brown book

Contract/SubcontractManagement User Guide

Copyright 1999. All Rights Reserved.

TABLE OF CONTENTS Page i of v

1 INTRODUCTION

Purpose

Scope

Related Manuals

2 RESPONSIBILITIES

Assignment of Tasks

3 INITIAL TASKS

Pre-Award Activities

Pre-Construction Meeting

Filing System

Correspondence and Correspondence Control

Insurance and Bonds

Schedule Submittals

4 PERFORMANCE

Changes

Commitment Approvals

Schedule

Requests for Information (RFI'S)

Technical Transmittals

Claims

Backcharges

5 MONITORING/REPORTING

Daily Report

Progress Review and Coordination Meetings

Progress Measurement and Payment

Quality Surveillance

Safety and Health

Environmental

6 CLOSEOUT

TOC TABLE OF CONTENTS *

CONTRACT/SUBCONTRACT MANAGEMENT MANUAL

TABLE OF CONTENTS Page ii of v

6.1 Contract Closeout

6.2 Beneficial Occupancy

6.3 Substantial Completion

6.4 Punch List

6.5 Warranty

7 SPECIAL TOPICS

7.1 Contract Law

7.2 Basis for Claims

7.3 Negotiation

7.4 Interface Coordination

7.5 Labor and Industrial Relations

7.6 Force Accounts

7.7 Liquidated Damages

7.8 Delays and Extension of Time

7.9 Acceleration

7.10 Suspension of Work

7.11 Differing Site Conditions

7.12 Terminations

7.13 Project Environmental Controls

INDEX

FORMS


TABLE OF CONTENTSSECTION 1. INTRODUCTION Page i

Introduction

TABLE OF CONTENTS

1.1Purpose......................................................................................................................................11.2Scope.........................................................................................................................................1

SECTION 1. INTRODUCTION Page 1 of 1

1.1 Purpose This Guide establishes standard practices for managing subcontracts.

1.2 Scope This Guide provides procedures for managing subcontracts.

Many of the procedures in this Guide include a work practice Checklist toprovide a quick overview of the key requirements of contract management.

A clear understanding of the terms and conditions of the contract beingmanaged as well as those of the prime contract is required before any actionprescribed by these procedures is taken.

This Guide should be used in conjunction with approved Project proceduresmanuals.

1 INTRODUCTION


TABLE OF CONTENTSSECTION 2. RESPONSIBILITIES Page i

Responsibilities

TABLE OF CONTENTS

2.1 ASSIGNMENT OF TASKS.......................................................................................................12.1.1Purpose..................................................................................................................................12.1.2Background............................................................................................................................12.1.3Procedure...............................................................................................................................12.1.4Exhibit...................................................................................................................................1

2.1 ASSIGNMENT OF TASKSSECTION 2. RESPONSIBILITIES Page 1 of 11

2.1ASSIGNMENT OF TASKS

2.1.1Purpose The purpose of this section is to provide a comprehensive list of tasks whichshould be performed to manage a contract successfully.

2.1.2Background Effective management of a contract includes making sure that each of theessential task is assigned and performed. The complexity and size of theindividual contract and available project resources will affect the decision ofwhich tasks are essential for the contract. However, certain tasks should beconsidered essential for all contracts (e.g., daily reports, change controlprocedures, correspondence log and files, insurance and safety/healthrequirements.

Contract management is a team effort. Optimizing a projects personnelresources requires that administrative responsibilities be delegated through theproject organization, independent of a groups discipline responsibilities.

2.1.3Procedure The method of communicating and assigning the functional responsibilities foreach contract is by a Division Of Responsibility (DOR) Matrix (Exhibit2.1.3.).

The generic DOR Matrix in this procedure is a guideline for development of aproject or contract-unique DOR to ensure that each of the identified tasks isassigned to specific project personnel. A small project may have one DORfor the entire job or a large project may have separate DORs for eachcontract.

2.1.4 Exhibit Division of Responsibility (DOR) Matrix (Exhibit 2.1.3)

2 RESPONSIBILTIES


Contract No.

Contractor

DIVISION OF RESPONSIBILITY MATRIXV (Exhibit 2.1.3)

ContractFormation -Regional OfficeIssued Contracts

Lead__________

Input to MaterialAssignmentSchedule

Assigned to:__________

Development ofproformadocument anddetermination ofmandatory primecontractflowdowns


Coordinatepackagedevelopment,pre-bid meetingandbidding/award ofcontract


Input to pricingand proposalsection


Prepare MaterialRequisition (MR),technical scope,specifications anddrawings


Identify companyor customerfurnished utilities,facilities andservices


Develop andprovide schedulerequirements andcost estimates forcontract package


Review bids,provide input tobid evaluationcriteria, bidevaluation andbid clarificationmeeting


Pre-bid Meeting

Lead__________

Develop agenda;biddingprocedure;commercialaspects; preparemeeting minutes


Chair andconduct meeting;cover projectscope, workrules, generalconditions; ethicsand code ofconduct


Review changemanagement,insurance,progressreporting andpaymentdocumentation


Review qualitycontrol, fieldengineeringrequirements


Cover siteoperationalrequirements, laborrelations, contractorinterface andcoordination


Describe cost andschedule reportingrequirements


Explain Safetyand Health Plan,and projectrequirements


VFor contracts which the company is managing on behalf of a customer, the DOR should be modified to include customer representative interfaces.

Notes: 1. The Project Manager or Site Manager, in conjunction with the Contracts Manager, is responsible for assignment of the functions listed in this matrix. All tasks must be assigned and the

responsible employee trained and familiar with the task.

2. If the nature of the contract or available project resources dictate that a task will not be assigned and performed, indicate "Not Performed" in the "Assigned To" box. 3. All employees are responsible for providing the necessary support to an employee assigned responsibility for a given task or function.



Division ofResponsibilityMatrix (DOR)

Lead__________

Initialassignments(by name)


Updates


Historical file


ContractPackageTurnover fromRegional Office to Field

Lead:__________

Review turnoverpackage forcompleteness


Composepunchlist ofmissing items inturnover package


Monitor andstatus punchlist


Establishresponsibilityfor resolution ofopen items


Pre-constructionMeeting

Lead__________

Define CompanyAuthorizedRepresentative


Prepare agenda,conduct meeting


Discussconstructionoperationsrequirementssuch as facilities,equipment,coordination


Cover LaborRelationsrequirements


Cover Safety andHealthrequirements


Cover scheduleand progressreportingrequirements


Cover contractadministrativerequirementsincludingsubmittals andinvoicing


Review ethicsand code ofconduct


Pre-constructionMeeting(continued)

Lead________

Prepare meetingminutes andaction/open itemslist


Monitor andstatusaction/openitems




Labor Relations

Lead _______________

AdministerProject LaborAgreement, ifapplicable

Assigned to:

Labor Relations Dept.

