BACHELOR OF SCIENCE IN CIVIL ENGINEERING

CE 7 – CONSTRUCTION METHODS AND PROJECT

MANAGEMENT
Engr. Aprille Ellen E. Quebada

College of Engineering
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PREFACE

This learning packet is for BS Civil Engineering second year students taking up
the course Construction Methods and Project Management. The topics discussed
in this learning packet are all about contracts and specifications, which includes
the different types of contracts, bidding procedures, and how to reduce
construction disputes. It also discussed project management specifically the
characteristics of a good project manager.
The topics in this learning packet were discussed in details and where designed in
the perspective of the students. The possible questions in mind of the students
while reading this learning packet were heavily considered. However, questions
and more reading from references given in the syllabus are still encourage from
the learners to much deepen their understanding of this course.
This learning packet have undergone a thorough evaluation from the SSU’s
committee of reviewer to ensure quality of this material before it is distributed to
the LGU.

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UNIT 1: CONTRACTS AND SPECIFICATIONS

UNIT 2: CONSTRUCTION PROJECT ORGANIZATION

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UNIT 1: CONTRACTS AND SPECIFICATIONS

1.0 LEARNING OUTCOMES

At the end of this chapter you are expected to discuss the importance of
project management, discuss bidding procedures, and discuss the ways to reduce
construction disputes.

1.1 INTRODUCTION

The construction industry is the largest industry in the world. It is more of a

service than a manufacturing industry. Growth in this industry in fact is an
indicator of the economic conditions of a country. This is because the construction
industry consumes a wide employment circle of labor. While the manufacturing
industry exhibit high-quality products, timelines of service delivery, reasonable
cost of service, and low failure rates, the construction industry, on the other hand,
is generally the opposite. Most projects exhibit cost overruns, time extensions, and
conflicts among parties.

In general, the construction industry is more challenging than other industries

due to: its unique nature; every project is one-of a kind; many conflicting parties
are involved; projects are constrained by time, money and quality; and high risk.

1.2 LESSON PROPER

1.2.1 Construction Contracts

Although there are many types of contracts, they all must contain four basic
attributes to be valid:

1. There must be “agreement” between the parties involved, such an

agreement involves offer and acceptance.

2. There must be “consideration”. In case of construction contract, if a

contractor promises to build an addition to a house without being compensated
and then changes his mind, he generally cannot be forced to build the addition
because there was no consideration.

3. There must be “capacity”. This means that both parties must be of sufficient
age to enter into a contract and must be mentally aware of what they are doing.

4. It must be “legal”. Obviously a contract between two parties in which one

agrees to commit an illegal act cannot be enforced.

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1.2.1.1 Types Of Construction Contracts

1. Lump-Sum Contract

The terms of this contract provide that the completion will pay the
contractor an agreed sum of money for the completion of a project
conforming to the plans and specification furnished by the architect or
engineer. It is based on accomplishment at specified periodic interval, with
the amount of each payment depending on the value of the work
computed during the prior period of time.

Advantages:
• The owner obtains the benefit of competitive bidding because of the
readily prepared pans and specification by the owner.
• The owner knows what the project will cost before he enters into a
contract with contractor.
• The contractor may earn a profit if he prepared a good estimate and
stayed within budget.

Disadvantages:
• The process requires an initial valuable cost from the owner for the
preparation of plans and specifications and the mobilization cost.
• The contractor may suffer a loss if actual cost exceeds his estimate.

2. Unit Price Contract

The terms of this type provide the owner will pay the contractor an agreed
amount of money for each unit of work completed in a project.
The unit of work may be any item whose quantity can be determine such as
cubic yards of earth, lineal feet of pipe, sq. yards of concrete pavement in
place, etc.

Payment are made by the owner to the contractor at specified intervals

during construction of the project with the amount of each payment
depending upon the work actually completed during the prior period of
time.

This type of contacts also requires complete plans and specifications and is
the preferred type of a contract when the actual quantities in plan are not
known before hand with certainty. For example, the exact amount of soil or
rock to be excavated may not be known until the contractor actually
performs the excavation, the owner by requiring this type of contract obtains
the benefit of competitive bidding without having contractors bidding
higher to lower the unknown quantities involved.

