24.Building Const. Bussiness Fund

7/28/2019 24.Building Const. Bussiness Fund.

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Building Construction

Business Fundamentals

24P A R T

24

H V A C E Q U AT I O N S , D A TA , A N D R U L E S O F T H U M B



366 PART 24

24.01 Engineering/Construction Contracts

A. Methods of Obtaining Contracts:

1. Competitive Bidding Contracts. Contracts in which Engineers/Contractors are selected

on the basis of their competitive bids.2. Negotiated Contracts. Contracts in which Engineers/Contractors are selected on the

basis of ability, reputation, past experience with the owner, or type of project, etc., and

fees are then negotiated.

B. Contract Types:

1. Lump Sum Contract. A contract in which the Engineer/Contractor agrees to carry out

the stipulated project for a fixed sum of money.

2. Unit Price Contract. A contract based on estimated quantities of adequately specified

items of work and the costs for these items of work are expressed in dollars per unit of work. For example, the unit of work may be dollars per foot of caisson drilled, dollars

per cubic yard of rock excavated, or dollars per cubic yard of soil removed.

This contract is generally only applicable to construction contracts.

Unit price contracts are usually used when quantities of work cannot be accurately

defined by the construction documents (driving piles, foundation excavation, rock exca-

vation, contaminated soil removal, etc.). Unit prices may be included in part of a lump

sum or other type of contract.

3. Cost Plus Contracts. A contract in which the owner reimburses the Engineer/Contractor

for all costs incurred and compensates them for services rendered. Cost plus contractsare always negotiated. Compensation may be based on the following:

a. Fixed Percentage of the Cost of the Work (Cost Plus Fixed Percentage Contract).

Compensation is based on an agreed percentage of the cost.

b. Sliding-Scale Percentage of the Cost of the Work (Cost Plus Sliding-Scale Percentage

Contract). Compensation is based on an agreed sliding-scale percentage of the cost

(federal income taxes are paid on an increasing sliding scale).

c. Fixed Fee (Cost Plus Fixed Fee Contract). Compensation is based on an agreed fixed

sum of money.

d. Fixed Fee with Guaranteed Maximum Price (Cost Plus Fixed Fee with Guaranteed

Maximum Price Contract). Compensation is based on an agreed fixed sum of money and the total cost will not exceed an agreed upon total project cost.

e. Fixed Fee with Bonus (Cost Plus Fixed Fee with Bonus Contract). Compensation is

based on an agreed fixed sum of money and an agreed upon bonus is established for

completing the project ahead of schedule, under budget, superior performance, etc.

f. Fixed Fee with Guaranteed Maximum Price and Bonus (Cost Plus Fixed Fee with

Guaranteed Maximum Price and Bonus Contract). Compensation is based on an

agreed fixed sum of money, a guaranteed maximum price, and an agreed upon bonus

is established for completing the project ahead of schedule, under budget, superior

performance, etc.g. Fixed Fee with Agreement for Sharing Any Cost Savings (Cost Plus Fixed Fee with

Agreement for Sharing Any Cost Savings Contract). Compensation is based on an

agreed upon fixed sum of money and an agreed upon method of sharing any cost

savings.

h. Other fixed fee contracts can be generated using variations on those listed above or

by negotiating certain aspects particular to the project into a cost plus fixed fee con-

tract with the owner.



Building Construction Business Fundamentals 367

4. Incentive Contracts. A contract in which the owner awards or penalizes the

Engineer/Contractor for performance of work in accordance with an agreed upon tar-

get. The target is often project cost or project schedule.

5. Liquidated Damages Contracts. A contract in which the Engineer/Contractor is

required to pay the owner an agreed upon sum of money in accordance with an agreed

upon target. The target is often for each calendar day of delay in completion of the

project.

Liquidated damages, when included in the contract, must be a reasonable measure of

the damages suffered by the owner due to delay in completion of the project to be

enforceble in a court of law. The owner must also be able to demonstrate and prove the

damages suffered due to delay in completion of the project. Weather, strikes, contract

changes, natural disasters, and other events beyond the control of the contractor can

void the claim for liquidated damages.

6. Percentage of Construction Fee Contracts. A contract in which the Engineer’s fee is

based on an agreed upon percentage of the project’s construction cost.7. Scope of Work. The scope of work is part of the Engineer’s contract defining the Engi-

neer’s responsibilities and work required to produce the Contract Documents required

by the owner to get the project built. The Engineer’s scope of work can be compared to

the Contract Documents defining a construction contract.

