Buildex Construction LLC is a major construction Company in Oman, involved in the provision of a wide range of construction services around the city of Muscat. Founded in the year 2005, the company is particularly committed to providing sufficient client satisfaction and long term relationship with its clients. One of the recent projects which Buildex Construction LLC is currently involved in is the construction of Al Mouj commercial building in Muscat. This report critically discusses the construction contract with particular focus on the obligations of various parties involved in the construction contract, contract administration as well as the three common types of contracts which are suitable for the commercial projects of Oman.
Obligation of the Contractor Based on the Pre-contract Stage and Post contract Stage
There are a number of important obligations of the contractor based on the pre contract stage as well as during the post contract stage. Firstly, during the pre-contract stage, the contractor is primarily obligated to carry out a number of activities namely scrutinizing and reviewing tender drawings as well as the contract documents for potential discrepancies as well as planning and coordinating for the various materials and resources that have to be procured (Uher, Uher, & Davenport, 2019).
Moreover, during the pre-contract, the contractor is also responsible for ensuring that all the extra BoQ (Bill of Quantities) related items as well as the scope of the project are taken into account during the submission of the final tender offer. This particularly involves the contractor managing and working together with different stakeholders of the project including the consultants, subcontractors, legal teams, potential suppliers finance team, as well as the end users on a wide range of aspects of the construction project. For example, some of the aspects which can be addressed include complete specifications, full terms and conditions, and any uncertainties on the contract work scope is especially crucial. At this point, it’s critical to seek clarification. Pay particular attention to and study any labor rates provided such as whether the best on the market, as well as potential legal issues. Material costing and manufacturing facility expenses, as well as any warehousing costs, should be given special consideration. Procurement professionals may help tremendously at this point by offering feedback and support in developing and creating realistic, long-term, and accurate costing, pricing, and analysis of both direct as well as indirect costs for the things you want to purchase.
The other important obligations of a contractor during the pre-contract stage include maintaining a vendor and regularly making enquiries, seeking possible clarifications from the various stakeholders including suppliers and sub-contractors. Finally, the contractor may also be obligated to carry out or perform analysis of quotations which were received during the bid stage as well as make a compilation of the tender submissions (Uher, Uher, & Davenport, 2019).
During the post contract stage, the contractor is primarily obligated to prepare and make agreements on payment terms as well as carry out valuations to ensure that the payment is received based on the terms of the purchase out contained in the contract agreement. This critically important step may also involve working together vendors and speeding up deliveries to ensure that the project is completed within the allocated time. The contractor is also obligated to be in charge of overseeing the project to ensure that it is finished on schedule and within budget. The other related obligations may include the maintenance of various logs for claims as well as meeting minutes, and potential change orders is part of the post-contract stage. Preparing and assembling the variation/change request claim document, which includes all required substantiation and justification, as well as an effect and risk evaluation of the change request’s execution. Finally, it is also the responsibility of a contractor during a post contract stage to prepare a Final Accounts Payment Report, reflecting and detailing all payments made in accordance with contract terms and duties. This often includes invoice documents, notes relating to goods received, related bank statements, as well as other documents.
Contract Administration Process
The contract administration involves the process of ensuring that the construction contract is properly undertaken based on the terms of the contract. This is usually taken by a contract administrator charged with the responsibility of managing, executing and supporting the contract process. There are a number of key aspects of a contract administration process namely scope of work, dispute resolution and construction variation.
Scope of Work
In contract administration, a scope of work is a compilation of all the construction deliverables including the various work obligation of the contractor, project managers, suppliers as well as the sub-contractors (Davison & Sebastian, 2011). This is critically important as it makes it easier to track the progress of the construction project. The scope work is widely considered to be one of the most important concepts in a construction contract as it not only defines the project activities but also schedules, expected deliverables, the duration of the project as well as how the project should be evaluated. Generally, the first step in achieving a successful contracting process is to precisely define the scope and deliverables. Scope creep is a major problem that may derail any contract, so putting everything in writing about what the contract covers and what it doesn’t can help keep things on course.