Under the terms of contract, the contractor may earn a profit or may incur a
loss depending upon the accuracy of his estimate.
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3. Cost-Plus-Fee Contract

The terms of this type provide that the owner will reimburse the contractor
for all costs specified to construct the project, including all labor cost,
material costs, equipment usage costs, contractor cost, and job supervision
cost.

In addition, the owner agrees to pay the contractor an additional fee, which
is essentially a management fee to reimburse the contractor for the cost
incurred at his head office resulting from the construction of the project, item
which are usually included in the fee are such cost as rent, taxes, insurance,
interest a borrowed money for the project, and main office supervision and
control cost to name a few.

Finally, the fee will include some expected profit for the contractor as that is
the primary reason for him being in business. Whether or not the contractor
actually makes a profit depends upon how he estimated his other costs
which make up the remainder of the fee.

Under this type of contract the contractor usually takes the least risk, and
therefore has the least incentive to keep costs down. It is used primarily in
situations where the scope of the work cannot be well defined ahead of
construction or where the state of the art for the particular construction is
not well known.

To exercise some control and give some incentive to the contractor to hold
down cost, there are many variations to this type of contract including:

a) Cost plus a percentage of cost

b) Cost plus a fixed fee
c) Cost plus a sliding fee all with guaranteed maximum or with
incentives for holding down cost.

4. Design and Build Contract

These contracts are useful to a promoter who wishes to delegate the whole
process of design and construction, or for whom gaining the output of a
project is of more importance than the details of design.

D&B contracts can offer a price advantage because the contractor can reduce
his costs by using easy-to-construct, standard, or previously used designs
which suit his usual methods of construction and existing plant.

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A disadvantage to some promoters is that they lose control over the designs
for which they are paying and may thus not get works wholly to their liking.
Such contracts should only be used where there is little risk of the promoter’s
requirements changing during construction.
Since the contractor is taking on more risks including those of design and
buildability, prices will usually be higher than for a measurement contract.
Any attempt to achieve a short completion time for a project by use of such
conditions may also lead to increased prices and possible overruns of time,
as not all of the processes of design and construction can overlap.

Activity 1:

Among the types of contracts above, what do you prefer if you are the
owner of the project? If you are the contractor?

1.2.1.2 Performance Bond

This bond which is not to be confused with insurance bond, is three-

party instrument in which a bonding company (surety) guarantees
(bonds) to another that the project will be built by the contractor in
accordance with the contract. If for any reason, the contractor becomes
unwilling or unable to complete the contract the surety will take steps
to engage another contractor to complete the contract or take such
steps as will be satisfactory to the owner. The cost of the performance
bond depend upon the size of the project but will generally be in the
range of 1% of the total project cost, provided the contractor has a
good reputation and can get a performance bond.

1.2.1.3 Types of Contractor

Although there are no clear-cut lines separating the many fields of

construction, contractors may be classified as:

1. General Contractors- those with capabilities to construct vertical and

horizontal structures that are general in nature, or are commonly
constructed.
2. Specialty Contractors-those with special capabilities to construct
highly specialized projects such as roads and bridges, or those that
deals with specific aspects of construction, such as steel works,
plumbing works, electrical, mechanical equipment and systems
installation. The specialty contractors are very numerous and may
also involve those with pipelines, power transmission lines, steel
erection, railroad, offshore, pile driving, concrete pumping and so
on. The reason for the specialization are complexity on equipment.

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1.2.2 Project Development and Contract Procedures

1.2.2.1 The Construction Project

A project is defined, whether it is in construction or not, by the

following characteristics:

• A defined goal or objective.

• Specific tasks to be performed.
• A defined beginning and end.
• Resources being consumed.

The goal of construction project is to build something. What

differentiate the construction industry from other industries is that
its projects are large, built on-site, and generally unique. Time,
money, labor, equipment, and, materials are all examples of the
kinds of resources that are consumed by the project.

Projects begin with a stated goal established by the owner and

accomplished by the project team. As the team begins to design,
estimate, and plan out the project, the members learn more about
the project than was known when the goal was first established.
This often leads to a redefinition of the stated project goals.

