4 Contracts and construction stage

Figure 16 shows the general contract and construction process explored in this stage, and the following stage (post-construction).

This section outlines how an appropriate remediation contract is arrived at, and discusses some of the major issues to be considered during construction work.

Appropriate expertise
If owners manage this stage of the work, they need a similar level of knowledge and judgement as an experienced consultant in order to assure a successful completion of repair work.

As discussed in the introduction to this guide, remediation projects generally involve complex technical and contractual issues that are beyond the skills and experience of most building owners (and also inexperienced consultants and builders).

This section is therefore based on continued consultant involvement throughout the tendering and construction stage, in order to establish as much certainty as possible in the often complex contractual and technical processes involved (refer to 'Appropriate expertise').

4.1 Tender type

The type of tender suitable for the remediation project should be discussed with the owner and resolved at an early stage in the process. It is important that the owner understands the basic differences between types of tenders. Which tender is the most appropriate will be influenced by the size, complexity and location of the project. In some areas, the availability of experienced contractors may limit the choice of tender (refer to 'Types of tender').

The ability of contractors to interpret and manage the contract is also a factor in choosing the type of tender. Some building companies are unfamiliar with remediation work and can require additional remediation guidance from the consultant during construction. The increased fees of the consultant may then outweigh the additional cost of a more experienced builder.

Selected or negotiated tenders
While open tendering may be appropriate for many new buildings, most remediation projects require contractors who have special skills and experience. Limiting tenders to a group of known, reliable and experienced contractors, or negotiating with a single suitable contractor, is more likely to ensure a successful project outcome.

Types of tender
The owner should be made aware of the risks and benefits that apply to different types of tender.

- Open to all tenderers
- Limited to selected tenderers
- Negotiated with single tenderers

Open tenders are generally unsuitable for remediation projects, and the reasons for recommending a particular type should be clearly explained to the owner.

The consultant should also explain provisional sum items included (and how risks within a contract are allocated between the parties).

4.2 The tender documents

The following section continues from Section 3.11.2: Technical specifications and covers the additional (non-technical) aspects of contract documents (refer to 'Tender documents').

4.2.1 General conditions of contract

The general conditions of contract should be based on a recognised standard form (such as NZS 3910, those from engineers' or architects' professional bodies, or from other respected sources).

The general conditions of contract must work with and complement the specific (special) conditions for the remediation project. It is important that any contradictions between general and special conditions are avoided, as these can lead to contractual problems and additional costs.

Tender documents
The tender documents consist of the:

1.  legal contract agreement
2. documentation expected from tenderers
3.  general conditions of contract
4.  special conditions of contract
5. ('P&G') sections of the specification.
6. construction documents (refer to 3.11)
- working drawings
- technical specifications
- pricing information (sums, rates)
7. other building consent requirements
- eg, scope of work, quality assurance schedule.

The consultant's role
The role of the consultant should be defined in a consultant/owner agreement, including the consultant's role in the owner/builder remediation contract. The latter is usually defined in the 'general conditions of contract' mentioned above.

Consultant's role
The owner needs to understand roles and responsibilities created by the contract, including the fundamental requirement for the consultant to administer the contract fairly and without bias.

Consultants will often need to give owners guidance on the practical effects of building (remediation) contract clauses, because some owners can be confused by parts of the standard conditions of contract and its terms.

4.2.2 Specific conditions of contract

Section 3.11 considers the technical aspects of contract design and documentation. However, specifications must also cover operational and procedural issues that apply to the contractual arrangements of the remediation project. Many of these specific conditions are covered within the preliminaries and general ('P & G') sections of the specification.

These requirements must complement the general conditions of contract in order to avoid later conflicts and should cover all of the circumstances that apply to the type of contract, building work and site conditions (refer to 'Preliminaries and general').

Preliminaries and General
Matters to be covered include:

- documentation, compliance issues, nominated suppliers etc
- site roles and responsibilities
- owner occupation of the building
- insurance covers, periods and details
- payment terms, dealing with variations
- Construction Contracts Act (CCA)
- QA programme (if BCA requirement)
- defect retentions (amounts, periods applying)
- special protection requirements (health and safety, security for occupants etc)
- weather and other protection of the works and existing building
- working space, storage, scaffolding, access restrictions
- working hours, security, access to existing facilities
- special conditions (phones, toilets, water, power, rubbish, noise etc).

4.3 Important specific conditions

The issues outlined below are not intended to be an exhaustive list of special contract conditions but rather concentrate on those that have particular significance to remediation contracts.

4.3.1 Documentation and compliance

Documents and submissions
The consultant should establish the documentation and form for responses required from tenderers. The contract must be clearly linked to a single set of building consent documents. Multiple sets of documents with varying status can lead to confusion.