Coordinate laborissues withcontractor


Receivecontractor'snotices ofactual/potentiallabor disputes


Record nature,duration andimpact of workstoppages


Correspondenceand Notices

Lead__________

Designaterecipient for allcontractcorrespondence(except as notedbelow)


Logcorrespondenceand maintain files


Assign actions

Assigned to:__ALL_____

Report andfollow up openaction items


Prepare outgoingcorrespondence,log and monitoropen items


Review outgoingcorrespondencefor compliancewith contract andprocedures


Review and signall outgoingcorrespondence


Archiving andpermanentstorage


Requests forInformation(RFI's)

Lead__________

Designaterecipient


Log RFI's,maintain Files


Assign action


Report andfollow-up openaction items


Review and signoutgoing responses


Review RFI's "afterthe fact" forcommercialimpact


File/RouteMiscellaneousDocuments

Lead__________

Contract files


Drawings


Technicaldocuments(other thandrawings)Assigned to:__________

Schedulesubmittals


Payment files


Expediting reports


Inspection reports


Progressphotos


File/RouteMiscellaneousDocuments(Cont'd)

Safety / Securityfiles




Insurance andBonds

Lead__________

Obtain and re-view InsuranceCertificates andbond commit-ment letters forcontractcompliance


Verify validity ofInsuranceCertificates andletters


Verify insuranceand bondingcompanies areon company'sapproved list


Maintain ticklersystem forpolicyexpirations


ContractorTechnicalSubmittals

Lead__________

Develop list ofcontractorsubmittals


Receive and logcontractorsubmittals


Assign actionitems andmonitor statusof open items


Conduct orcoordinatetechnicalreviews


Conduct orcoordinate cost andschedule reviews oftechnical submittals


Approvecontractorsubmittals


Monitor closureof contractorsubmittalrequirements


ContractSchedule

Lead:__________

Set Milestonedates


Obtain initialcontractorschedule


Verify schedulesubmittal meetscontractrequirements


Coordinate sub-mitted schedulewith projectschedule


Approve schedulesubmittal


Monitor progressagainst approvedcontract schedule


Obtain/reviewperiodic scheduleupdates fromcontractor


Review claimedimpactsaffecting criticalpath/milestones


ContractSchedule(Cont'd)

Processcompany or 3rdPartybackchargesarising from latescheduleperformance


Evaluate whethercontractmilestone datechanges arejustified


Issue ChangeOrder to confirmjustified andagreed uponchangesto contractschedule


Issue notices ifcontractmilestone datesare in jeopardy


Direct accelerationto recover schedule


Directacceleration toadvancemilestone datesrelative to contractdates




ProgressPaymentSchedules

Lead__________

Obtain, review forcompliance withcontract


Establish methodand verifyquantity or workmeasurementmethods


Review,compare tocontractschedule anddevelop cashflow curve


Approvequantityprogresscalculations


Invoices andPayments

Lead__________

Check invoicesfor accuracy andthat pricing isaccording tocontract


Verify billed workagrees withapprovedprogress


Verify contractrequirements aremet beforepayments issued


Verify properdeductionsmade forretention,backcharges orother offsets


Approve payments


TechnicalTransmittalsfrom Engineer

Lead__________

Receive copies oftransmittals,prepare ChangeNotices


Sign ChangeNotices


Assemble andpreparetransmittals tocontractor


ContractChanges

Lead__________

Initiate requestsfor changes


Review requestsfor changes


Prepare ChangeNotices, ChangeOrders andAmendments


Sign ChangeNotices


Issue, control andmonitor ChangeNotices


Track costs for allchanges pendingnegotiated settle-ments


Negotiatechanges




ContractorProposals

Lead__________

Receive and logcontractorproposals


Evaluatetechnical merit


Evaluateschedule merit


Evaluatecommercialmerit


Prepare responsesto contractor


Authorizenegotiation limits


Plan and conductnegotiations


Approve finalsettlements


ContractorProposals(continued)

Prepare cost andcommitmentchanges andobtain approvals


Daily Reports

Lead__________

Observe,assemble andreport significantinformation(Prepare DailyReports)


Review DailyReports forcommercialsignificance


Review DailyReports forProjectsignificance


Log and retainDaily Reports


Contractor'sForce, EquipmentUtilization andMaterial UsageReports

Lead__________

Obtain reports


Review andanalyze reports


Log and retainreports


ContractorQuality Program

Lead:__________

Obtain copy ofprogram


Analyze, reviewand approve


Resolve openaction items




QualitySurveillance

Lead__________

Inspect work inprogress andcoordinate withcontractor


Inspect off-site/shopfabrications


Verify inspec-tions complywith contractrequirements


Determineacceptance orrejection of work


Review contractor'sproposedremedial actions


Determine bestremedialaction and directcontractor


Monitor close-outof open qualityissues


Daily Report ofForce Account

Lead__________

Obtain reportsfrom contractor


Summarize dataand report


Approve reports


Retain originalswith contractorinvoices


Backcharges

Lead__________

Identify scope ofbackcharge work;prepare summary


Determine ifwork isbackchargeable


Prepare noticesof backcharge


Obtaincontractorapprovals


Establish uniquecost code forbackcharge workand verify work isproperly coded


Summarize dailydata and reports


Approvebackchargesettlements


Safety and Health

Lead__________

Obtain copy ofContractor'sSafety andHealth Program


Monitorcontractor comp-liance with Safetyand HealthProgram


Obtain name ofdesignatedcontractoremployee forsafety & health


Identify andevaluateviolations


Prepare notices tocontractor


Sign/approveviolation notices


Transmit notices,maintain log andmonitor status ofviolation notices


Verifycontractorcorrectiveactions




Environmental

Lead:__________

Identify projectagencies.environmentalregulations andconstraints


Obtain copy ofcontractor'swrittenEnvironmentalComplianceProgram (ECP),if required andobtain name ofdesignatedcontractoremployee forECP


Prepare apermitting planor matrix

Assigned to:_________

Reviewcontractorpermitrequirementsand monitorcompliance


Identifyenvironmentaldesign criteria andincorporate intodesign basis


Facilitate thepreparation andreview process ofthe EnvironmentalImpactAssessment, ifrequired


Monitor theprogress ofpermit acquisition


Prepare aConstructionEnvironmentalControl Plan(CECP)


Environmental(continued)

Obtain HazardousMaterials andWaste List fromcontractor and, asappropriate,Material SafetyData Sheets(MSDS)

Reviewcontractorproposed use ofhazardous mater-ials and monitorhazardousmaterials andwaste storageand removal

Determinewhethercontractor needsasbestosinspection ifwork includesdemolition orrenovation

Monitor writtennotice to EPA orstatedesignatedagency 10 daysprior todemolition orrenovation asrequired

Develop andimplement anenvironmentaltraining plan

MonthlyProgressReports

Lead__________

Provide data orother information


Summarize andassemble dataand information


Approve andissue monthlyreport


Assigned to:__________Assigned to:__________Assigned to:__________Assigned to:__________Assigned to:__________



ContractProgressReview/CoordinationMeetings

Lead__________

Chair meetings


Prepare agenda,meeting minutesand monitoraction items


Obtain periodicupdates ofcontractor'sworkingschedules


Review mostrecent as-builtschedule data


Evaluate near term(3 week/4 week)look aheadschedules


Coordinatecontractor's planwith othercontractors' plansand Company'sPlan


Resolve scheduleconflicts


Approve update-ed contractorworkingschedules andany changes toworkingschedules


CoordinationMeetings forContractors

Lead__________

Chair meetings


Prepare agenda,meeting minutes,and monitoraction items


Resolvecoordinationconflicts


LiquidatedDamages

Lead__________

Identify triggeringrequirements(e.g. submittals,milestones, etc.)