1.2.2.2 Bidding Procedures For The Procurement Of Goods

Procurement - refers to the acquisition of goods, consulting

services, and the contracting for infrastructure projects by
procuring entity. (Sec. 5(aa), IRR, R.A. 9184)

Goods and Services - refer to all items, supplies, materials and

general support services, except consulting services and
infrastructure projects, which may be needed in the transaction of
public businesses or in the pursuit of any government undertaking,
project or activity. (Sec. 5(r), IRR, R. A. 9184)

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1.2.2.3 Preparation of Bidding Documents

Prepare the Bidding Documents following the standard forms

prescribed by the GPPB:
• Specifications and other terms in the Bidding Documents shall
reflect the minimum requirements or specifications required
to meet the needs of the procuring entity;
• Reference to brand names not allowed
• Bidders will be asked to pay for the Bidding Documents to
recover the cost of its preparation and development;
• BAC shall issue the bidding document upon payment of the
standard rate, as follows:

• Bidding Document must be available on the same date the

advertisement and/or posting of the Invitation to Bid is
made;
• The Bidding Document shall include the following:

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a. Approved Budget for the Contract;

b. Invitation to Bid;
c. Minimum eligibility requirements;
d. Instruction to Bidders;
e. Technical Specifications;

1.2.2.4 Pre-Procurement Conference

Purpose: Determine readiness to proceed with the bidding

process.
• Conducted before advertisement/posting of the
Invitation to Bid
• Mandatory for the procurement of Goods with ABC
above Php 2M;
• Attended by the following:
a. BAC
b. BAC Secretariat
c. TWG
d. Consultants
e. End-user unit/Other officials

1.2.2.5 Advertising and Posting of Invitation To Bid

Not required for projects with ABC of 5M and below.

Posted continuously for 7 calendar days –

a. PhilGEPS;
b. website of the PE, if any; and
c. At any conspicuous place in the premises of the PE

1.2.2.6 Pre-Bid Conference

• Mandatory for projects with ABC of 1M or more;

• Held at least 12cd before deadline for bid submission. For
complex items as to method and nature of the contract, PBC
may be held at least 30cd before deadline for bid submission.
• At the option of procuring entity, only bidders who purchased
bid documents are allowed to attend or ask questions.
• Attendance of prospective bidders is not mandatory.

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1.2.2.7 Receipt and Opening of Bid

• BAC opens bid envelopes in public to determine each bidder’s

compliance with the documents required to be submitted;
• BAC shall check the submitted documents of each bidder
against a checklist of required documents using a
nondiscretionary “pass/fail” criteria
• If a bidder submits the required documents, it shall be rated
“passed” for that particular requirement.
• Bids that fail to include any of the requirement or are
incomplete or patently insufficient shall be considered as
“failed”

1.2.2.8 Evaluation and Bid Ranking and Post Qualify

Contract Procedures

Award the Contract:

The contract shall be awarded to the bidder with the LOWEST
CALCULATED RESPONSIVE BID (LCRB) at its submitted bid price
or its calculated bid price, whichever is lower. (IRR-A Section 37.1)

Timeline for Contract Award:

The Head of Procuring Entity or his duly authorized representative

should approve or disapprove the recommendation of award within
seven (7) calendar days from the date of determination and
declaration by the BAC of the LCRB, or four (4) calendar days in case
of projects with an ABC of PHP 50 million and below. In the Case of
GOCCs and GFIs, the governing Board has a period of fifteen (15)
calendar days to approve or disapprove the said recommendation.
(IRR-A Section 37.2)

Involved in the Award of the Contract:

• The Head of Procuring Entity

• The BAC
• The procurement Unit/Office;
• The BAC Secretariat;
• The bidder who submitted the LCRB/SCRB; and
• The Observers.

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1.2.2.9 Contract Signing and Approval And Issuance of NTP

The parties must sign the contract within ten (10) calendar days from
receipt by the winning bidder of the Notice of Award. (IRR-A Section
37.3)

The NTP must be issued together with a copy or copies of the

approved contract to the successful bidder within three (3) calendar
days from the date of approval of the contract by the appropriate
government approving authority. (IRR-A Section 37.5)

The following parties are involved in contract signing and approval

and in the issuance of the NTP:

1. The Procurement Unit/Office/End-User Unit;

2. The Head of the Procuring Entity and/or higher contract
approving authority; and
3. The winning bidder.

Activity 2:
Discuss the bidding procedure from pre-procurement to signing of
contract concisely and in your own words.

1.2.3 Construction Disputes

Why do disputes arise?