Nominated suppliers and warranties
Remediation projects frequently involve nominated or preferred subcontractors and suppliers. These should be identified and written into the contract. At the same time, the consultant should establish requirements for warranties, guarantees and producer statements, together with timelines for when these are expected, and identify this in the contract (refer to 'BCA documents').

The building consent
Responsibility for obtaining the building consent should be clearly defined in the contract.

An agent (such as the consultant or contractor) may do this, but it is the building owner's ultimate responsibility to ensure a building consent is obtained. Depending on the terms of the consultant/owner agreement, the consultant can handle dealings with BCAs on behalf of the owner (refer to 'BCA requirements').

BCA requirements
Some BCAs are tying consents to a specified quality assurance programme. This can set particular requirements that will need to be incorporated into the contract.

Any particular requirements, such as an inspection programme, producer statements, warranties, certificates, must be clarified and allowed for within the contract documentation and during construction - to avoid later problems with code compliance certificates.

Amendments during construction
The consultant should generally be responsible for documenting amendments to the building consent during construction (and seeking BCA approval for these as required). If the main contractor is required to submit information for amendments, this should be defined and covered within the specification.

Variations
Remember that work on any variations affecting NZBC requirements cannot legally begin until the BCA has approved them and a way of recording these on the consent documentation has been agreed. This can cause delays.

BCA documents
Building consent documentation required by the BCA must be allowed for.

The BCA should be consulted on any particular requirements (including any additional details as work progresses).

At the same time, particular policies with regard to documentation such as producer statements, warranties and the like should be confirmed and covered in the specification.

The consultant should also be aware of sub-contractors (such as plumbing and drainage, electrical) who are expected to provide 'as-built' drawings and/or compliance certificates for their particular sections of the works as part of separate compliance requirements (refer to 'BCA documents').

Further detail
Section 5.1: Contract completion

The code compliance certificate
Required procedures on completion of the project also need to be defined. As with the building consent, it is the owner's ultimate responsibility to ensure a code compliance certificate is obtained. If it is intended that the contractor will seek the code compliance certificate on behalf of the owner, then this must be specified. If not, the relevant requirements must be defined and specified. This also applies to expectations around substantial completion of the work (including staged completion of parts if applicable).

Further detail
Section 5.1: Contract completion

4.3.2 General roles and responsibilities

Communications
Appropriate site responsibilities must be defined, including the requirement to maintain a representative of the main contractor on site throughout the contract period.

Lines of communication must also be clarified. This will ensure site workers receive instruction from only one source, and that any issues are fed back from the owner, site workers or sub-contractors to the consultant (refer to 'Consultant liaison').

Consultant liaison
In addition to administering the contract (and interpreting the contract documents fairly), the consultant represents the owner during construction and provides overall liaison between the contractor and owner. This includes progress reporting and seeking owner decisions during construction.

Meetings and inspections
Meetings should be held throughout the project. The number and frequency will be determined by the size and complexity of the project. Some meetings will involve just the consultant and contractor, to resolve technical details, or for monitoring construction quality at critical points in the repair work.

The specification should require the contractor to allow for regular meetings and for taking minutes if required (in practice it is often common for the consultant to take the minutes). It is also important to allow for BCA inspections in a timely manner as they are mandatory (refer to 'BCA inspections').

BCA inspections
Allowance for inspections required by the BCA will also be needed. This should include providing inspectors with access to all parts of the work.

The BCA should be consulted on any particular requirements for inspections as these may differ according to location. At the same time, particular policies with regard to final inspections and Code compliance issues should be clarified to allow any relevant matters to be covered in the specification.

Sampling and framing replacement
Responsibilities and arrangements for taking samples of timber framing and other materials for laboratory testing, and for the replacement of damaged framing, need to be clearly defined.

Further detail
Section 4.4.3: Timber replacement, Appendix 2: Timber rot and moulds

4.3.3 Occupancy and insurances

Occupation during construction
Before the design is completed, and the project documentation and budgets are finalised, the owner should decide, with advice from the consultant, whether to occupy all or parts of the building during the remediation project. Drawings and specifications should therefore assume occupancy or vacancy of the site. The conditions of contract will also need to be adjusted to reflect this (to include the requirement for parts of the building to be vacated to fit with the programming of construction activities if applicable).

Further detail
Section 3.9.1: Project programming

The continued occupation of the building can affect other site requirements, particularly work that is likely to impinge on the safety and day-to-day activities of the occupants. The owner should be made aware of the advantages and disadvantages that are involved in the building being occupied during remediation work.