Monitorperformance


Collect/deductliquidateddamages


Claims orDisputes

Lead__________

Monitor andmitigate potentialclaim situations


Receive and logcontractor claims


Monitor labor,equipment andmaterial usageon a daily basis.


Conduct factfinding


Evaluate technicalmerit


Evaluate schedulemerit


Evaluatecommercial merit


Prepareresponse tocontractor


Claims orDisputes(continued)

Authorizenegotiation andset limits


Plan and conductnegotiation


Prepare costand commitmentchanges andobtain approvals


Approve finalsettlement


Prepare ContractChange Order orAmendment (ifrequired)


Issue ContractChange Order orAmendment andobtain signatures




Final Inspectionand Acceptance

Lead__________

Prepare finalacceptancepackage


Assemble, statuspunch list


Coordinate andperform finalwalk down,recommend finalacceptance


PrepareContractCloseoutChecklist


Coordinatecompletion ofContract CloseoutChecklist


Release of Lienand FinalPayment

Lead__________

Obtaincontractor'scertificate that allsubcontractorsand suppliershave been paidAssigned to:__________

Issue final checkto contractor


Warranty Claims

Lead__________

Prepare warrantyclaim


Notify contractor


Monitor timelyresponse


Evaluateproposedremedial actionand direct bestsolutionAssigned to:__________

Monitor completionof remedial action


Inspect/acceptremedial action



TABLE OF CONTENTSSECTION 3. INITIAL TASKS Page i

Initial Tasks

TABLE OF CONTENTS

3.1 PRE-AWARD ACTIVITIES......................................................................................................13.1.1Purpose..................................................................................................................................13.1.2Procedure...............................................................................................................................13.1.3Exhibits..................................................................................................................................33.1.4Checklists...............................................................................................................................3Pre-Bid Meeting Agenda [SAMPLE] (EXHIBIT 3.1.2-A)..................................................................4Pre-Bid And Site Inspection Visit Contracts Agenda Checklist (EXHIBIT 3.1.2-B)............................5Pre-Award Meeting Agenda [SAMPLE] (EXHIBIT 3.1.2-C).............................................................6Pre-Award Action Checklist (EXHIBIT 3.1.4)...................................................................................7

3.2 PRE-CONSTRUCTION MEETING..........................................................................................93.2.1Purpose..................................................................................................................................93.2.2Procedure...............................................................................................................................93.2.3Exhibits................................................................................................................................103.2.4Checklist..............................................................................................................................10Pre-Construction Meeting Agenda [SAMPLE] (EXHIBIT 3.2.2-A)..................................................11Kickoff Letter To Contractor [SAMPLE] (EXHIBIT 3.2.2-B)..........................................................14Notice of Site Mobilization (EXHIBIT 3.2.2-C)...............................................................................17Pre-Construction Meeting Checklist (EXHIBIT 3.2.4.).....................................................................18

3.3 FILING SYSTEM.....................................................................................................................193.3.1Purpose................................................................................................................................193.3.2Procedure.............................................................................................................................193.3.3Filing Index..........................................................................................................................213.3.4Exhibit.................................................................................................................................21Contract Management File Index [SAMPLE] (EXHIBIT 3.3.3)........................................................22

3.4 CORRESPONDENCE AND CORRESPONDENCE CONTROL.........................................253.4.1Purpose................................................................................................................................253.4.2Effective Correspondence......................................................................................................253.4.3Procedure.............................................................................................................................263.4.4Exhibits................................................................................................................................26Correspondence Log - Incoming (EXHIBIT 3.4.2-A)........................................................................27Correspondence Log - Outgoing (EXHIBIT 3.4.2-B)........................................................................28Correspondence Checklist (EXHIBIT 3.4.5).....................................................................................29

3.5 INSURANCE AND BONDS.....................................................................................................303.5.1Scope...................................................................................................................................303.5.2Insurance..............................................................................................................................303.5.3Bonds...................................................................................................................................303.5.4Exhibits................................................................................................................................323.5.5Checklist..............................................................................................................................32Insurance Certificate Review Instructions (EXHIBIT 3.5.4-A).........................................................33


TABLE OF CONTENTSSECTION 3. INITIAL TASKS Page ii

Certificate of Insurance (EXHIBIT 3.5.4-A - Attachment A)............................................................36Insurance Register (EXHIBIT 3.5.4-B)............................................................................................37Insurance and Bonds Checklist (EXHIBIT 3.5.6).............................................................................38

3.6 SCHEDULE SUBMITTALS....................................................................................................393.6.1Purpose................................................................................................................................393.6.2Procedure.............................................................................................................................39

3.1 PRE-AWARD ACTIVITIESSECTION 3. INITIAL TASKS Page 1 of 40

3.1 PRE-AWARD ACTIVITIES

3.1.1Purpose The purpose of this Section is to provide guidance to jobsite personnel withrespect to their participation in the pre-bid and pre-award process.

Pre-Bid Site Visits and Pre-Bid Meetings are held to provide prospectivebidders an opportunity to evaluate jobsite conditions and to obtain clarificationof bid or work scope requirements.

Bid Clarification Meetings are held with selected bidders prior to contractaward to review their proposals and to allow further clarifications, ifnecessary.

Pre-Award Meetings are held with the selected contractor to assure that aclear, mutual understanding of the work to be awarded has been reached.

3.1.2Procedure The following general guidelines apply to all meetings held prior to award:

Each meeting will have an agenda prepared in advance.

Attendance, pertinent information, questions and answers will all berecorded. Bidders should be advised that for fairness and consistencythey are only to rely on written answers to questions. Meetingminutes will be issued, after internal review, to all meeting attendees.However, meeting minutes will not be used to change any contractrequirement. If a change in the contract requirements is necessary,the change will be implemented by addendum to the bid documents.

All contacts with bidders prior to award of the contract are to becoordinated through the designated representative.

The objective of the meetings held prior to award is to do the best jobpossible to ensure there is a meeting of the minds regarding the contractrequirements.

The Pre-Bid Meeting is an opportunity to elaborate on therequirements as stated in the bid documents. In addition, it provides aforum for an interactive exchange with potential bidders to discussquestions and concerns they may have. (Refer to Exhibit 3.1.2-A fora sample Pre-Bid Meeting Agenda.)

3 INITIAL TASKS



The Pre-Bid Site Visit provides bidders an opportunity to examine thesite and locale in order to reach their own conclusions regarding themany site related factors, e.g., physical conditions/constraints, labormarket, laydown area, access/congestion. (Refer to Exhibit 3.1.2-Bfor a Pre-Bid and Site Inspection Visit Contracts Agenda Checklist.)This is also an opportunity to share any unique or "superior"knowledge you may have regarding the project or site and how suchfactors might affect the contract. If there are separate jobsite visits,each bidder should receive the same information and any questionsanswered must be recorded and shared with all bidders.

Bid Clarification Meetings are held to resolve any questions that mayarise with respect to bids from bidders in the competitive range. BidClarification Meetings may evolve into negotiation sessions. Terms,scope or price issues may arise that require negotiation to resolve.