• Delays on a contract.
• Lack of understanding of the contract.
• Failure to administer the contract.
• Unsubstantiated or incomplete claims being made by the parties
involved.

Reduce the possibility of disputes arising:

• Make significant upfront planning before beginning work.

• Carefully read and understand the contract.
• Negotiate clauses that are murky or potentially problematic.
• Deal with problems as they arise, do not postpone them.
• Be diligent when it comes to pre-construction work.
• Make schedules realistic and executable and plan for delays and
disruptions.
• Document any issues and challenges that arise during the execution
and plan for delays and disruptions.
• Identify risks in advance and consult specialists.
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Construction Dispute Resolution Methods:

• Negotiation
A negotiation clause basically includes the agreement that if a cause for
a dispute should arise between a contractor and a project owner, these
parties will attempt to reach a just and satisfactory resolution between
themselves before moving on to other means.
• Mediation
A mediation clause suggests the inclusion of a neutral third party in the
dispute situation to help mediate the process of resolving the dispute.
• Expert Determination
An alternative to mediation is expert determination which is used to
resolve disputes of a specialist nature or in cases where there is a
valuation dispute requiring a specialist's opinion.
• Adjudication
The adjudication method also includes a neutral third party but unlike
with the mediation method, the adjudicator will give a decision,
whereas the mediator will assist parties in finding the resolution.
• Arbitration
In arbitration parties agree to the arbitrator who has the relevant
experience to engage in the matter. The arbitrator considers documents
and facts that concern the situation, and can make a decision that favors
one side if the parties fail to achieve consensus.
• Litigation
Litigation is usually also included in the dispute clause, in case the
parties do not find any other way to resolve the issues that have come
up. Litigation involves a trial and is legally binding and enforceable,
though it can also be appealed.

Activity 3:

Explain in your own words why do disputes arise?

1.2.4 ASSESSEMENT

Summative Test 1:

I. Identification
1. One of the basic attributes of contract in which both parties must be of
sufficient age to enter into a contract and must be mentally aware of
what they are doing.

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2. A type of contractor who has capabilities to construct vertical and

horizontal structures that are general in nature, or are commonly
constructed.
3. A party or person that must be present in the issuance of constructions
project’s Notice to Proceed.
4. Dispute arises because one fails to carefully read and understand the
______.
5. It refers to the acquisition of goods, consulting services, and the
contracting for infrastructure projects by procuring entity.
6. It refers to all items, supplies, materials and general support services,
except consulting services and infrastructure projects, which may be
needed in the transaction of public businesses or in the pursuit of any
government undertaking, project or activity.
7. One of the methods of construction disputes resolution where in there
is an inclusion of a neutral third party in the dispute situation to help
mediate the process of resolving the dispute.
8. The parties must sign the contract within ____ calendar days from
receipt by the winning bidder of the Notice of Award.
9. The contract shall be awarded to the bidder with _____ at its submitted
bid price or its calculated bid price, whichever is lower.
10. Pre-Bid conference held at least _______ calendar days before deadline
for bid submission.
II. Give what each letter stands for the following acronyms:
1. PhilGEPS
2. BAC
3. ABC
4. GPPB
5. TWG

III. Short Essay

1. Discuss the importance of project management.
2. If you are the contractor, list down the types of contract from your
most preferred type to the least one and explain each briefly.
3. Discus in your own words the ways to reduce construction disputes.

Rubrics:
Organization – 25%
Originality – 25%
Accuracy – 50%

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UNIT 2: CONSTRUCTION PROJECT ORGANIZATION

2.0 LEARNING OUTCOMES

At the end of this chapter you are expected to discuss the concepts of
management and identify the structural elements of organization.

2.1 INTRODUCTION

When two or more people work together to achieve a group result, it is an

organization. After the objectives of an organization are established, the
functions that must be performed are determined. Personnel requirements are
assessed and the physical resources needed to accomplish the objectives
determined. These elements must then be coordinated into a structural design
that will help achieve the objectives. Finally, appropriate responsibilities are
assigned.

2.2 LESSON PROPER

2.2.1 The Structural Organization

The primary formal relationships for organizing, as

discussed earlier, are responsibility, authority, and
accountability. They enable us to bring together functions,
people, and other resources for the purpose of achieving
objectives. The framework for organizing these formal
relationships is known as the organizational structure. It
provides the means for clarifying and communicating the
lines of responsibility, authority, and accountability.

