Assignment No: 2

Type of contracts and their application

to the built environment

Unit 23: Contracts & Management

Student Name :J.A.M.Jeewandara

Batch no. :939
SCoT ID: 510147

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BTEC LEARNER ASSESSMENT SUBMISSION AND DECLARATION

When submitting evidence for assessment, each learner must sign a declaration confirming that the work
is their own.

Learner Name: J.A.M.Jeewandara

Assessor Name: Mr. Akila Deemantha

BTEC Programme Title: Construction and the built environment

Unit or Component Number and Title: Unit 23: Contracts & Management

Assignment Title: Assignment 2: Type of contracts and their application

to the built environmentRequirements for a Contract

Date Assignment Submitted: 07.06.2023

Please list the evidence submitted for each task. Indicate the page numbers where the evidence can be
found or describe the nature of the evidence (e.g. video, illustration).

Assignment task reference Evidence submitted

Learner declaration
I certify that the work submitted for this assignment is my own. I have clearly referenced any sources
used in the work. I understand that false declaration is a form of malpractice.

Learner signature: Date:-07-June-23

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Content
Introduction………………………………………………………………..……………………..03
Analyze the factors that influence the selection of a contract used to control and manage the
project…………………………………………………………………………………………....04
Revise Standard contracts in meeting the requirements of a
client…………………...………………………………………….……………………………..06
Present the rationale for defining selected terms and conditions in the preparation of a
contract……………………………………………………………………………………….......07
References………………………………………………………………..………………………09

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Introduction
As a trainee civil engineer working for a prestigious construction consultancy firm, I have been
entrusted with a crucial responsibility: advising Movenpick Hotels, an esteemed international
hotel chain group, on the selection and formation of a contract for their upcoming 5-star hotel
project in Battaramulla. Our consultancy firm has been awarded the consultancy services for this
high-profile project, and with the contract between Movenpick Hotels and the Main Contractor,
Build Pvt Limited, scheduled to be signed within the next month, time is of the essence.
In collaboration with my colleagues and under the guidance of our Senior Consulting Engineer, I
am delving into the critical aspect of contract selection and formation for this prestigious hotel
project. Movenpick Hotels is seeking our expertise to ensure that the contractual requirements
are met to the highest standard, ensuring a successful and efficient construction process. This
informative report aims to provide valuable insights into the specific contractual considerations
that need to be fulfilled to meet the project's unique needs and requirements.

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Analyze the factors that influence the selection of a contract used to
control and manage the project
A number of factors significantly impact the selection of a contract for controlling and managing
a construction project. These factors can vary depending on the specific project, the parties
involved, and the desired project outcomes.
The size and complexity of a construction project play a crucial role in contract selection.
Large-scale projects with multiple phases, intricate designs, or specialized technical requirements
necessitate comprehensive contracts that cover all aspects, including project objectives,
deliverables, quality standards, and performance criteria [1]. As complex projects often involve
higher risks due to uncertainties, the contract must appropriately allocate these risks between the
involved parties.
Managing change orders is critical, and clear processes for documenting and approving changes
should be included in the contract [2]. Additionally, the contract should define specific technical
requirements, adherence to specific standards, and the subcontracting of specialized trades. To
ensure effective project management, robust project controls and reporting mechanisms should
be established to monitor progress, costs, and compliance with specifications.
When selecting a construction project contract, risk allocation becomes crucial. This involves
identifying and assessing potential risks such as planning uncertainties, unforeseen site
conditions, delays, regulatory changes, and financial risks. Different contract types, such as
lump-sum contracts, cost-plus contracts, and design-build contracts, have varying implications
for risk allocation and management [3]. Thus, the chosen contract should match the project's risk
profile and the desired risk allocation strategy. Risk sharing arrangements should clearly define
the responsibilities and obligations of the owner, contractor, and other stakeholders involved. The
contract should also specify insurance requirements and indemnity provisions and include
provisions for contingency plans to manage contingencies and risks effectively. Performance
guarantees and warranties can further ensure that the contracting parties fulfill their obligations.
Furthermore, including dispute resolution mechanisms, such as mediation, arbitration, or
litigation, in the contract can help efficiently manage disputes and avoid significant project
disruptions.
Time pressure significantly influences contract selection for construction projects. Contracts
must align with the desired project completion timeline, encompassing provisions for project
duration, start and finish dates, and milestones. To maintain progress and avoid delays, the
contract may include damage and delay provisions as incentives for timely project completion.
Time-related performance guarantees, such as meeting milestones or critical path schedules, can
help ensure project progress stays on track [4].
Effective contracts should also take into account program management and reporting
requirements to enable timely decision-making and mitigate potential delays. Contractors should
execute change orders promptly to avoid disruption, and the contract may require time impact