Insurances
Whether or not the building is occupied, the owner's insurers will need to confirm the extent and status of cover under the existing house and contents policy over the construction period, and any additional or special cover that will be required. It is generally practical for the owner to extend their insurance policy to cover 'Contractors All Risks' (often referred to as Contract Works insurance) for the period of the project, and it is important that the division of insurance between the owner and the contractor is clarified prior to tender (such as responsibility for security and health and safety on the site, theft, damage, responsibility for unfixed materials, plant and equipment).

Third party covers any other special risks where needed, and should be in the joint names of the owner and the contractor (appropriate public liability insurance). The consultant should establish the minimum levels of required cover in consultation with the owner and identify that value in the special conditions.

Off-site storage
Storing materials for the project away from the site should be avoided where possible because of the problem of insuring against ownership disputes (in addition to the usual risks of damage, theft or fire).

If the building is vacated, the contractor then has possession of the site and their insurance should cover the whole of the building, the construction work, as well as plant, equipment and materials stored on site.

If household contents are left on site, the responsibility for insurance cover for these must be resolved and defined.

4.3.4 Contract payments

Progress payments
The terms for progress payments should be outlined. These must comply with the requirements of the Construction Contracts Act 2004 (CCA). If payment terms are covered within the general conditions of contract, they should also be checked for compliance with the CCA.

A payment schedule (prepared by the consultant in consultation with the owner) is often included as part of the tender documents. The contractor will then base progress claims on this schedule, with any changes explained and calculated. (Under the CCA, if a schedule is not included, the contractor's claim will by default be the claim to be paid.)

The format of progress claims, with progress reports and certified time sheets for reimbursable work (signed off by the consultant) must be clear and fair to all parties. Details on payment processing times (including the effects of late payments) should be provided. Also specify the period for submitting the final account and release of retentions (refer to 'Retentions and bonds').

Retentions and bonds
The amounts and liability periods that apply to any retentions must be clearly stated.

Liquidated damages or similar remedies for late completion are not usually applicable to this type of work, so the owners need to be aware of the time flexibility required.

In special circumstances, contractors' or owner's bonds can be required. Should bonds be needed, specialist advice should be sought.

Variation costs
The requirements and procedures that apply to the costs of variations must be covered in the conditions of contract (refer to 'Variations').

A contractor is entitled to recover any variations in costs from the initial pricing as outlined in the contract documents, including all relevant overheads and profit margins. The owner, however, is also entitled to pay only fair and justifiable costs for extra work and a fair credit for work not completed.

Variations
Contract clauses should cover:

1. changes in:
- amount of work done
- material types
- installation methods
- underlying conditions revealed
2. unforseen additional work
- owner-requested changes
3. record-keeping requirements.

Uncertain costs
It is almost inevitable that the repair work will reveal unforeseeable hidden problems that must be remedied. A system for handling this type of work is necessary. Payment processes for work done within provisional sums and prime cost items should therefore be clearly defined (including how margins will be adjusted and what rates are required for the work).

Clarity
The specification should clearly define what rates are expected to include, as poorly worded clauses lead to misunderstandings and disputes.

Provisional work may be based on a 'cost plus' basis (materials plus time costs) or a 'unit rate' basis (where the type of work is known but not the amount).

Prime cost items mean sums can be set aside for specific items (such as new floor coverings), the detail of which is agreed prior to the expenditure of the sum.

4.3.5 Special protection requirements

Health and safety

Disturbing moulds
In remediation construction work there are particular hazards related to disturbing potentially toxigenic moulds during building activities.

Health and safety considerations to the building site are essential. The consultant must ensure the contractor's health and safety policies are project-specific and presented with the tender. Health and safety procedures are necessary for protecting workers on site (and any occupants) during construction.

Reasonable care must also be taken to prevent any unauthorised entry to the building site. Robust health and safety procedures must be established and implemented to ensure that workers are safe when they are handling potentially harmful materials.

Further detail
Appendix 2: Timber rot and moulds

Weather protection
It is important that 'dry' areas of the building remain weathertight during construction. Good temporary weather protection covers will speed repairs and provide adequate protection. Building protection requirements must be clearly outlined in the contract to allow for the appropriate equipment (which can be costly) to be provided. If inadequately provided for, some tender bids can appear deceptively attractive when compared with others, resulting in later problems.

Care of existing property
As well as the above, provisions for ensuring the existing building and its surroundings are appropriately protected against damage during construction activities should be clearly defined within the contract.

4.3.6 Construction activity issues

The conditions of contract must also clearly define any other issues that are specific to the particular remediation project such as, site working areas, storage, availability of facilities and services, working hours, access and noise restrictions, rubbish disposal and any other additional elements that could impact on the progress of the project.