Major Types of Organizational Structure

• Line Organization
The line organization is the simplest organizational
structure. It is the "doing" organization, in that the
work of all organizational units is directly involved
in producing and marketing the organization's
goods and services. There are direct vertical links
between the different levels of the scalar chain.
Since there is a clear authority structure, this form

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of organization promotes greater decision making

and is simple in form to understand.

Example of Line organization

• Line and Staff Organization

When staff specialists are added to a line
organization to "advise; "serve;” or “support" the
line in some manner, we have a line and staff
organization. These specialists contribute to the
effectiveness and efficiency of the organization.
Their authority is generally limited to making
recommendation to the line organization.
Sometimes this creates conflict. However, such
conflict can be reduced by having staff specialists
obtain some line experience, which will tend to
make them better understand the problems facing
the line managers they support.

Example of Line and Staff Organization

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• Committee Organizations
When a group of people is formally appointed to
consider or decide certain matters, this type of
structure is a committee. Committees can be
permanent (standing) or temporary and usually
supplement line and staff functions. Sometimes ad
hoc or temporary committees are set up to deal
with a specific problem. Once this committee
makes its recommendations, it is dissolved.

Activity 4:
What type of organizational structure the Samar
State University has? Explain your answer
briefly.

2.2.2 Principles of Good Organization

Business organization has conditions peculiar to itself. A set

of rules cannot be laid down that would be applicable to
organization of all enterprises.
However, certain underlying principles can be given and
among them are:

➢ Principle of Good Objective

A clear and complete definition of the objective must
be known. Any business concern or any individual
must adhere to a definite purpose or aim. The
objective serves as the guide to future planning and
action.
➢ Analysis
A sound business judgment attempts to build an
organization through full knowledge of the
requirements of the business.
➢ Simplicity
This principles emphasizes the simplicity of
organizational structure, organization should be
simple with minimum number of levels do that its
member and understand duties and authorities. The
simplest organization that will serve to attain the
desired objective is considered the best.

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➢ Functionalism
The organization should be built around the main
functions of the business and not around the
individuals. A function is a normal or characteristic
way of doing a task that stands out distinctively by
itself.
➢ Departmentalization
Necessitating departmentalization to achieve a
smoother flow of operations. It can be through
functions, products, locations, or by project of
organization.
➢ Centralization of Authority and Responsibility
In every organization there should be centralized
executive control or command authority.
Subordinates should receive orders from singles
superior at a time and all subordinates should be
accountable to that superior.
➢ Limited Span of Control
The number of subordinates an executive can manage
effectively. This principles thus help to determine
numerical limit if subordinates to be supervised by
manager.

2.2.3 Management Concept

The discussion under this topic is narrowed to the
characteristics of a good project manager. As future
engineers you will handle construction projects that needs a
leader to accomplish the project’s objectives on time and
within resources constraint.
The construction project manager is the person in the
middle, sandwiched between management and non-
managerial employees. He faces the dilemma of attempting
to adequately represent the needs of both management and
his subordinates. He is the leader to function effectively as
management’s emissary and the employee’s representatives.

A good project manager is a:

➢ A Coach
The coach leads in formulating plans and goals,
properly identifies and uses talents of various players,
administering training and serves a fair evaluator of
performance.
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➢ A Good Motivator
A good supervisor are often characterized as persons
who have the ability to “motivate people”.
➢ A Good Communicator
A supervisor is able to articulate conversation that,
makes a complex technical speech easy for layman to
understand.
➢ Appraise Employees Fairly
Considerable evidence suggest that people do
welcome fair and even unflattering comments if made
in a total context of honesty, empathy, and trust.
➢ Manages Time Better
The supervisor who is making optimum use of his
time (1) employs a program of “management by
objectives” (2) plans his workday systematically and
(3) know how and when to delegate work to others.
➢ A Good Decision Maker
Steps to making a better decision:
a. Classify the problem.
b. Define the problem
c. Specify what the answer to the problem must
satisfy.
d. Decide on what is right rather than what is
acceptable.
e. Include in the decision the action needed to
carry it out.
f. Seek feedback.

Activity 5:

How do you manage your time/ organize your

timetable as a student? How do you think it will
help you become a good project manager in the
future?