Dispute resolution is another important concept in contract administration which denotes the process of resolving potential disputes or disagreements involved in the construction contract through mediation, arbitration as well as adjudication among other dispute resolution mechanisms (Fawzy & El-Adaway, 2012). Whenever a potential contract conflict arises, it is critically important the involved contracting parties to attempt at resolving their dispute by themselves before seeking mediation or arbitration. This is particularly because this is often likely to be the quickest and most cost-effective conflict resolution approach which an effectively enable the project to progress without interruption while keeping strong working relationships.
The concept of construction variation refers to the potential alteration or change in the scope of work as contained in the original contract agreement. This may include additional work, omission of certain activities as well as substitution of some project works.
Three Common types of Contracts which are suitable for the Commercial Projects of Oman
The three common types of contracts which are suitable for the commercial projects Of Oman include standard form contract (build-only contracts), engineer, procure and construct (EPC) contracts and Public private partnership contracts. Firstly, Standard Form Contracts are agreements using pre-printed forms that use standardised, non-negotiated clauses. These are also known as ‘boilerplate contracts. The conditions may be created or developed by or on behalf of one of the transaction’s parties which is typically the party with greater negotiating power who engages in such transactions on a regular basis. The stipulations are not modifiable by the opposite party, with a few exceptions. Nevertheless, the wording of the Oman Standard Form Contract, does not usually function as a tight time limit, nor does it say that compliance with notification obligations is a necessity before items may be regarded as reasons for a change or extension of time (Courtney-Hatcher, et al., 2013). If a stringent time limit is necessary, or if the employer chooses to impose additional notice obligations, the contract must be amended.
On the other hand, engineer, procure and construct (EPC) contracts is another important type of contract suitable for commercial contract in Oman which are usually used by the private sector on large complex infrastructural projects. Under this type of contract, a contractor is normally required to provide a particular facility to a developer who is then expected to turn the key to commence the project based on an EPC contract; hence, EPC contracts are also widely referred to known as turnkey construction contracts. Aside from producing a full facility, the contractor must also provide it at a certain price by a specific date and to the stated degree of performance in the contract agreement. Failure to meet any criteria will almost always result in financial penalties for the contractor. According to Oyegoke & Al Kiyumi (2017), all design, procurement, and construction work is coordinated by the EPC contractor, who guarantees that the project is finished on schedule and under budget. They may or may not do on-site work.
Finally, Public private partnership (PPP) contracts are suitable for the commercial projects Of Oman. A public-private partnership (PPP) is usually characterized as long-term contractual agreement between a private contractor and a governmental organization for the sole purposes of provision of a public asset or service. This particularly involves the private party assuming the major risk and management responsibilities entailed ii the project (Turner, 2017). PPP arrangements are increasingly being adopted in Oman particularly when it comes to the completion of long-term construction infrastructure projects as well as electricity projects. In addition, this type of project is also suitable for the construction and maintenance of various public sector assets such as hospitals (Ismail, 2020). According to many experts, the primary advantage of PP contract is that it can easily be supervised.
Courtney-Hatcher, D., Tee, S., Hamilton, D., & Barton, J. (2013). Construction and projects in Oman: overview.
Davison, B., & Sebastian, R. J. (2011). A detailed analysis of the relationship between contract administration problems and contract types. Journal of Public Procurement.
Fawzy, S. A., & El-Adaway, I. H. (2012). Contract administration guidelines for managing conflicts, claims, and disputes under World Bank–funded projects. Journal of Legal Affairs and Dispute Resolution in Engineering and Construction, 4(4), 101-110.
Ismail, M. A. (2020). Public Private Partnership Contracts: The Middle East and North Africa. Routledge.
Oyegoke, A. S., & Al Kiyumi, N. (2017). The causes, impacts and mitigations of delay in megaprojects in the Sultanate of Oman. Journal of Financial Management of Property and Construction.
Turner, J. R. (Ed.). (2017). Contracting for project management. Taylor & Francis.
Uher, T. E., Uher, T., & Davenport, P. (2019). Fundamentals of building contract management. UNSW Press.