Recommended Contract Practices for Underground Construction, Second Edition

A successful underground project is one where relationships are strong, the objectives as understood by each party are met or exceeded, and the work product serves its stakeholders and is maintainable in a way that fits with the project vision. High-level metrics for project success relate to safety, quality, schedule, and budget. The first edition of Recommended Contract Practices for Underground Construction has become a valued resource for the underground industry, serving as a concise guide for drafting and implementation of contract provisions. It provided improvements to underground contracting practices during all project stages. It also presented clear roles and responsibilities for project participants to promote better contracts. This second edition was undertaken by the UCA of SME because the industry has undergone numerous changes over the last decade. Changes in tunneling technology, more common use of design-build as a contracting mechanism, and many lessons learned have sparked some creative contract approaches. The recommendations contained in this edition are intended to guide owners and their engineers in developing and administering contracts and to give contractors a better understanding of the rationale behind contract provisions. The goal is that more underground projects in this country can be best projects, where improved relationships and fair contracts enable all project participants to personally invest in cost-effective, profitable projects, ensuring the continued health of the underground industry. Cover 1 Copyright 2 Contents 3 Preface to the Second Edition 7 Acknowledgments 9 Chapter 1: Relationships 13 Introduction 13 The Stakeholders 14 The Contract 15 Improving Relationships 16 Conclusions and Recommendations 18 Chapter 2: Project Planning 21 Introduction 21 Roles and Responsibilities in Planning 22 Needs Assessment 22 Feasibility Study 23 Alternatives and Environmental Analysis 24 Regulatory Approvals, Permits, Easements, and Property Acquisitions 26 Conceptual Design 29 Establishing the Implementation Plan 29 Conclusions and Recommendations 32 References 33 Chapter 3: Subsurface Conditions 35 Introduction 35 Importance of Comprehensive Subsurface Investigations 36 Implementation of a Subsurface Investigation Program 39 Use of Geotechnical Reports as Contract Documents 43 Conclusions and Recommendations 47 References 48 Chapter 4: Risk Management 51 Introduction 51 Understanding Risk 52 Risk Management Is a Process 53 Use of the Risk Register in Procurement 63 Responsibilities of the Parties for Risk Management 66 Insurance Codes of Practice 66 Conclusions and Recommendations 68 References 69 Chapter 5: Design 71 Introduction 71 Delivery Methods 71 Initial Design 72 Design Development 73 Design Documents 77 Design Review 79 Construction Support 82 Testing and Commissioning/Operations and Maintenance 84 Value Engineering Change Proposals 85 Conclusions and Recommendations 85 References 87 Chapter 6: Construction Management 89 Introduction 89 Need for a Specialized Construction Manager 89 Selecting a Construction Manager 90 Scope of Work 93 Conclusions and Recommendations 96 References 97 Chapter 7: Cost Estimates 99 Introduction 99 Cost Estimate Applications 100 Preparing Cost Estimates 102 Factors Affecting the Cost of Underground Construction 104 Establishing the Contract Time of Performance 105 Contingencies 106 Conclusions and Recommendations 108 References 109 Chapter 8: Schedules 111 Introduction 111 Realistic Schedule: Design/Construction/Testing/Completion 111 Schedule Preparation 112 Evolution of Underground Construction Scheduling Needs 113 Schedule Models for Underground Projects 114 Interim Milestones: Substantial/Final Completion 117 Liquidated Damages 118 Scheduling Constraints 119 Scheduling Specifications 120 Cost- and Resource-Loaded Schedules 122 Approval or Acceptance of a Contractor’s Schedule 123 Subcontractor Scheduling Problems 124 Short-Term and Partial Schedules 124 Forensic Scheduling 124 Monte Carlo Simulations 125 Conclusions and Recommendations 125 References 126 Chapter 9: Pricing and Payment Provisions 127 Introduction 127 Philosophy of Contract Pricing Provisions 127 Firm Fixed Price Contracts 128 Problematic Payment Issues 129 A+B Bidding 137 Payment for Design Costs: Design-Build Projects 138 Conclusions and Recommendations 139 Reference 140 Chapter 10: Contracts 141 Introduction 141 Contract Law and Underground Construction 142 Factors That Shape Underground Construction Contracting 143 Procurement Options: Delivery Methods 144 Selection of Delivery Method 148 Procurement Options: Pricing Methods 148 Procurement of Professional Services 151 Owner’s Option to Pre-Purchase 152 Contract Documents 153 Construction Contractor Qualifications 155 Conclusions and Recommendations 157 References 158 Chapter 11: Changes 159 Introduction 159 Change Avoidance 160 Notice 161 Determining Merit 163 Differing Site Conditions 163 Force Majeure 164 Pricing Methodology 165 Elements of Cost 167 Extended Overhead 169 Overhead and Profit 170 Performance Bond 171 Bidding to Finish Early 172 Conclusions and Recommendations 172 References 173 Chapter 12: Dispute Resolution 175 Introduction 175 Dispute Management and Avoidance Tools 176 Dispute Resolution Methods 179 Conclusions and Recommendations 189 References 190 Chapter 13: Insurance 191 Introduction 191 Overview of Insurance Concepts and Relationships Involved 191 Insurance and Surety Products for Underground Construction 193 Relationship Between Contractual Responsibilities and Insurance 200 Insurance for Joint Ventures 203 Unique Insurance Considerations for Alternative Delivery 204 Use of Consolidated Insurance Programs 206 Conclusions and Recommendations 208 Chapter 14: Summary of Recommendations 211 Introduction 211 Relationships 211 Project Planning 212 Subsurface Conditions 212 Risk Management 213 Design 214 Construction Management 215 Cost Estimates 215 Schedules 216 Pricing and Payment Provisions 216 Contracts 217 Changes 218 Dispute Resolution 219 Insurance 219 Additional Reading 221 Index 225 Back Cover 233 "The recommendations contained in this edition are intended to guide owners and their engineers in developing and administering contracts and to give contractors a better understanding of the rationale behind contract provisions. The goal is that more underground projects in this country can be best projects, where improved relationships and fair contracts enable all project participants to personally invest in cost-effective, profitable projects, ensuring the continued health of the underground industry."--Back cover