2.2.4 Management Structures

There are four involved in a project or contracting parties:
➢ The Owner
• Specifies the technical performance standards
of the completed project.

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• States the intended use of the structure,

production capacity, accommodation volume,
etc.
• Specifies special project requirement in terms
of equipment, materials, or criteria.
• Specifies his degree of participation in project
execution, ie, whether he deserves the right to
review.
➢ The Designer
• Provides project design computations,
drawings and specifications that meet the
needs of the owner.
• Tasked by the owner to conduct on-site
inspection of the project, review shop drawings
submitted by contractor, subcontractors and
require the necessary permits.
• Has the duty to produce a design that complies
with the local or national codes.
• Ensures that the design produced can be
completed within reasonable time by the
project contractor.
• Prepares the estimate of the cost.
➢ The Contractor
• Undertakes the physical construction of the
project in accordance with the contract
documents prepared by the designer.
• Provides all labor, materials, equipment, and
the know-how necessary to execute the project.
• Prepares accurate and realistic construction
schedules, set up an organized effective site
organization, prepare an accurate estimate of
the project cost and establish an effective
project monitoring and control system.
➢ The Project Manager
• The leader of the project team.
• Ensures that the project is completed within
the time, budget constraints.
• Achieves the end results despite the risks and
the problem involved.
• Executes the required tasks in logical sequence.

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Activity 6:

Give three components of a construction project that

without it the project will not be successful.

2.2.5 Assessment

Summative Test 2:

Direction: Identify if the statement is “doing” or “managing” . Explain

your answer in each item briefly using the concepts discussed in this
learning packet.

1. Building the project staff into an effective team that works

together as a unit.
2. Phoning a department to request help in solving a problem
which one of your people is trying to solve.
3. Get problems out in the open with all persons involved so
they can be resolved.
4. Giving a verbal report of progress to your supervisor.
5. Filling out a form to recommend a salary increase to one of
your people.
6. Explaining how to solve a work problem which one of your
people has brought to you.
7. Prepare a formal agreement with appropriate parties
whenever there is a change in the project.
8. Interviewing a prospective employee who was refereed to
you by an employment agency.
9. Establish a project organizational chart that shows authority
for all members.
10. Transferring responsibility form employee A to employee B
because employee A did not devote the necessary effort.

Rubric:
Originality -50%
Clarity-25%
Accuracy-25%

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2.3 REFERENCES

Sharma, M. R., 2012. Fundamentals of Construction Planning and

Management, S.K. Kataria & Sons, ND.

Rangwala, S.C., 2012. Construction of Structures and Management Works. 5 th

Edition, Charotar Publishing House Pvt. Ltd., India.

Hillier, Frederick S. 2010. Introduction to Operations Research. Mc Graw Hill

Education.

Maylor, Harvey. 2010. Project management. 4th Edition.

Fajardo, Max B., 2000. Project Construction Management. 2 nd Edition.
Philippines.

Montana, P. and Charnov, B. Management: A Streamlined Course for Students

and Business People. (Hauppauge, New York: Barron’s Business Review
Series, 1993), pp. 155-169.

S.W. Nunnally. 2007. Construction Method and Management. 7 th Edition.

Pearson Education, Inc., Upper Saddle River, New Jersey 07458.

Sarausad, Fidel. 2006. Construction Project Management User’s Manual. 2nd

Edition.

Vicente B. Foz. The National Building Code of the Philippines. Philippine Law
Gazette. 2018 Edition. Philippines.

National Structural Code of the Philippines, 7th ed. Association of Structural

Engineers of the Philippines, Manila 2015

Government Procurement Policy Board. 2002. Handbook on Philippine

Government Procurement. GPPB. Philippines.

Philippine Institute of Civil Engineers, Inc. 2003. Manual of Professional

Practice for Civil Engineers, 2nd Edition. Manila: Philippine Institute of Civil
Engineers, Inc.

2.4 ACKNOWLEDGEMENT

The images, tables, figures and information contained in this module were
taken from the references cited above.

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Disclaimer: This learning material is for instructional delivery purposes of the

faculty members of Samar State University only. This is intended solely for the
consumption of officially enrolled students of the course and this should not be sold,
reproduced, shared nor copied by other individuals.

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6700

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