What are Specifications?

Specifications describe the nature and the class of the work, materials to be used in the work,
workmanship etc. and is very important for the execution of the work. The cost of a work
depends much on the specifications. Specifications should be clear.

Purpose
of giving
Specifications

 The cost of an unit quantity of work is governed by its specifications.

 Specification of a work is required to describe the quality and quantity of different
materials required for a construction work and is one of the essential contract
documents.
 This also specifies the workmanship and the method of doing the work. Thus
specification of a work serves as a guide to a supervising staff of a contractor as well as
to the owner to execute the work to their satisfaction.
 A work is carried out according to its specification and the contractor is paid for the
same. Any change in specification changes the tendered rate.
 As the rate of work is based on the specification, a contractor can calculate the rates of
various items of works in tender with his procurement rates of materials and labour.
Thus tender rate without specification of works is baseless, incomplete and invalid.
 Specification is necessary to specify the equipment tools and plants to be engaged for a
work and thus enables to procure them beforehand.
 The necessity of specification is to verify and check the strength of materials for a work
involved in a project.
Types of Specifications

1. General Specifications
2. Detailed Specifications
General Specifications
In general specifications, nature and class of works and names of materials that should be used
are described. Only a brief description of each and every item is given. It is useful for estimating
the project. The general specifications do not form a part of contract document.

Detailed Specifications

The detailed specifications form a part of a contract document. They specify the qualities,
quantities and proportions of materials and the method of preparation and execution for a
particular item of works in a project. The detailed specifications of the different items of the
work are prepared separately and they describe what the work should be and how they shall be
executed. While writing the detailed specifications, the same order sequence as the work is to
be carried out is to be maintained.
 Contract
The word as ‘Contract’ in human activities is so general under legal contest. In construction, the
main important thing is that work information is enough to carry out the works though Contract
also can be seen every projects.

The reason behind to include the contract is for helping to parties to overcome the situation
where something goes wrong then no parties are willing to accept the fault or consequence of
the problem.

A formal contract incorporating the terms described in the tender may be sent to the successful
bidder for execution.
Contract types
The following are the various types of contracts, for execution of civil engineering works:

1. Lump Sum or Fixed Price Contract

2. Measurement contract
3. Turnkey Contract
4. Design and Build
5. Cost Plus Contracts
6. Unit Price Contracts
7. Time and Material Contracts
8. Item rate contract
9. Percentage rate contract
10. Labour contract
11. Piece-Work agreement
12. Target Contract
1. Lump Sum or Fixed Price Contract

Under a Lump Sum or Fixed Price Contract, the contractor agrees to perform the work
specified and described in the contract for a fixed price. The price of a fixed contract can only
be changed upon the execution of a change order, under which the owner and the contractor
either

(1) Agree for the contractor to perform additional work that falls outside the scope of the
original work for an agreed upon extra compensation or

(2) Agree to remove certain work from the original scope of work and reduce the price of the
contract in proportion to the work that the contractor no longer has to perform.

These types of contracts are appropriate when a clear scope and a defined schedule have been
reviewed and agreed upon.

Advantages:
Lower financial risk to Employer.
Higher financial risk to Contractor.
Minimum Owner supervision related to quality and schedule.
Contractor has higher incentive to achieve earlier completion and better performance.
Contractor selection is relatively easy.

Disadvantages:
Changes difficult and costly. (but it usually is)
Need to substantially complete design prior to bidding.
Contractor inclined to choose lowest methods / materials to comply with specification.
Hard to build relationship. Each project is unique.
Bidding expensive and lengthy.
Contractors may include high contingency within each Schedule of Rate item

2. Measurement contract

Measurement contracts (sometimes called “re-measurement” or ‘measure and value’

contracts) contains a Bill of Quantities ( BOQ ) provided by the employer or its consultants, can
be used in situations where the design (or type of works) can be described in reasonable detail,
but the amount cannot. The contractor will quote against each BOQ item and enter a unit rate
or unit price to build up the total contract price on basis of those BOQquantities. During the
construction period, the actual quantity of works executed under each BOQ item will be jointly
measured and valued at the quoted rate for interim payment purpose.
 A measurement contract might also be appropriate on projects where the design has not been
completed in sufficient detail for bills of quantities to be produced.