The Pre-Award Meeting is held only after selection and approval of acontractor, but prior to award (Refer to Exhibit 3.1.2-C for a samplePre-Award Meeting Agenda). The Pre-Award Meeting provides anopportunity to reaffirm and confirm understandings that have beenreached during the pre-bid/bidding stages and an opportunity to resolvedetail level issues that affect the contractors mobilization. Thefollowing should be addressed:

Confirm that all addenda issued during the bidding process havebeen incorporated in the contract scope, specifications anddrawings.

Review the contract drawings to ensure that all changes discussedhave been incorporated in the "Issued for Construction" set.Formally set aside (forever) the "Bid Drawings". Ideally this isaccomplished with a drawing by drawing review of the Issued forConstruction drawings to ensure no design evolution has crept in.If the drawings are not ready for reissue at the time of award, theaward will state that the Bid Issue Drawings (with markups, ifapplicable) constitute the Contract Drawings. If the Bid IssueDrawings are to be used "For Construction" they shall bedesignated "Issued For Construction".

Confirm acceptability of all proposed substitutions.

Confirm any agreements reached with respect to work plan,access, changes in sequence or other schedule constraintsnecessary for the contractor to be able to make its initial schedulesubmittal.

Discuss in detail owner provided materials, services and facilities in



Reinforce the pre-mobilization administrative requirements (e.g.insurance, bonds, pre-job labor conference) that can betroublesome if not handled properly.

Discuss specific activities that must be accomplished to receivemobilization payment, if applicable. (Refer to Section 5.3 entitled"Progress Measurement and Payment.")

Combining Pre-Award and Pre-Construction Meetings

There are some situations where a Pre-Construction Meeting (referenceSection 3.3) and a Pre-Award Meeting can be held as a single meeting.In these cases, the agenda should be adjusted for appropriate contentand the minutes should indicate a joint meeting.

3.1.3 Exhibits Pre-Bid Meeting Agenda [Sample] (Exhibit 3.1.2-A)Pre-Bid and Site Inspection Visit - Contracts Agenda Checklist (Exhibit 3.1.2-B)Pre-Award Meeting Agenda (Exhibit 3.1.2-C)

3.1.4 Checklists Pre-Award Action Checklist (Exhibit 3.1.4)



Pre-Bid Meeting Agenda [SAMPLE] (EXHIBIT 3.1.2-A)

Contract:

Contractor:

1. Introduction of company (and Customer) participantsA. Point of contact for questionsB. Role of participantsC. Brief description of evaluation and target award dateD. Discussions and meeting minutes cannot change requirements, only addendum

2. Review of technical requirements by Engineering representativeA. Overview of scopeB. Interfaces with others' work packages/crewsC. Explain drawing release planD. Explain use of RFI'sE. Quality

3. Review site considerations by Construction representativeA. Safety considerationsB. Access and work areasC. Facilities and utilities providedD. Permits required and permits furnishedE. Labor relations

This presentation may include a jobwalk of the work site.*

4. Review schedule requirementsA. Milestone datesB. Reporting requirementsC. Work execution/ interface

5. Review bid package mechanicsA. Explain Exhibit C forms individuallyB. Explain formation process and content of contractC. Describe written question and answer process and stress that all questions must be in

writingD. Describe bid package addendum processE. Restate due dates and point of contact

6. ConclusionsA. QuestionsB. Minutes will be provided by the company and sent to all attending Bidders, company

Departments and Owner



Pre-Bid And Site Inspection VisitContracts Agenda Checklist (EXHIBIT 3.1.2-B)

1. Site conditions under which the work will have to be performed.__________

2. Access to the project and the work area. __________

3. Contractor laydown area(s). __________

4. Location, capacity and details of Customer/Company -Furnished power, water, fuel,and compressed air. __________

5. Material handling equipment and procedures. __________

6. Site investigation program (i.e. borings, samples, test pits, borrow pits, quarries).__________

7. Customer/Company -furnished permits, contractor-furnished permits and __________generation of hazardous waste.

8. Customer/Company -furnished facilities and schedule for availability (e.g. camp,warehousing, delivery or construction materials or equipment on site, contractorresponsibility for loading, unloading, storing of Customer/Company -Furnishedmaterials). __________

9. Contractor participation in the company's safety and first aid programs.__________

10. Other work which will or may be in progress during the term of the contract.__________

11. Scope of work for the contract and any unusual or difficult construction that maybe required. __________

12. Point out building sites, access roads, borrow pits, and other important sitefeatures. __________

13. Work of a similar nature, if underway on the site, to show the required standardof workmanship. __________

14. On foreign jobs, available communications set-up for on-job and external to job.__________

15. Location of disposal areas for cleanup purposes, and cleanup areas where morethan one contractor is working. __________

16. Full scope of the project and the facilities yet to be performed that will have aninfluence on the work of the contract being bid.__________

17. Details of the work which might involve premium time. __________



Pre-Award Meeting Agenda [SAMPLE] (EXHIBIT 3.1.2-C)

Request for Proposal (RFP) NO._________________

Title:_________________________________________

1. General Introduction

1.1Introduction; Individual greetings and Attendance Sheet signature1.2Purpose; Review and sign finalized contract1.3Distribution; Provide contractor copy of Contract Documents.

2. Contract Document Review

2.1RFP Changes; Discuss agreed changes and indicate where incorporated in the Contract Documents.

A.Specifications; Technical Department (Engineering and Construction) input as required

B.Drawings; Technical Department input as requiredC.Terms and Conditions

2.2Contract Interpretation; Review Terms and Conditions utilizing the General and Special Conditions definitions in Appendix I of the Contracts/Subcontracts Formation Manual.

3. Securities (bonds or bank guarantees) and Insurance

3.1Securities; Remind contractor when they are due or collect securities.3.2Insurance; Remind contractor when they are due or collect insurance certificates.

4. Jobsite Requirements

4.1Jobsite Procedures; Construction to review Jobsite Procedures which bid was based on (key procedures should have been issued at Pre-bid Meeting).

4.2Jobsite Update4.3Labor Agreements and Trade Council Meetings

5. Contract Signing

5.1Contractor Copy; Contractor takes home signed copy.5.2Company Copy; Copied to provide conformed copy distribution and then maintained

in Procurement contract formation file.5.3Customer Copy; Only when the company is agent a third signed original is provided,

otherwise conformed copy(ies) will suffice.

6. Turnover to Contract Administrator



6.1Point of Contact; Exchange notification with contractor under the General Condition titled NOTICES.

6.2Meeting Minutes; Announce meeting minutes will be prepared and distributed to all parties and Company/customer departments in attendance.

