lecture 12

Question 1

Since the only ________ is with the GC,Performance is expected only from the latter.

Answer 1

construction contract

Question 2

GC is an independent contractor hired by the ____ He must communicate any subcontractor concerns to the Owner as if they were the GC’s.

Answer 2

Owner

Question 3

Third tier subs generally do not have the right to file __________when working as a sub to a subcontractor

Answer 3

Mechanic’s lien

Question 4

Sub-subcontractors, suppliers, and/or manufacturers are independently hired by the subcontractors. They have no direct contractual obligation or relationship with the ____.

Answer 4

GC

Question 5

is an agent of the GC that does not have a direct contractual relationship with the Owner.

Answer 5

A subcontractor (second tier)

Question 6

_________ might be an agent of the subcontractor (supplier or manufacturer)

Answer 6

A third tier subcontractor

Question 7

Subcontractors are essential to the construction process, as ______ of the works are usually subcontracted.

Answer 7

20-80%

Question 8

1. Partial source of project financing for the GC.
2. Might be indirectly linked to the owner through liens.
3. Used primarily for their skill, and to offset some of the risk from the GC. (Though the GC is still liable for their work).

Answer 8

subcontractors

Question 9

________ helps improve efficiency, quality, and productivity.

Answer 9

Specialization

Question 10

The owner might limit the amount ($ value) or percentage of works to be subcontracted

Answer 10

(GC is not a CM).

Question 11

is charged for risk reallocation.

Answer 11

Markup

Question 12

Contract with GC might use ______ from the prime contract.

Answer 12

flow-down language

Question 13

Owner might determine a percentage of works for “set-asides” [Usually

Answer 13

SBE, MBE, and WBE]

Question 14

What Work is Subcontracted?

Answer 14

1. GC will subcontract portions of work for which no in-house capabilities exist.
2. GC may subcontract works with in-house capabilities if beyond in-house capacity. (Large volume)
3. GC might subcontract work in foreign or unfamiliar markets.
4. Equipment warranty validity may be tied to installation by vendor.
5. Proprietary types of work or works with high levels of specialization have to be subcontracted.

Question 15

GC’s responsibilities to Subs.

Answer 15

1. Award subcontract to lowest responsible bidder, or following pre-set, pre-announced criteria for selection.
2. Provide competent and responsible coordination and supervision.
3. Pay approved statements under subcontract in a timely manner.
4. Serve as advocate of the subcontractor in disputes with other contract parties (Owner, A/E, and other subs).
5. Establish mechanism for information exchange between different parties.

Question 16

Sub’s responsibility to GC

Answer 16

1. Perform in a timely manner.
2. Follow GC’s instructions within contract.Offer best competitive price.
3. Fulfill oral agreements (Promissory Estoppel)
4. May be required to present a performance bond to GC.
5. Indemnify GC against sub’s own faults. (Limited form)
6. Resolve disputes in a timely manner.

Question 17

also known as bid chiseling, is usually regarded as unethical, and it squeezes the subcontractor’s price to get a better deal.

Answer 17

Pre-bid bid shopping

Question 18

is illegal, and occurs when the GC intentionally divulges the bid of a sub to another sub to get a better deal.

Answer 18

Bid rigging

Question 19

occurs when a group of specialty subs conspire to fix prices to distribute work among a limited pool.

Answer 19

Bid fixing or collusion

Question 20

GC has the right of postbidbid shopping, whereas sub is bound by_______.

Answer 20

promissory estoppel

Question 21

secure the same information for all GCs.

Answer 21

Bid repositories

Question 22

__________ have exactly the same significance as they do for prime contracts and purchase orders.

Answer 22

The payment and retention provisions

Question 23

________ issue arises in the same way as for purchase orders and is generally treated by the courts similarly.

Answer 23

The “no pay until paid”

Question 24

The clause will hold up except in cases where the owner never pays the prime contractor. Then, the prime will normally have to pay the subcontractor even though payment has not been received from the owner.