It should be possible to describe the works in sufficient detail to determine a programme and to
obtain rates from tenderers. Generally tenderers rates will be based on drawings and
approximate quantities.

The actual contract sum (sometimes called the ‘ascertained final sum’) cannot be determined
when the contract is entered into, but is calculated on completion, based on “re-measurement”
of the actual work carried out and the rates tendered.

Measurement contracts can allow an early start on site, before design is complete, and they
can allow changes to be made to the works relatively easily. However, there is inevitably
some risk for the client as the cost of the works is not known. In effect, the client is taking
the risk for any ‘unknowns’, and whilst this can result in competitive prices from contractors,
the level of uncertainty for the client means that measurement contracts are rare other than
on civil engineering projects.

3. Turnkey Contract

A turnkey contract is a business arrangement in which a project is delivered in a completed

state. Rather than contracting with an owner to develop a project in stages. The developer is
hired to finish the entire project without owner input. The builder or developer is separate from
the final owner or operator, and the project is turned over only once it is fully operational. In
effect, the developer is finishing the project and “turning the key” over to the new owner.

This type of arrangement is commonly used for construction projects ranging from single
buildings to large-scale developments.

 Difference between lump-sum contract & turnkey contract

Under a traditional lump-sum contract, the owner agrees to pay the developer to complete a
project that is built to the owner’s specifications. The owner is given many opportunities to
make decisions throughout the project, and to make changes as needed. In a turnkey contract,
the owner is generally left out of the building process entirely as the developer handles all
decisions and problems related to construction.

A contract of this kind may also be used in the residential home building industry. With a
turnkey agreement, a builder or developer completes both the construction and the finishes in
the home before turning it over to the homeowner. The homeowner is often offered a chance
to select finishes, including curtains, paint colors and carpeting.
 4. Design and Build

Design and Build procurement works on the basis that the main contractor is responsible for
undertaking both the design and construction work on a project, for an agreed lump-sum price.

Design and build projects can vary depending on the extent of the contractor’s design
responsibility and how much initial design is included in the employer’s requirements.
Nevertheless, the level of design responsibility and input from the contractor is much greater
on design and build projects than a traditional contract with a contractor’s designed portion.

Adequate time must be allowed to prepare the employer’s requirements (the employer usually
appoints consultants to facilitate this), as well as time for the contractor to prepare their
proposal and tender price. It is vital that the proposal matches all of the employer’s
requirements before any contract is entered into.

The employer has control over any design elements of the project that are included in their
requirements, but once the contract is let responsibility over design passes to the contractor, so
the employer has no direct control over the contractor’s detailed design.

The contractor can carry out the design in a number of ways. Often they will appoint their own
consultants or use their own in-house team. It is also common practice for the contractor to
take on the employer’s consultants and continue to use them to complete the detailed design
under what is known as a novation agreement.

Other Features of Design and Build Procurement

 As design and construction can be carried out in parallel, the overall programme time of design
and build projects can be shorter. However this depends on how much design the contractor is
responsible for.
 There is reasonable certainty over costs because the contract price is known at the outset.
Provided the employer does not order changes during the construction of the work, the
contractor will be obliged (subject to the conditions) to complete the project for the contract
sum. If the employer does require design or specification changes during the construction
period, the contractor advises as to the effect this may have on costs or additional time needed.
 Design and Build is a relatively low risk procurement option for the employer, in terms of cost
and time. There can be a risk related to design and quality, particularly if the employer’s
requirements were not properly gathered and if insufficient time went into examining the
contractor’s proposal.

5. Cost Plus Contracts

The Cost Plus Contract is a type of a construction contract under which the owner agrees to pay
the complete cost of the materials and labor needed to needed to build the project along with a
 fee for the contractor’s overhead and profit. This contract type is favored where the scope of
work is highly uncertain or indeterminate and the type of labor, material, and equipment
needed to build the project is also uncertain in nature.

This type of contract involves payment of the actual costs, purchases or other expenses
generated directly from the construction activity. Under this arrangement, complete records of
all time and materials spent by the contractor on the work must be maintained. Cost Plus
Contracts must contain specific information about certain pre-negotiated amount (some
percentage of the material and labor cost) covering contractor’s overhead and profit. Costs
must be detailed and should be classified as direct or indirect costs.