Pre-Award Action Checklist (EXHIBIT 3.1.4)

Contract Number:_____________________Contractor:______________________________

ContractScope:________________________________________________________________________

1. Pre-bid: Company/Customer provided materials, facilities and construction servicesreviewed.

YES NO

Comments:

2. Pre-bid: Contract Schedule conforms to project schedule.YES NOComments:

Pre-bid: Special construction support requirements, if any, reviewed.YES NO

Comments:

Bid Evaluation: Bidder understands total scope. YES NO

Comments:

5. Bid Evaluation: Manpower loading reviewed. YES NO

Comments:

6. Bid Evaluation: Bidders schedule and construction plan reviewed and resolved.YES NO

Comments:

7. Bid Evaluation: Substitutions, if any accepted/rejected (list accepted substitutions).YES NO

Comments:

8. Bid Evaluation: Bidder's Safety and Health Plan and experience reviewed anddetermined to be satisfactory?

YES NO

Comments:

. Pre-Award: Pre-Mobilization requirements reviewed and understood.YES NO

Comments:

10. Pre-Award: Issued for Construction drawings reviewed -- all bid periodcomments/changes incorporated.

YES NO

Comments:



Name:_______________________________ Date:______________________________

3.2 PRE-CONSTRUCTION MEETINGSECTION 3. INITIAL TASKS Page 9 of 40

3.2 PRE-CONSTRUCTION MEETING

3.2.1Purpose The goal of the Pre-Construction Meeting is to achieve a mutualunderstanding with the contractor regarding the way in which the contractrequirements will be translated into action.

3.2.2 Procedure A meeting agenda will be developed. (Refer to Exhibit 3.2.2-A for a samplePre-Construction Meeting Agenda.)

There are some situations where a Pre-Construction Meeting and a Pre-Award Meeting (reference Section 3.1.) can be held as a single meeting. Inthese cases, the agenda should be adjusted for appropriate content and theminutes should indicate a joint meeting.

The Pre-Construction Meeting will be conducted prior to the contractor'smobilization.

The contractor will be provided an advance copy of the agenda.

Each participant will be instructed by the meeting leader on the scope oftheir involvement.

Attendance at the meeting will be recorded.

A contract representative will prepare the meeting minutes and formallydistribute them to the contractor.

A contract representative will prepare an Action Items List and assumeresponsibility for verifying closure of open items.

A confirming letter summarizing contract management expectations andcontract provisions of particular significance should be sent to thecontractor. (Refer to Exhibit 3.2.2-B for a sample Kickoff Letter.)

3 INITIAL TASKS



A Notice of Site Mobilization (reference Exhibit 3.2.2-C) should be issued ifthere is a need to notify various departments of impending mobilization of acontractor.

3.2.3 Exhibits Pre-Construction Meeting Agenda [Sample] (Exhibit 3.2.2-A)Kickoff Letter to Contractor [Sample] (Exhibit 3.2.2-B)Notice of Site Mobilization (Exhibit 3.2.2-C)

3.2.4 Checklist Pre-Construction Meeting Checklist (Exhibit 3.2.4)



Pre-Construction Meeting Agenda [SAMPLE] (EXHIBIT 3.2.2-A)

Contract:_____________________________________________________________________________

Contractor:_________________________________________________________________________

I. Introduction and Background

A. Meeting purposeB. Introductions

II. Organization

A. YoursB. ContractorC. Authorized representatives

1. Yours2. Contractor

III. Safety and Health

A. Your policyB. Contractor Safety Action PlanC. First aidD. Fire protection and preventionE. Sanitation and housekeepingF. Review contractor's proposed usage of hazardous materialsG. Hazardous Material handling and disposalH. CitationsI. Drug Testing/Fitness for Duty (as applicable)

IV. Environmental

A. Your PolicyB. Contractor Environmental Control PlanC. Environmental permit requirementsD. Hazardous waste generation and managementE. Asbestos inspection and notificationF. Compliance monitoring

V. Construction

A. Scope



B. Facilities and equipment furnished by you, owner and contractorC. Permits and Environmental Impact StatementD. Work coordinationE. Quality control and inspection

VI. Labor Relations

A. Pre-job conferenceB. Craft accessC. Project Labor AgreementD. Job RulesE. Daily Force ReportF. Reporting disputesG. BadgingH. Work assignmentsI. Jurisdictional procedures (disputes/grievances)

VII. Construction Schedule and Progress Reporting

A. Project/construction schedule Initial submittal and requirements for approval Periodic updates

B. Manning curvesC. Contractor-furnished equipment and material (schedule and coordination)D. Four-week rolling scheduleE. Progress review meetingsF. Coordinating work areas with othersG. Coordination meetings

VIII.Quality Assurance/Quality Control/Quality Surveillance

A. Contractor responsibilitiesB. Your/Owner rolesC. Offsite QA/QCD. Pre-fabrication submittal requirements

IX. Drawings

A. Design drawings and their distributionB. Drawing controlC. Contractor drawing submittals, approvals and schedules

X. Other Submittals

A. Fabrication procedures, if requiredB. Construction proceduresC. QA/QC proceduresD. Health and Safety Plan



XI. Contract Management

A. Correspondence

1. Addressee2. Control and distribution3. Requirement for sequential serialization4. Formal notices

B. Contract Change Procedures

1. Directed Changes (Authorized)2. Notice Requirements and Constructive Changes (risk of proceeding without authorization)3. Discovery of potential errors, omissions and ambiguities and required notifications4. Cost records - all changes5. Proposal requirements6. Duty to proceed7. Dispute resolution8. Claim submittal requirements

C. Insurance and Bonds -contractor submittals

D. Payments

1. Progress payment schedule2. Progress measurement and approval3. Invoice and Certificates of Payment4. Submittals required prior to payment

(see Mobilization Payment Checklist in Section 5.3)5. Force Account Work

E. Backcharges

1. Notices2. Procedure3. Performance

F. Ethics and Conduct

1. Conflicts of Interest2. Gifts

G. Warranty Procedures

H. Project Schedule Reviews and Coordination Meetings

I. Contract Close-out Procedures



Kickoff Letter To Contractor [SAMPLE] (EXHIBIT 3.2.2-B)

To: Smith Construction Company B-SCC-001Subject:COMPANY JOB NO.______________________ DATE

CONTRACT NO.________________________KICKOFF LETTER

Gentlemen:We are pleased to be working on this project with you and look forward to a mutually beneficialrelationship. To ensure that this relationship is a positive one and to avoid any future misunderstandings,we have listed below some of the more important and sometimes overlooked contract articles. Althoughevery provision of the contract is significant, we want to call your particular attention to the following:

Section No.Title Action[Use project article numbers and titles and include clauses which should be highlighted for this particularcontract.]

Authorized Representatives A letter designating the contractor's authorizedrepresentativeand scope of authority should besubmitted to the company prior to the start ofconstruction

Permits The contractor should review this article and confirmthat all required permits, licenses and certifications havebeen obtained prior to the start of construction, and thatall permit conditions are satisfied, prior to, during or afterconstruction.

Labor, Personnel and WorkRules

This provision establishes the contractors obligation tocomply with project labor agreements and provides thebasis for settling jurisdictional disputes. It also establishesthe companys right to remove unacceptable personnel.

Publicity and Prior written permission is required from the companyfor any Advertising announcements, photographs and videos orrelease of any information regarding the contract orProject.

Safety & Health The contractor must comply with the requirements of thecompanys Safety & Health Plan and shall have sole responsibilityto implement its own Safety and Health Program. Please appoint aSafety & Health Representative for your work and inform thecompany of your designation in writing.