Answer 24

The “no paid till paid”

Question 25

The specific control provisions are the”______“and “_____“clauses,presentinmostsubcontractagreements.

Answer 25

48 hour, 72 hour

Question 26

pertains to the contractor’s right, after directing the subcontractor to remedy some default (such as failing to pick up their construction debris from the work site), to perform the necessary work with the contractor’s forces for the account of the subcontractor if the subcontractor fails to remedy the default within 48 hours of receipt of the contractor’s directive.

Answer 26

The 48-hourclause

Question 27

clause permits the contractor to terminate the subcontract agreement for default, after furnishing notice that the subcontractor is in default, the particulars of the default, and the corrective action required to remedy the default.

Answer 27

The 72-hour

Question 28

When the prime contract contains an_______ , all subcontracts should contain a similar clause, so that the prime’s liability to the owner and architect/engineer for acts committed by the subcontractor is passed through to the subcontractor.

Answer 28

indemnification clause

Question 29

Even when the prime contract does not require indemnification because the owner is protected by sovereign immunity or otherwise does not require indemnification, many subcontracts will still contain a comprehensive indemnification clause requiring the subcontractor to _______.

Answer 29

indemnify the prime

Question 30

Although the owner may be protected by _____ , the prime contractor is not and thus may require protection from the consequences of the subcontractor’s acts or failures to act that is afforded by the indemnification clause.

Answer 30

sovereign immunity

Question 31

There are two main categories for subcontractor / supplier evaluation:

Answer 31

1. Process based evaluations

2. Performance based evaluations

Question 32

which is an assessment of the supplier production or service process. It is based on providing flowcharts, manuals, and procedures (e.g. supplier has to be ISO certified)

Answer 32

Process-based evaluations:

Question 33

which is an assessment of the supplier’s actual performance according to a variety of criteria. This is an “after the fact” or historical evaluation based on documented past performance with the same client or with other clients.

Answer 33

Performance-based evaluations:

Question 34

• Involves categorizing suppliers’ performance in specific areas (% on time, % of work redone, # of claims, etc.)
• It is a simple and informal systems as a grade (e.g. Good, Neutral, Above average, Unsatisfactory) is assigned without going into deep details.
• More suitable for private projects where the client has more leeway in the decisions leading to the selection of the supplier.
• Fast and inexpensive

Answer 34

Categorical Method

Question 35

Cost-Ratio Method

Answer 35

• A-Determine the internal cost associated with quality, delivery, and service
• B-Convert each element to a cost ratio, expressing cost as a percentage of the value of the purchase
• C-Add the three cost ratios (quality, delivery, and service) to obtain an overall cost ratio
• D-The overall cost ratio is applied to the supplier’s quoted unit price to obtain the net adjusted cost figures

Question 36

•This is the most commonly used evaluation method•It is based on a cumulative point system corresponding to weights given to specific criteria (Time, Cost, Quality, Service, etc.)

Answer 36

Linear Averaging:

Question 37

The sequential steps for using linear averaging are

Answer 37

• 1 -Assign appropriate weights to each performance criterion or factor (e.g. cost 40%, time 25%, quality 35%)
• 2 -Use these weights as multipliers for individual ratings
• 3 –Add the scores for each factor and multiply by the sum by the respective weight
• 4 -Select the supplier with the highest performance rating.

Question 38

Single sourcing allows:

Answer 38

• Better prices due to large volume (economy of scale)
• Reduction in paperwork due to long term contracts
• Better cooperation and communication
• Expedited decision making

Question 39

Multiple sourcing allows

Answer 39

• Higher competition leading to better prices
• Risk distribution in case of default
• Improved innovation and market intelligence
• Re-evaluation of the contractual relationships

Question 40

Dual sourcing

Answer 40

• This is a mix between single and multiple sourcing allowing for the benefits from both approaches to be achieved.
• By servicing several projects, two different suppliers (single source for each project) may be able to achieve the economy of scale and the contractual stability, while still allowing for competition and best price guarantees.
• Limiting the overall contracts to a certain ceiling allows for diversifying the sources of materials or services.