiesandtrades,showingdurationsand
dependenciesandtheexpecteddatesforachievementofmilestonessuchasstructurallockup',services

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State Government of Victoria, Australia, Department of Health

Construction Contract Administration


commissioningandhandoveretc.
Thesequencing,dependenciesanddurationscollectivelydefinethecriticalpath',whichistheshortestperiod
inwhichthecontractworkscanbecompleted.TheContractormustkeeptheprogramuptodateasdelaysto
oraccelerationofactivitiescanleadtochangesinthecriticalpath.
TheSuperintendentshouldregularlyreporttothePCGonthecriticalpath,achievementoforchangestothe
worksprogram,toenabletheagencytocoordinatetheirownactivitieswiththebuildingworks.

ExtensionsofTime
Foravarietyofreasons,acontractormaybeunabletocompletetheWorksbythedatestipulatedinthe
contract.ThedelaysmaybeoftheContractor'smakingorattributabletocircumstancesbeyondthe
Contractor'scontrol.Whenthelatteroccurs,theContractorisentitledtoanextensionoftimetothecontract
period,asjustifiedagainsttheconstructionprogram.
Therearetwotypesofextensionsoftime.Those:
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Withoutcostimplication
WithcostimplicationsthesearecalledProlongation.

Generally,extensionsoftimewouldnotleadtoanincreasedcost.Wherethedelayisduetotheactionsofthe
Principal(client)whichthereforeaffectstheprogrammedcriticalactivities,thentheContractorhasan
entitlementtoreasonablecostsfordelay..
Causesofdelaymayincludethefollowing:
WithoutCostImplicationstotheContract
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Industrialdisputese.g.StatewideorNational
Inclementweather
Delaysinreceivingpermitsandapprovalsfromauthoritiesorutilitycompanies.

PotentialforCostImplicationstotheContract
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DelaysbytheSuperintendentingivinginstructionsorresponsestothecontractor
Majorvariationstoconstruction,planningordesignapprovedbythePrincipal
Instructionstodeferordelayaportionorthewholeoftheworkduetooperationrequirementsofthe
HealthService/Agency.

Notethat:
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Unexpectedsiteconditions(incertaincircumstances,costsmaybeapplicable)mayfallintoeither
category

Itisnotalwayseasytodetermineifaparticulardelaywillwarrantanextensiontothetimeofthe
contract.TheSuperintendentmayrequestthattheContractorjustifyclaimsforextensionoftime
throughthepresentationofarecent(nomorethan14daysold)criticalpathprogram/diagramforthe
contractworks.

PracticalCompletion
Theterm'PracticalCompletion'describesthestagewhen
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theworkhasbeencompleted,allequipmentinstalled,testedandfoundtobeinrunningorder,
theprojectisdeemedsafeandfitforoccupationtothesatisfactionoftheSuperintendent.

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State Government of Victoria, Australia, Department of Health

Construction Contract Administration


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thefacilityisfitforitspurpose,complieswithservicedeliveryperformancerequirements,and
thefacilitycommissioninghasbeenundertaken
operationandmaintenancemanuals,traininganddocumentationhavebeenprovided.

TheAustralianStandardcontractAS21241992providesthattheSuperintendentmayissueacertificate
statingadatethat,intheSuperintendent'sopinion,thebuildingworksarePracticallyComplete',meaning
thatallworksarecomplete,withtheexceptionofminoromissionsanddefectswhichwillnotaffecthandover
to,andoccupationby,thePrincipalandfacilityusers.Atthistimethefinalisedworksarehandedovertothe
HealthService/AgencywithnecessarydocumentationincludingaCertificateofOccupancy,operationmanuals,
warrantiesetc.
PracticalCompletiondoesnotrelievethecontractorfromtheneedtorectifyomissionsanddefectsinatimely
manner,anditisimportantthattheSuperintendentcloselymonitorsprogressonrectifyingomissionsand
defects.
ItisimportanttodetermineandadvisetheDateofPracticalCompletionforitscontractualimplications.
Othercontractualeffects,whichoccuratthetimePracticalCompletionisreached,arethe:
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Beginningofthedefectsliabilityperiod
Contractualendtothecontractor'sliabilityforliquidateddamagesorthePrincipal'sliabilityfor
prolongationcosts
Partialreductionofsecurityorbankguarantee,requiredunderthecontract.

WhereaprojectcontainsSeparablePortions',applythePracticalCompletionindividuallytoeachofthe
separableportionsunderthecontract.
ThePrincipalhasnocontractualrighttooccupyanypartoftheworksarea(portionofthesiteforwhichthe
contractorisgivenpossessionforthepurposeofexecutingtheconstructionworks)beforePractical
CompletionwithouttheconsentoftheContractor.TheDepartmentrequiresthatoccupationoccuronly
followingtheissueofaCertificateofOccupancy.
AfullinspectionpriortoissueofaPracticalCompletioncertificateisnecessary.Ifthefacilityisnotsuitablefor
occupancy,afollowupinspectionwillberequiredfollowingremedialworksbythecontractor.
AnomissionsanddefectslististobepreparedbytheSuperintendentandprovidedtotheContractorat
PracticalCompletion.Itshouldonlycontainminoromissions&defectsthatdonotrestrictthefacilitybeing
usedforitsintendedpurposeorrequireclosureforrestorativeworks.