Environmental Requirements This provision emphasizes the contractors obligation tocomply with environmental laws, regulations andpractices to minimize adverse impact to the site,personnel on the site and adjacent environmentally



a copy of your Environmental Control Plan prior tocommencing work.

Section No.Title Action

Changes This provision establishes the mechanism for change. Aclear understanding and adherence to this provision fromthe onset of the project is of great importance.

Assignments andSubcontracts

Prior written approval from the company is requiredbefore the contractor assigns the contract or enters intoany subcontracts for the performance of work related tothis contract.

Insurance All insurance requirements must be met before mobilization. Areview of the contractor's coverage with the companyrepresentative is required.

Commencement, Progressand Completion of theWork

The contractor will be required to furnish the resourcesnecessary to meet contract milestones. Progress meetingsand schedule submittals will be utilized to monitor thisprogress. The company has the right to direct thecontractor to take corrective action to restore progress tomeet the schedule.

Contract Schedule A detailed CPM contract is to be submitted within thirty(30) days of contract award and is therefore due on orbefore . The progress reports specified in this articlewill be required as stated.

Measurement for Payment The contractor should review this article carefully.An early meeting with the company to ensure a thoroughunderstanding and complete compliance with this article issuggested. The company will supply the correct formsand review the proper invoicing procedures.

The provisions of the contract relating to changes will be strictly observed. Insofar as possible, changeswill be covered by Change Order prior to execution of the work, but if the demand of time or the nature ofthe work makes that impossible, the company may issue written instructions (Change Notices) to proceedwith the change. Any such work undertaken without such written instructions will be at your own risk andany resulting charges may not be allowed. Change Orders will be issued only for work authorized by thecompany. This policy will be firmly enforced and all invoices for work not covered by the contract or byChange Orders will be returned unpaid.

All correspondence you receive from the company will carry sequential serial numbers. Please ensure thatall letters which you send to the company are likewise numbered. All correspondence to and from thecompany will be required to be identified with the contract number, be dated, and carry a unique sequentialserial number. Letter logs will be exchanged on a monthly basis to ensure no letters have been lost ormisplaced.



All correspondence you receive from the company will carry sequential serial numbers. Please ensurethat all letters which you send to the company are likewise numbered. All correspondence to and from thecompany will be required to be identified with the contract number, be dated, and carry a unique sequentialserial number. Letter logs will be exchanged on a monthly basis to ensure no letters have been lost ormisplaced.

For example:

Letters To:Smith Construction Company

Letters To:Company (Contract No. )

_____________________[Contracts representative] has been assigned for your portion of this project.[Contracts representative] will work with your field supervisory personnel and will be your primary contactwith respect to construction procedures and technical compliance. When you encounter field problemsthat require our assistance, please bring them to the attention of [Contracts representative]. We expectthat with the help of [Contracts Representative] you will be able to resolve such problems, but if anyshould persist, please feel free to contact me.

We will require [three] copies of all correspondence from your designated representative which shall beaddressed to the attention of the, .

If we can otherwise assist you in any way, do not hesitate to call on us. We feel that your success will beour success and we will extend our cooperation and assistance to the fullest degree possible.

Very truly yours,



Pre-Construction Meeting Checklist (EXHIBIT 3.2.4.)

Contract Number:________________________________________Contractor:_____________________

Contract Scope:________________________________________________________________________

1. Need for Pre-Construction Meeting. YES NO

Comments:

2. The date is set PRIOR to contractor mobilization.YES NO

Comments:

3. Agenda issued to contractor and key company participants.YES NO

Comments:

4. Attendance list prepared. YES NO

Comments:

5. Open actions identified. YES NO

Comments:

6. Meeting minutes prepared and issued. YES NO

Comments:

7. Kickoff letter sent to contractor. YES NO

Comments:

8. Notification(s) of contractor mobilization given.YES NO

Comments:

9. Contractor's authorized representative designated.YES NO

Comments:

Name:______________________________________________ Date:___________________________

3.3 FILING SYSTEMSECTION 3. INITIAL TASKS Page 19 of 40

3.3 FILING SYSTEM

3.3.1Purpose The Contract Management Files must contain all pertinent original contractdata and documents and be organized to allow for efficient storage,identification and retrieval.

The files should be integrated into the project's document control program.

3.3.2Procedure A complete contract file set will be maintained for each contract. Thefollowing file subjects, as a minimum, will be included:

Conformed Contract

Change Notices/ Change Orders

Amendments

Internal Approval

Chronological, sequentially numbered correspondence and relevantphone notes of telephone and other conversations

- Outgoing correspondence- Incoming correspondence

Insurance and Bond Certificates

Daily Reports

Inspection Reports

Construction Schedules

Requests for Information

Drawing File

Backcharge File

Progress Payment File

3 INITIAL TASKS



Minutes of Meetings File

Claims File

Warranty File

Closeout File

At the conclusion of the project all closed contract files will be dispositionedin accordance with project procedures. All contract files that may have abearing on open claims or other unresolved matters are to be separatelydispositioned in accordance with project procedures.

GENERAL DISCUSSION OF DOCUMENTATION

A. WHY IS DOCUMENTATION NECESSARY

Documentation, including a monitoring program for receipt, closeoutand maintenance, is of crucial importance to proper contractmanagement. Its significance cannot be over-emphasized.

B. DISCUSSION

1. Concise and complete documentary records always will have asubstantial effect on the resolution of any problems. Frequently,proper documentation will serve as sufficient and clear evidence toresolve problems at the lowest possible level.

It is imperative in the administration of contracts that significantevents be documented in permanent records such ascorrespondence, written notes and memoranda.

It is essential to summarize important discussions and meetings.Notes covering conferences, telephone calls and discussions, shouldgive the date, location, parties involved and important issuesdiscussed. The contract number should also be included on all ofthese items.

2. In order for any piece of documentation to be useful, it must standon its own. Each must contain information to satisfy thefundamental six questions of what, where, when who, how and why.Documentation should be dated and signed providing continuitythroughout the length of a project. In addition to being complete,documentation must be objective.


3.3 FILING SYSTEMSECTION 3. INITIAL TASKS

Page 21 of 40

If no problems materialize on a contract, it may seem the time andefforts documenting a contract's performance was wasted. This is notthe case, as the documentation effort likely contributed significantly tosuccessful management of the contract.

3.3.3Filing Index The Contract Management Files will conform to approved project documentcontrol procedures and utilize the approved project document controlcomputer tracking program. A Sample Contract Management File Index isprovided in Exhibit 3.4.3.

