Construction Contracts

Build, Operate and Transfer (BOT) Contract

This type of contract is sometimes known as “Build, Own, Operate and Transfer (BOOT) contract”. The clients will layout a series of required end products with specification , terms and conditions ; and the contractor has to finance , design , construct , maintain , manage and operate the finished work for an agreed period say 10 years , 20 years or so . During this agreed period, the contractor has the temporary ownership of these finished works and can charge the end users for recovery of its investment together with the expected profit. However when the agreed period expires, the finished work will have to be transferred back to the client in specified conditions.

Maintenance Contract

This type of contract is usually for the maintenance or renovation work of a large sized project and the construction period usually ranges between 2 to 3 years or as otherwise agreed.

Usually a “schedule of rates” contains a comprehensive list of work items is already prepared to cover the employer’s proposed works but without specified quantities. The tenderers will be invited

to quote their competitive rates against the work items in the schedule; or sometimes to quote an addition / deduction percentages against the pre-determined rates entered by the employer or its engineer.

The employer will issue Works Orders to the contractor during the stated period for execution of any work items as required in anywhere within the project site. Payment for workdone will be based on the agreed schedule of rates. In case the executed work items are not covered under the agreed schedule of rates, a new rate or “star rate” will be built up and jointly agreed for payment purpose.

Term Contract

This type of contract is a short term contract and usually applies to some project which has an urgency to commence construction work. It includes a list of major work items with provisional quantities and invites the contractor to quote.

Following the award of the contract, the contractor will immediately commence preparatory work and detailed scope of works will be instructed from time to time until the whole design is completed. The works payment will be on the basis of the list of major work items, and will negotiate a relevant new rate for the missing work items.

Construction Projects

Invitation of Tender

When the client decides to proceed the project by enter into a contract, normally there are 3 ways to select a contractor that are as follows: –

a) Open tendering

b) Invited tendering

c) Negotiation with a selected contractor

“Instructions to tenderers ” will be issued to the interested parties to assist them to complete the tender documents , and return the tenders in a format as required by the client or its engineer for easy assessment .

Tender Bond

The employer might require each of the tenderers to provide a bond (usually from a bank) as a security to ensure the selected contractor would not attempt to withdraw its tender after submission or refuse to sign the contract after it is awarded . In the latter case, it obviously will cause loss to the employer owing to the additional expense or time delay to the proposed project.

Tender Query

During the preparation of the tender, the prospective contractors may make extensive inquiries for clarification of some omissions, mistakes, uncertainties or ambiguities found in

the tender documents. In order to assist the tenderers to ascertain the appropriate cost and time of work and to minimize the contractual risks, the client’s engineer will reply to these queries and copy to all tenderers at the same time for their information.

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