LiquidatedDamages

Underthecontract,iftheContractorfailstobringtheworkstoastageofPracticalCompletionbythedue
date,(i.e.thedatestatedinthecontract,adjustedforanyagreedextensionsoftime)thenthePrincipalis
entitledtoLiquidatedDamages(LDs).TheamountofLDsissetoutinthecontractatthestartoftheproject
andmustbejustifiable(seebelow).
Itisimportantthatalltimebasedcontractualissuesrelatedtovariationstotheoriginalscopeofworksand
otherdelayshavebeenresolvedpriortotheapplicationofLDs.
LossesandcostsduetodelaycanbeclaimedattheratestatedinthecontractbytheHealthServiceor
Agency,providingthecorrectstepshavebeenfollowed.Thenominatedamountsmusthavebeenagenuine
pretenderestimateofcostsandmustbeabletobesubstantiated.Forexample,thecostofengagingan
alternativefacilitytodeliverhealthservicesorcostsassociatedwithcontinuingtousetheexistingfacilities.
Asaminimum,LDsmaybebasedonthecapitalinvestmentatthelongtermbondrate,plusanallowancefor
additionalcostsofmaintainingtheSuperintendentandotherConsultantsforanextendedperiod.

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Construction Contract Administration


TheHealthService/AgencyisnotifiedoftheLDsthataretobedeductedfromthecontractsum,bythe
Superintendent.
LDsarenormallyassessedatthetimethatcontractualissuesarebeingcompletedandoutstandingvariations
areconsidered.

ProlongationCosts

Inthestandardcontractformthatgovernstheusuallumpsum'buildingcontract,thebuilder/contractoris
responsibleforthemajorityofrisks.However,delaysandcostsmayresultfromthePrincipal'sinstructions
causingadelay.SuchdelaysincludeadelayinmakingdecisionsorinprovidinginformationtotheContractor
ormayarisefromexcessiverequestsforvariationsandchangestobemade.
TheContractormaybeentitledtoclaimcompensationunderthecontractfordelayscausedbyothers,egthe
SuperintendentorPrincipal.Theclaimmaybeforidleequipment,staffandoverheadse.g.scaffoldingplant,
cranes,foreman'stime,officesandshedsdisruptionsoftheprogramstorageandothercosts.
TheSuperintendentistonotifythePrincipalandProjectControlGroupifsuchanissuearisesandthemajor
costimplicationsinvolved.ProlongationclaimsshouldbevaluedbytheQuantitySurveyoranddeterminedto
beclearlyjustifiablepriortoendorsementbytheSuperintendent.Departmentapprovalisrequiredofall
prolongationcostclaimspriortotheiracceptance.

SecurityandRetentionMoneys

ToensurethattheContractorperformsinaccordancewiththeContract,thePrincipalshouldrequestan
appropriateformofguaranteefromtheContractor.
Themostcommonformsofguaranteesare:
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Security(PreferredOption)TheacceptancefromtheContractorofanunconditionalbankguarantee.
Similarformsofsecuritymaybeconsidered.Theamountisequivalenttotheamountstatedinthe
contractandisheldbythePrincipalshouldtheContractordefault.Theamountofsecurityisnormally
setbyassessingfinancialrisk.Anindustrystandardminimumis5%oftheContractSum

Thenormalpracticeisforsecurity,intheformofabankguarantee,tobeprovidedtothePrincipalfollowing
tenderacceptance,andpriortositepossessionbythecontractor.Itisheldintwoequalparts.Halfisnormally
releasedatPracticalCompletionandthebalancewhenFinalCertificateisissuedafterthedefectsliabilityperiod
hasfinished.
Thisformofguaranteeisrecommendedforallcontractsinexcessof$1Musingthestandardformavailable.
ThebalanceofsecuritymustbereleasedontheissueoftheFinalCertificate.
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RetentionMoneys(NonPreferredOption,butmaybeapplicabletoverysmallcontracts,generally
below$50,000.)Apercentage(upto10%)oftheamountdueoneachprogresscertificate(payment)
isretaineduntilastatedsumisreached.ThissumisasafeguardforthePrincipalshouldtheContractor
default.Itisknownastheretentionamount.Normallythetotalretentiondoesnotexceed5%ofthe
ContractSum.HalfoftheretentionisnormallyreleasedtotheContractoronissuingthenoticeof
PracticalCompletionandthebalancewhentheFinalCertificateisissued(afterthedefectsliabilityperiod
hasfinished).