3.3.4 Exhibit Contract Management File Index [Sample] (Exhibit 3.3.3)



Contract Management File Index [SAMPLE] (EXHIBIT 3.3.3)

GENERAL FILES

1.1 File Index1.2 Prime Contract1.3 Contract Plan1.4 Project Master Schedule1.5 Contract Register1.6 Inter-Office Correspondence1.7 Customer Correspondence1.8 Standard Document Distribution1.9 Directives and Special Procedures1.10Site Survey/Soil Reports1.11Site Procedures and Instructions1.12Site Labor Agreement1.13Project F & A Procedures and Audit Programs

CONTRACT FILES

As each contract is awarded and Construction assumes responsibility from Procurement ContractFormation, individual files are established in the following typical major groups:

2.0 CONTRACT2.1 Master Bid Package2.2 Pre-Award Documentation (See Procurement Procedures)2.3 Contract (Conformed Copy)2.4 Change Notice Log2.5 Change Notices2.6 Change Order/Amendment Log2.7 Contract Change Orders/Amendments (Conformed)2.8 Commitment Authorizations2.9 Insurance Correspondence2.10Payment/Performance Bond Correspondence2.11Contract Fact Sheet

3.0 ADMINISTRATION3.1 Backcharge Register3.2 Backcharge Notices3.3 Contractor Schedules

3.3.1Contract Schedule3.3.2Construction Schedules3.3.3Non-Manual Manpower Schedule



3.3.1Contract Schedule3.3.2Construction Schedules3.3.3Non-Manual Manpower Schedule

3.4 Contractor Key Personnel, Addresses, Day/Night Phones3.5 Drawing and Specification Control

4.0COMMUNICATIONS4.1 Correspondence Log4.2 General Correspondence Files

4.2.1Correspondence with Customer4.2.2Out-going Correspondence to Contractor4.2.3Incoming Correspondence from Contractor4.2.4Inter-Office Correspondence

4.3 Log/General Facsimile Files4.4 Contacts File (Discussions/Telephone)4.5 Minutes of Meetings4.6 Memos for Record4.7 Transmittal Memo Receipts

5.0 REPORTS5.1 Daily Force Reports5.2 Contractor Daily Report5.3 Progress Reports5.4 Work Interruption Reports5.5 Inspection Reports5.6 Accident Reports5.7 Progress Photo/Video File

6.0 CONTRACTOR PROCEDURES AND PROGRAMS6.1 Safety (Personnel, Equipment, Traffic)6.2 Security6.3 Environmental Compliance6.4 Fire Protection6.5 Inspection6.6 Training6.7 Housekeeping

7.0 CONTRACTOR EQUIPMENT7.1 Equipment Schedule7.2 Control Procedures7.3 Customer/Company -Furnished Tools and Equipment

8.0 PAYMENTS8.1 Contractor Invoices/Applications for Payment



8.2 Quantity Verifications (Field Engineering)8.3 Cash Flow/Schedule "S" Curve8.4 Contract Financial Status Sheet8.5 Contractor Forecasts8.6 Contract Trend Reports (if required)8.7 Certified Payroll Reports (if required)


3.3 FILING SYSTEMSECTION 3. INITIAL TASKS Page 25of 40

9.0 ACCEPTANCE AND CLOSEOUT9.1 Final Inspection Reports9.2 Punch List Reports9.3 Taking Over Works9.4 Completion Certificates9.5 Maintenance Certificates9.6 Final Acceptance9.7 Closeout

10.0WARRANTIES10.1Log10.2Vendor Backcharges10.3Site Backcharges or Rework Accounts

11.0 CLAIMS11.1Contractor Proposal/Claims Log11.2Contractor Proposals (Claims)11.3Claims Analysis11.4 Statements/Depositions (Personnel Concerned)11.5Claims Correspondence

11.4.1Customer Correspondence11.4.2Company/Contractor Correspondence

11.6Claims Reports to Management11.7Claims Settlement Agreements

12.0CONTRACTOR PERFORMANCE EVALUATION/HISTORICAL12.1 Fact Sheet and Historical Record12.2 Performance Evaluation

3.4 CORRESPONDENCE AND CORRESPONDENCE CONTROLSECTION 3. INITIAL TASKS Page 25 of 40

3.4CORRESPONDENCE AND CORRESPONDENCECONTROL

3.4.1Purpose Contract correspondence control is designed to ensure that allcorrespondence to and from a contractor is accounted for, required repliesare sent and responses received, correspondence is cross-referenced,correspondence can be quickly identified and retrieved, and actionrequirements generated by correspondence are closed out on a timely basis.

3.4.2EffectiveCorrespondence

Make an exceptional effort to eliminate any chance of communications beingmisunderstood. Clear communication is essential to contract managementsuccess. Everyone on the project team should understand that all contractualcommunications may have legal ramifications, or at a minimum, be one ofthe primary tools available to reconstruct facts if a dispute arises.

Correspondence should have a well defined purpose. Separate topics shouldbe addressed in separate letters. Clear, simple language should be used.Ideas should be presented logically.

To maximize the value and effectiveness of correspondence:

Serialize all contract correspondence

Log all contract correspondence to ensure accountability for actionand timely responses.

Coordinate all outgoing correspondence through one individual percontract

Periodically exchange logs with contractors to secure agreement onopen and closed items

Write a separate letter for each subject

Keep all correspondence objective and factual (avoid inflammatorylanguage or style)

Clearly state the subject in all correspondence

Identify all referenced items by title, date or revision

Identify all enclosures

Establish a minimum response time for all communication andclearly state this in the correspondence

3 INITIAL TASKS



Outgoing correspondence which requires no response should sostate

Show "blind" distribution on the file copy

Date stamp all incoming correspondence to establish chronology

Acknowledge every letter by one of the following:

-Answer as required by incoming letter

-Interim reply if full response cannot be provided within theestablished time period and then maintain an action item list toensure follow up.

3.4.3Procedure Correspondence to and from each contractor will be sequentially numberedfor each contract.

All outgoing and incoming correspondence will be logged, action/replyresponsibility assigned, and replies recorded. Correspondence control logsshould be checked weekly to ensure that all open items are taken care of andto provide follow-up. Larger projects are encouraged to electronically "sort"the logs and distribute an open correspondence report weekly as a controldevice. Ideally the project should exchange logs monthly with the contractorto confirm agreement on open and closed items as well to confirm receipt ofcorrespondence requiring no response.

Original documents will be retained in the Contract Management Files andonly copies will be circulated.

Email, while an attractive convenience, is not to be used for contractcorrespondence unless each transmittal is serially numbered, logged, signed andcontrolled in the same manner as hard copy correspondence.

By establishing designated points of contact, you can control the flow ofcorrespondence. The authorized signatory should be identified to the contractorin writing and no others should sign correspondence. However, various people onthe project team may originate correspondence. An appropriate counterpart in thecontractor's organization should be identified as contractor's addressee. (Multipleoriginators and multiple addressees results in lack of coordination andconsistency.)

Contract management correspondence control will conform to approvedproject document control procedures and utilize the approved projectdocument control computer tracking program. A Sample ContractManagement File Index is provided in Exhibit 3.3.3.

