| Vll. CONDITIONS
OF CONTRACT
Always utilize a
written contract to maximize communication and minimize controversy.
A contract should be used to anticipate what the parties intend to do
if a problem occurs on the job. The contract should be readable and
understandable.
A. The Bid Package - A proposal presented by a contractor to
the owner is an offer by the contractor, that becomes a binding contract
if accepted by the owner. The parties, price and performance must be
specified. Define the project to be undertaken by detailing the scope
of work and incorporate all plans and specifications from the bid package.
B. DIFFERING GROUND CONDITIONS AND WALKAWAY PROVISION - Owners
should accept the responsibility of performing an adequate geotechnical
investigation. Despite adequate testing of ground conditions, unknown,
unusual, and/or unexpected ground conditions may be encountered. The
contract should provide solutions when the project encounters differing
ground conditions. The walkaway provision in the contract should entitle
the contractor to stop work and walk away from the job without the owner
having the right to take over the contractors equipment. The contractor
should be entitled to receive compensation for demobilization, lost
profits and work performed prior to walkaway. If the project is completed,
the contractor should be paid on a cost-plus basis. Assumption of risk
of unforeseen ground conditions by the contractor affects the bid price.
C. ENVIRONMENTAL CONCERNS - Before the project begins, address
environmental concerns because owners and contractors are included as
potentially responsible parties when environmental damages and cleanup
costs are assessed. Federal, state and local laws must be evaluated
and licensing, permitting and other regulations must be followed. Directional
crossings that damage soil or water may cause liability.
1. Turbidity of Water and Inadvertent Returns - As these events
are difficult to predict and work stoppage may occur, the contract should
offer a mechanism to mutually address and mitigate the problem. Liabilities
are generally shared by both the contractor and owner and many times
can be insured.
2. Slurry Disposal - Comply with the regulations of the area
regarding slurry disposal. Slurry disposal should be referred to in
the contract and bid as a separate line item on a cost plus or unit
price basis.
D. ALLOCATION OF RISK OF LOSS - Evaluate and allocate risks of
loss that may occur during the project. Owners should share the risk
of loss rather than shifting all the losses through the indemnification
to the contractor because the bid price is directly affected by contingent
losses. Insurance may provide coverage by third parties for losses from
differing ground conditions or environmental losses.
E. DISPUTE RESOLUTION - Provide for dispute resolution in the
event of controversy by including mediation or arbitration provisions
in the contract. Disputes should be resolved in the following order:
1) negotiation, 2) non binding mediation through a third party, 3) binding
arbitration and lastly, 4) litigation. Determine who should be parties
to the resolution, what law will be used and where the dispute will
be resolved.
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