DefectsLiability

ThedefectsliabilityperiodistheperiodstatedintheContractthatprovidesfortherectificationofminor
defectsand/oromissionsoritemsthatfailtoperformsuitably,thatmaybeoutstandingoroccurafter
PracticalCompletion.ThePrincipal,SuperintendentandContractorstillhaveobligationsandrightsduringthis

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Construction Contract Administration


period.Theremayalsobeparticularitemsofequipment,finishesandservicesunderparticular
warranties/guarantees(e.g.roofing),whichexceedtheDefectsLiabilityPeriod.Theseguaranteesrequire
Contractorsignoffandcontinualmonitoringuntiltheirexpirydate.
CareistobetakenbythePrincipal,nottovoidwarrantiesortheContractor'sresponsibility,e.g.byusing
anothercontractortoundertakerepaironworksorequipmentassociatedwiththecompletedmaincontract,
duringthedefectsorwarrantyperiod.
AminimumDefectsLiabilityperiodof12monthsisrecommended.ThePrincipalshouldcheckwiththe
Superintendenttodeterminethemostsuitableperiodoftime,andtoarrangeaprocessfortherecordingand
referralofissuesforactionbytheContractor.

FinalCertification

UponcompletionoftheDefectsLiabilityperiodtheSuperintendentissuesaFinalCertificateonthebasisthat
theContractorhasrectifiedalloutstandingomissions/defectsaccordingtothecontract.Thisusuallyinvolves
afinalinspectionbyallparties.

IssuesRequiringSpecialAttention

Consultantsaretoensurethatthecontractdocumentationisclear,anddrawsattentionofcontractorsto
theseimportantphasesofprocurement.Keyissuesofconcerninclude:
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WorkinanOperatingFacility:

Awarenessoftheimpactonhealthandrelatedservicesbeingdeliveredbyconstructionactivitiesinvolving
essentialservices,access,infectionandnoisecontroletc.isvital.Measurestomitigaterisksorreduce
negativeeffectsneedtobesetoutbythePrincipalandSuperintendentforprojectswhereconstructionwork
isbeingundertakeninanoperatingfacility.
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CommissioningPeriod:

TheContractadministratorshouldbeawareofthenecessityofallowingfortwocommissioningperiods.
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Period1fortheContractoranditssubcontractorstoensureoperabilityofbuildingsandservices
tocomplywiththecontract'sTechnicalPerformanceRequirements'.
Period2forthecontractortorecommissionfollowinghandovertoandoccupationbyusersof
thefacilitytoensureproperperformanceinaccordancewiththeiruserrequirements,following
occupancy.

CertificateofOccupancy:

Toobtainthiscertificatethemaintenancemanualrequirementsmustbetakenintoaccount,whichincludesthe
maintenanceofessentialservices,plusreportingandrecordingrequirements.
UndernocircumstancesisafacilitytobehandedoverwithoutanoperationmanualbeingprovidedforHealth
Service/Agencyuseaswellasallemergencybackuparrangements.
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EnvironmentalSustainability:

Variousenvironmentalissuesmustbecontrolledandmonitoredduringconstruction,suchasuse/wasteof
water,recyclingofmaterialspowerandotherservices,dustandnoisegenerationandstormwaterrunoff
fromthesite.

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Construction Contract Administration


Checklist
Thisisthechecklistthatrelatestothecontentofthisguideline.
TheContractAdministrationchecklististobecompletedandsignedwitheachprojectandsenttothe
appropriateDepartmentalProjectManager.

Checklists
ContractAdministrationChecklist(pdf,31.1KB)
TheContractAdministrationchecklististobecompletedandsignedwitheachprojectandsenttothe
appropriateDHSProjectManager.

Examples
Thesearetheexamplesthatrelatetothecontentofthisguideline.

ExampleFiles

LetterofNominationofSuperintendent(MSWord,27.0KB)
ThisletterisatemplatethatshouldbeusedtoassistinnominatingtheSuperintendent.
MonthlyReportsSiteMinutes(MSWord,92.5KB)
SiteMinutesaretobecompletedaspartofthemonthlyreport.
ContractAdministrationCostVariationsExample(MSWord,37.0KB)
TheCostVariationsformistobecompletedasrequiredforpaymentpurposes.
ContractAdministrationProgressFinancialStatus(MSWord,23.0KB)
TheProgressFinancialStatusFormistobecompletedbytheQuantitySurveyorandsubmittedwiththe
monthlyreport.
ContractAdministrationSampleProgressClaim(MSWord,42.5KB)
TheProgressClaimformistobecompletedtoreceivepayment.
ContractAdministrationSampleVariationForm(MSWord,61.0KB)
TheVariationsformistobecompletedasrequiredforvariationpurposes.
ContractAdministrationSampleProgressCertificateForm(MSWord,23.0KB)
TheProgressCertificateFormverifiesthatworkshavebeencompletedandpaymentcanbeprocessed.
ContractAdministrationCapitalPaymentClaimForm(MSWord,181.5KB)
TheAgencycompletesthisformaspartofthepaymentprocess.

For information relating to this content contact:


Capital Projects and Service Planning, Department of Health
Email: capital@dhs.vic.gov.au

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22:32:43 PM