3.4.4Exhibits

3.5.5 Checklist

Correspondence Log - Incoming (Exhibit 3.4.2-A)Correspondence Log - Outgoing (Exhibit 3.4.2-B)

Correspondence Checklist (Exhibit 3.4.5)

(Outgoing)Correspondence Log

COMPANY: JOB NO.:

CONTRACT NO.: CONTRACTOR:

NOTE: ENTER ONLY ONE LETTER PER LINE

LETTER REQUESTREPLY

DATE ACTION CONTRACTOR

SERIAL NO. DATED ANSWERING LETTERSUBJECT NO YES REPLY ASSIGNED

Expedition



Correspondence Checklist (EXHIBIT 3.4.5)

Contract Number:________________________ Contractor:___________________________

Contract Scope:________________________________________________________________________

1. Correspondence is objective/factual and has the appropriate tone.YES NO

Comments:

2. Correspondence is input to correspondence/document control system.YES NO

Comments:

3. All letters to contractor including email are being logged and tracked.YES NO

Comments:

4. All letters from contractor, including email are being logged and tracked.YES NO

Comments:

5. Open items are identified. YES NO

Comments:

6. Open items are statused and updated (at least bi-weekly). YES NO

Comments:

7. There are no past due action due dates. YES NO

Comments:

8. No letter numbers are missing. YES NO

Comments:

9. YES NO

Comments:

Name:___________________________________ Date:___________________________

3.5 INSURANCE AND BONDSSECTION 3. INITIAL TASKS Page 30 of 40

3.5 INSURANCE AND BONDS

3.5.1Scope This procedure outlines the requirements for obtaining, verifying andmonitoring contractor Certificates of Insurance and bonds.

3.5.2Insurance Certificates of Insurance are submitted by a contractor to confirm that theinsurance policies required by the contract have been obtained. Becauseinsurance policies can expire by their terms, their expiration dates must bemonitored and policies extended as necessary.

The contractor should submit a Certificate of Insurance or otherdocumentation of insurance meeting contract requirements immediatelyfollowing contract award but no later than contractor's site mobilization.Contractors without complete and satisfactory Insurance Certificates willnot be permitted to mobilize. Furthermore, if during the course of the work,the contractor's insurance expires or is significantly modified, the contractormust be denied access to the site until the required insurance is in place.

Verify that the certified insurance coverage conforms to the contractrequirements and is valid. (Refer to Exhibit 3.5.4-A for Insurance CertificateReview Instructions.)

After the contractor starts work, Insurance Certificates will be monitored toverify that the coverage is maintained in force and proper renewal isobtained by the contractor.

An Insurance Register with expiration dates will be maintained (referenceForm 3.5.4-B).

An early notification system (tickler) which identifies 45 days in advancethose Certificates which require renewal will be maintained.

3.5.3Bonds A performance bond is a surety company's guarantee that the obligationsthat the contractor undertakes pursuant to the contract will be performed,including those that extend past final acceptance (e.g., warranty). Apayment bond ensures that the contractor's suppliers and subcontractors arepaid for the work and/or material they supply. Performance and paymentbonds are typically issued together as a package for a single premium.Bondingrequirements, if any, are contained in the contract. Performance andpayment bonds should be in a penalty amount equal to 100% of the contract.There is no reduction in bond premium for a reduced bond penalty.

3 INITIAL TASKS



The contractor should submit performance and payment bonds which meetcontract requirements immediately following contract award. Typically, thesuccessful bidder's bid bond is not returned until receipt of satisfactoryperformance and payment bonds. Note that bonds do not normally need tobe updated during the course of the work. If extra work is added that isequivalent to another contract, it will be necessary to obtain another bond tocover this work.

Verify that the bonds conform to the contract requirements and have beenissued.

Note that while Change Notices do not normally necessitate notification tothe bonding company, Contract Amendments for extra work outside of theoriginal scope of the contract may require specific notification to the bondingcompany to ensure coverage of this extra work.

Verify that the bond(s) conform to the contract requirements. The suretyshould be on the U.S. Department of Treasury's approved list of sureties.

When a contractor is required to obtain a performance/payment bond, thepremium is based on the final contract price. Therefore, an adjustment to thepremium will apply when pricing change orders. Performance and paymentbonds typically provide coverage for the contractually specified warrantyperiod without an additional premium.

Advance payments to a contractor in excess of what has been earned underthe contract should not be made. Such payments may be construed to be"loans" to the contractor and therefore not credited toward the contractbalance owed by the bonding company.



An Advance Payment Bond is a special category of payment bond (unrelatedto the standard performance/payment bond) which is sometimes used oninternational projects but rarely in the U.S. An Advance Payment Bondassures that moneys advanced to the contractor will be used in connectionwith the project. Such a bond may be required prior to making advancepayments to the contractor.

A Maintenance or Warranty Bond is usually written by the surety thatprovided the Performance and Payment Bond and provides an extendedwarranty for defects in materials and workmanship. Its cost is significantlyless than that of the Performance and Payment Bond. The normal penaltyamount is 10% of the contract price.

When a contractor's supplier or a lower-tier subcontractor has filed a lienagainst the owners property, you may require the contractor to purchase arelease of mechanic's lien bond to release the lien. Thesupplier/subcontractor's lien is then attached to the bond allowing the lien tobe removed from the customer's property. In effect, these bonds allow theproject to be turned over to a customer without any encumbrances and allowthe contractor to receive its retention pending resolution of the dispute withits suppliers and subcontractors. Such bonds will typically have a penaltyamount of 125% to 150% of the lien obligation.

In some jurisdictions, to be able to file a lien the contractors must submit aPreliminary Notice of Intent to file a lien at the start of work. ThePreliminary Notice looks very much like a lien and can be alarming, but hasno adverse consequences.

Reference Special Topics Section 7.2 "Basis for Claims" pages 27 and 28.

3.5.4 Exhibits Insurance Certificate Review Instructions (Exhibit 3.5.4-A)Insurance Register (Exhibit 3.5.4-B)

3.5.5 Checklist Insurance and Bonds Checklist (Exhibit 3.5.6)



Insurance Certificate Review Instructions (EXHIBIT 3.5.4-A)

PURPOSE

To establish responsibility for acquiring initial contractor submitted Certificates of Insurance and toprovide guidelines for determination of the validity of such Certificates.

DEFINITIONS

A Certificate of Insurance establishes that the contractor has appropriate insurance to cover claims forwhich the contractor is responsible.

REQUIREMENTS

Attachment A is a sample Insurance Certificate. The sections below provide explanations anddirections. The numbers also correspond to the sections on the Certificate.

1.This is the date the Certificate of Insurance was typed.

2.The name and address of the agent or broker who placed the insurance coverage for the contractor.

3.The name and address of the contractor who provided the evidence of insurance on the Certificate.

Verify that the name of the contractor is the same as the name in the contract.

4.The names of the insurance companies providing the insurance for the insured.

When there is any question about a contractor purportedly having valid insurance coverage,contact the insurance company directly referencing the policy number.

5.Letter designation will indicate which insurance company is providing insurance coverage from thelist of insurance companies under Companies Affording Coverage.

6.Type of Insurance identifies the specific insurance being provided.

Commercial General Liability (formerly Comprehensive General Liability) is the insurancegenerally available to contractors to cover third party liability arising from their operations. Thistype of policy includes the following coverages:

Premises and Operations Products and Completed Operations Contractual Liability Broad Form Property Damage Explosion, Collapse and Underground Hazards Personal Injury Liability Cross Liability or Severability of Interest Clause

The company requires that the Commercial General Liability policy be on an OccurrenceForm. This form provides coverage for a loss that happened during the policy term even if



Cross Liability or Severability of Interest Clause

The company requires that the Commercial General Liability policy be on anOccurrence Form. This form provides covera

brown book

Documents

contract law7

contract closeout6

prime contract

assignment of tasks2

assignment of taskssection

quick overview

punch list6

warranty7 special topics7