 Cost Plus Fixed Percentage Contract– Compensation is based on a percentage of the cost;
 Cost Plus Fixed Fee Contract– Compensation is based on a fixed sum independent the final
project cost. The owner agrees to reimburse the contractor’s actual costs, regardless of
amount, and in addition pay a negotiated fee independent of the amount of the actual costs;
 Cost Plus Fixed Fee with Guaranteed Maximum Price Contract– Compensation is based on a
fixed sum of money. The total project cost will not exceed an agreed upper limit;
 Cost Plus Fixed Fee with Bonus Contract– Compensation is based on a fixed sum of money. A
bonus is given if the project is finished below budget, ahead of schedule, etc.;
 Cost Plus Fixed Fee with Guaranteed Maximum Price with Bonus Contract–Compensation is
based on a fixed sum of money. The total project cost will not exceed an agreed upper limit and
a bonus is given if the project is finished below budget, ahead of schedule, etc.; and
 Cost Plus Fixed Fee with Arrangement for Sharing Any Cost Savings Contract– Compensation is
based on a fixed sum of money. Any cost savings are shared with the buyer and the contractor.
The Cost Plus Fixed Fee construction contract is more predictable than Cost Plus Fixed Fee
Percentage Construction Contract because the contractor’s fee for overhead and profit is, as its
name suggests, predetermined. Regardless of what the cost of construction ultimately amounts
to, the contractor’s fee remains the same. Conversely, the Cost Plus Fixed Percentage
Construction Contract provides more variability with respect to the amount of the contractor’s
fee because it is directly linked to the cost of construction, which in these types of
arrangements is inherently unpredictable. In fact, the Cost Plus Fixed Percentage Construction
Contract arguably incentivizes the contractor to not keep the costs low because its fee
increases with the cost of construction.

The Cost Plus with Guaranteed Maximum Price Contract seeks to eliminate some of the risks
associated with Cost Plus Contracts in that it caps the owner’s overall financial exposure. Thus,
while the contract price is to be determined based on the cost of construction and the
contractor’s fee, owner’s costs are capped at a certain amount.

These types of Cost Plus Construction Contracts are oftentimes grouped with bonus contracts,
built-in contingencies, or cost savings contracts which incentivize the contractor to complete
the project with agreed targets regarding schedule, quality, and budget in exchange for
additional compensation on the project.
6. Unit Price Contracts

Unit Price Contracts are based on anticipated quantities of items which are counted in the
project in addition to their unit prices. The final price of the project depends upon the
quantities required to carry out the work. Generally, these types of contracts are suitable only
for construction and supplier projects which involve accurate identification of different types of
items, but not their numbers, in the contract documents. These types of contracts are
oftentimes used on excavation projects.

7. Time and Material Contracts

Time and Material Contracts are usually preferred if the project scope is not clear, or has not
been defined. The owner and the contractor must establish an agreed hourly or daily rate,
including additional expenses that could arise in the construction process. The costs must be
classified as direct, indirect, mark-up, and overhead. Sometimes the owner might want to
establish a cap or specific project duration to the contractor that must be met, in order to have
the owner’s risk minimized.

8. Item rate contract

For this contract, contractors are required to quote rates for individual items of work on the
basis of schedule of quantities furnished by the client’s department.

9. Percentage rate contract

In this form of contract, the client’s department draws up the schedule of items according to
the description of items sanctioned in the estimate with quantities, rates, units and amounts
shown therein.

10. Labour contract

This is a contract where the contractor quotes rates for the item work exclusive of the elements
of materials which are supplied by the client’s Department.

11. Piece-Work agreement

This is that for which only a rate is agreed upon without reference to the total quantity of work
to be done or the quantity of work to be done within a given period.

12. Target Contract

This is the type of contract where the contractor is paid on a cost-plus percentage work
performed under this contract. In addition, he receives a percentage plus or minus on savings
or excess effected against either a prior agreed estimate of total cost or a target value arrived
at by measuring the work on completion and valuing at prior agreed rates.