Project meetings
Initial meeting
Matters to be covered should include:

- introduction of relevant representatives
- communication and site responsibility issues
- scheduling of project meetings
- reviewing the contractor's construction programme
- reviewing payment schedules and processes
- processes for resolving construction discrepancies
- reviewing the list of subcontractors and suppliers
- processes for dealing with uncertain work
- BCA liaison and inspection requirements
- health and safety matters
- any other design clarifications or procedural issues
- any of the owner's concerns and questions.

Ongoing meetings
The agenda should include:

1. a review of:
- construction schedule
- relevant quality issues
- costs and overall budget
2. construction activity issues
3. unanticipated delays
4. design clarifications
5. contract variations, owner's concerns
6. unforseen extra work, decay etc
7. health and safety matters.

4.4 During construction

Apart from representing the owner during the construction phase, the consultant has two principal roles, contract administration and general review.

Depending on the circumstances, a consultant may also provide construction management services.

4.4.1 Contract administration

Initial site meeting
The first site meeting should take place before the project work begins.

This initial meeting is important for clarifying and agreeing on various procedural issues for the project. It is particularly important to emphasis the protocols expected for communication throughout the contract. The meeting should involve the owner (or their representative), the consultant and the main contractor (refer to 'Project meetings').

Ongoing meetings
Regular site meetings should be held during the construction process, with participation of the owner, consultant and main contractor varying according to the particular stage of the work (refer to 'Project meetings').

General review
Matters covered should include:

- monitoring and approving work quality
- approving progress payment claims
- approving variation or provisional cost claims
- interpreting contract document requirements
- providing explanations, interpretations, clarifications and extra instructions
- updating drawings etc if required
- providing variation instructions (and any role in amending consents)
- reviewing contractor's variation claims
- verifying substantial completion
- verifying final completion and Code compliance.

While most matters can be dealt with on a day-to-day basis, regular meetings allow general issues and anticipated problems to be addressed and recorded.

Various sub-contractors or suppliers may be required to attend these meetings at critical junctures throughout the project. In remediation work, this can apply in particular to cladding and window suppliers/installers.

4.4.2 General review

In addition to administering the contract and interpreting contract documents fairly, the consultant also processes payment claims, reports on progress, monitors costs and the quality of the work, and consults with the owner on decisions required during the construction process (refer to 'General review').

Quality assurance
An owner may not always be aware of the consultant's role in monitoring quality assurance during construction, so it is important to clearly explain the limits and responsibilities involved in reviewing the construction. The consultant does not control or supervise the contractor. It is the contractor who, in accordance with the contract documents, is responsible for the organisation and methods used for construction.

The consultant reviews the building work, which includes examining and reporting on quality. The normal expected level of quality assurance is of a general nature (rather than supervision of all details of construction).

The contractor is then responsible for correcting any discrepancies noted, including occurrences of other, similar discrepancies (refer to 'Extended services').

Extended services
Extended services may be negotiated between the consultant and the owner.

In a very large remediation project, the appointment of an on-site consultant's representative may also be considered.

Professional engineers and architects offer various levels of construction monitoring (refer to NZIA, IPENZ and ACENZ).

Inspections (consultant and BCA)
Regular inspections by the consultant form part of the general quality assurance process and these must be coordinated between the consultant, the contractor and sub-contractors to ensure that all critical stages and parts of the construction work are covered.

Inspections by the BCA are also required (refer to 'BCA inspections).

BCA inspections
The BCA will require inspections at key points in the building work. It can be advantageous if the consultant is present.

If the consultant chooses to be present, BCA inspections should be integrated into the overall review process.

4.4.3 Contract changes and uncertainties

The nature of remediation work is such that unanticipated circumstances are expected more than in new construction projects. Some suggestions for handling uncertainties have been discussed in earlier sections (refer to 'Uncertainties').

Further detail
Section 3.9.2: Estimates and budgets Section 4.3.4: Contract payments

Uncertainties
The greatest unknowns relate to the extent and resulting costs of structural repairs to walls, floors, decks and support structures (together with further sample testing, repairing finishes and so on).

The contract should have included appropriate payment methods that would apply to different types of expected additional work based on:

- material plus labour costs ('cost plus')
- unit price items
- lump sum fixed costs.

Contract variations
Changes during the construction process, such as those from unforeseen circumstances, owner-requested changes, BCA requirements, and errors or omissions in the documents, are inevitable.

Unit rates
The use of unit rates is suitable when the type of work can be clearly defined, but not the quantity or extent.Unit rates may not be suitable for work that cannot be defined until the walls are opened.