24.02 Building Construction Business Players

A. Owner. The individual or individuals who initiates the building design process

(May be a business, corporation, developer, hospital, local government, municipality,

state government, or federal government).

B. Architect. Design team member responsible for internal and external space plan-

ning, space sizes, relative location and interconnection of spaces, emergency egress,

internal and external circulation, aesthetics, life safety, etc. Generally the architect is

the lead and the driving force behind the project.

C. Civil Engineers. Design team member responsible for site drainage, roadways,

parking, site grading, site circulation, retaining walls, site utilities (sometimes done

by the mechanical and electrical engineers), etc.

D. Structural Engineers. Design team member responsible for building structure

(design of beams, columns, foundations, floors, roof). Responsible for making the

building stand.

E. Interior Designers. Design team member responsible for building finishes (wall

coverings, floor coverings, ceilings); often assists with or is responsible for space

planning. Often this is also done by the architect.

F. Landscape Architect. Design team member responsible for interior as well as

external plantings (grass, shrubs, trees, flowers,) etc.

G. Surveyors. Design team member responsible for establishing contours and site

boundaries and locating existing benchmarks, trees, roads, water lines, sanitary and

storm sewers, electric and telephone utilities, etc.



368 PART 24

H. Geologists/Soils Analysts. Design team member responsible for establishing soil

characteristics for foundation analysis, potential ground water problems, rock for-

mations, etc.

I. Transportation Engineer. Design team member responsible for elevators, escala-

tors, dumbwaiters, and other modes of vertical and/or horizontal transportation.

J. Electrical Engineer. Design team member responsible for design of electrical dis-

tribution systems, lighting, powering mechanical and other equipment, receptacles,

communication systems (telephone, intercom, paging), fire alarm and detection sys-

tems, site lighting, site electrical (or civil engineer), emergency power systems, unin-

terruptable power systems, security systems, etc.

K. Mechanical Engineers:

1. Plumbing Engineer. Design team member responsible for water supply and distributionsystems; sanitary, vent, and storm water systems; natural gas systems; medical and labo-

ratory gas and drainage systems; underground storage tanks; plumbing fixtures; etc.

2. Fire Protection Engineer. Design team member responsible for sprinkler and other fire

protection systems, standpipe and hose systems, fire pumps, site fire mains, fire extin-

guishers (or architect), etc.

3. HVAC Engineer. Design team member responsible for the design of the heating, venti-

lating, and air conditioning systems; ductwork and piping systems; automatic tempera-

ture control systems; industrial ventilation systems; environmental control; indoor air

quality; heat loss and heat gain within the building; human comfort, etc.

L. Contractors:

1. General Contractor. Also referred to as prime contractor in single contract construction

projects. The general contractor is the construction team member responsible for con-

struction of the building structure and foundations,building envelope, interior partitions,

building finishes,roofing,sitework, elevators,project schedule, project coordination,proj-

ect management, etc.The general contractormay sub some or all of the work to other con-

tractors. In single contract projects, the general contractor is also responsible for

mechanical andelectrical work as well,butthis work is most often done bysub-contractors.

2. Mechanical Contractor. Also referred to as sub-contractor in single contract constructionprojects. The mechanical contractor is the construction team member responsible for

construction of the building HVAC,plumbing, and fire protection systems. The mechan-

ical contractor may be broken into one, two, or three sub-contracts HVAC and Plumbing

and/or Fire Protection. The mechanical contractor may sub some or all of the work to

other contractors (plumbing, sheet metal, fire protection, automatic controls, etc.).

3. Electrical Contractor. Also referred to as sub-contractor in single contract construction

projects. The electrical contractor is the construction team member responsible for con-

struction of the building electrical systems, fire alarm systems, communication systems,

security systems, lighting systems, etc. The electrical contractor may sub some or all of the work to other contractors (communication, security fire alarm, etc.).

4. Prime Contractor. The contractor who signs a contract with the owner to perform the

work.

5. Multiple Prime Contractors. When more than one contractor signs a contract with the

owner to perform the work. Often this is accomplished with four prime contracts as fol-

lows, but may be done with any number of contracts:

a. General Contract

b. Mechanical (HVAC) Contract



Building Construction Business Fundamentals 369

c. Plumbing/Fire Protection Contract

d. Electrical Contract

6. Sub-Contractor. The contractor or contractors who sign a contract with the general or

prime contractor to perform a particular portion of the prime contractor’s work.

7. Sub-Sub-Contractor. The contractor or contractors who sign a contract with the sub-

contractor to perform a particular portion of the sub-contractor’s work.