The replacement of structural components often includes replacement of other associated items that cannot be defined by the contractor in the tender. This can lead to large variations between tenderers and problems in the adjustments during construction.

Materials plus labour costs
For reimbursable work or contracts, the contractor should maintain daily work sheets that show the activity carried out, number of personnel on site, hours worked and materials used.

These work sheets should be reviewed regularly and approved by the consultant, thereby providing ongoing monitoring. This process allows good budget control and minimises disputes over progress claims.

Uncertain items
The inclusion of appropriate contingency funds and provisional allowances in the contract can help to cover areas where additional work is expected, but where costs cannot be estimated until the full extent of the damage is revealed (usually when the cladding is removed).

Costs of work on provisional items can be based on unit rates, materials plus labour costs or requested fixed-price quotations, depending on the nature of the work. Some contracts may be based entirely on cost reimbursement. Accurate record-keeping is essential in all cases (refer to 'Unit rates').

It is also possible to include provisional numbers of hours in the contract, based on a consultant's experience of similar projects. These hours can then be priced as part of the tender. As work is completed, actual hours are compared with contingency hours, resulting in a credit or debit adjustment.

Further detail
Section 4.3.4: Contract payments

Fixed-price quotations may be used when the extent of extra work is revealed (for instance, following the removal of cladding) and is able to be defined clearly and measured. A price for the extra work is then submitted and approved in total.

Timber replacement
As existing framing is exposed during the repair work, decayed timber that will need to be replaced may be revealed. Control sampling should be carried out early in the construction process in order to set the testing levels to be used later as reference points.

As decay is revealed, further sampling and laboratory testing will be required to ensure that the framing to be left in place is sound and unlikely to contribute towards future failure (refer to 'Framing replacement').

Framing replacement
While the contractor is expected to recognise possible decay and raise any concerns about the framing, it is the consultant who is responsible for the identification of timber decay, including arranging for sampling and testing to establish the extent. The consultant is then responsible for instructing the builder on which areas require replacement.

The in-situ treatment of retained timber must also be considered as part of this process.

Further detail
Appendix 2: Timber rot and moulds

Existing construction
The consultant's review role is generally limited to those areas of the building that are directly affected by the remedial work (as defined within the drawings and the scope of the works).

However, deficiencies in the existing construction may be exposed that will need to be addressed during the remediation construction. As well as overseeing the replacement of decayed timber, the consultant is also responsible for ensuring that any sub-standard framing or structure is upgraded to meet Building Code requirements (refer to 'Existing framing').

Existing framing
As well as decay, common deficiencies in timber framing can include:

- missing or sub-standard studs/dwangs
- missing, corroded or sub-standard fixings
- lack of adequate structural supports
- inadequate deck balustrades.

Monitoring costs
Buildings that are in a much poorer condition than expected place an additional financial burden on owners. It is important for consultants to keep owners up-to-date on contract expenditure against contingency sums (variations).

The consultant should maintain running estimates of cost increases and regularly provide the owner with projected final cost expectations. Owners will usually have based their contractual agreements on initial costs estimates provided by a consultant at commencement of the work, and will expect to be advised in advance if these are likely to be exceeded. This provides owners with an opportunity to arrange additional finance where necessary or to investigate possible reductions in the original scope of work.

Further detail
Section 3.9.2: Estimates and budgets

Any variations from the building consent drawings, especially significant changes, will need to be approved by the BCA, who may also require consent drawings to be amended during construction or to be submitted as a final set of 'marked-up' drawings that record the amended consent. Designers should discuss with BCAs, requirements for variations at outset of the work.

Building defects, damage and deterioration need to be documented by the consultant as the structure is opened up during construction. This record can include photographs, analyses of timber or material samples, failed original components, and any other evidence collected during the completion of the remedial work. This evidence forms an essential audit trail, which the owner may later require if legal issues are pursued.

4.5 Substantial completion

It is important to remember that the project is not complete until the BCA is satisfied that the remediation work complies with the Building Code as set out in the consent documentation.

The remediation work may be sufficiently finished to allow occupants to move back into the building - but there may be a number of unfinished items, outstanding documentation and defects still to be remedied.

Substantial or practical completion
The meaning (and relevance) of these terms should be defined by the particular conditions of contract used for the remediation project.

It is important that this stage be linked with the completion of all Code compliance issues identified by the BCA.

The consultant should ensure that overseeing the project continues once the project has been substantially completed, because it can be easy to lose sight of the contract work at this stage. The final section of this guide discusses matters that need to be completed or finalised as part of the post-occupancy stage of the remediation project.

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