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analyses to evaluate the effects of project schedule changes. Force majeure provisions covering
unforeseen events or circumstances beyond the parties' control should be included to allow for
extensions. In some cases, contracts may even incorporate time-related incentives to motivate
contractors to complete the project ahead of schedule, reducing construction duration and
meeting tight time constraints.
Costs and payment terms are critical considerations in contract selection for construction
projects. The chosen contract should align with the project budget and cost control objectives.
Different contract types, such as lump-sum contracts, cost-plus contracts, or unit price contracts,
can have varying effects on cost management. Thus, the contract must specify payment terms,
timing, and provisions for prepayments, holdbacks, and retentions. To account for cost
fluctuations and changes, the contract should include provisions for modifications or change
orders to ensure project costs remain within budget and that effective cost management is in
place. Performance-based payment incentives can also motivate contractors to achieve project
goals. Thus, the contract should include clear payment documentation and certificates, provide
payment security or guarantees, and consider currency considerations. Additionally,
incorporating clear dispute resolution mechanisms can help prevent payment conflicts from
interfering with project progress and provide a framework for effective dispute resolution [6].
Legal and regulatory requirements significantly influence the selection of a construction project
contract. These requirements encompass various aspects of the project, including laws, building
codes, permits, licenses, and environmental regulations. The contract should clearly define the
obligations, responsibilities, and liabilities of the parties regarding safety standards,
environmental protection, labor laws, and anti-corruption measures. Utilizing standard forms like
FIDIC, NEC, AIA, or JCT is recommended due to their relevance, applicability, and established
legal precedent. Legal requirements can also impact the allocation of risks and responsibilities
between the contracting parties. Thus, the contract must be structured to align with legal
requirements to ensure enforceability and protect the rights and interests of all parties involved.
Moreover, the contract should be drafted and executed in compliance with these legal
requirements, including authenticated signatures. Complying with insurance and surety
obligations can help mitigate risks and provide financial protection to the parties involved. The
contract should also consider intellectual property and proprietary rights, addressing copyrights,
patents, trademark ownership, usage rights, and confidentiality obligations.
Past experience and industry practices also significantly influence contract selection for
construction projects. Successful experiences with specific contract types may lead to a
preference for contracts that effectively mitigate risks. Industry practices and standards
developed by professional organizations or trade associations can serve as a starting point for
tailoring contracts to specific project needs. Past relationships with contractors, subcontractors,
and other stakeholders can also influence contract selection. Experience with similar projects can
guide contract choices, as past projects may contain arrangements that address similar
challenges. Drawing insights from past experiences can provide valuable lessons on what
worked well and areas for improvement from previous projects. Being aware of industry trends
and innovations can also impact contract selection. As the construction industry evolves, parties

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can enter into contracts that reflect this progression, leveraging the latest industry practices to
enhance project control and management.

Revise Standard contracts in meeting the requirements of a client

Whereas Build Construction Pvt Limited, the Main Contractor, possesses the necessary
expertise, qualifications, and resources to undertake the Project. In mutual agreement, the Client
and the Main Contractor enter into this Contract to define their respective rights, obligations, and
responsibilities concerning the Movenpick 5-star hotel construction.
Therefore, in consideration of the covenants and agreements stated herein, the parties hereby
concur as follows:
1.0 Scope of Work:
1.1 Build Construction Pvt Limited, as the Main Contractor, commits to providing all essential
labor, materials, equipment, and services required for the successful completion of the
Movenpick 5-star hotel, adhering to the agreed project specifications and drawings.
2.0 Project Timeline:
2.1 The Main Contractor shall commence the construction work on 15/08/2023 and is obligated
to complete it within 24 months from the commencement date, unless otherwise mutually agreed
upon in writing.
3.0 Contract Price and Payment Terms:
3.1 The total contract price for the Project is Rs. 15 billion.
3.2 The Contract Price shall be disbursed to Build Construction Pvt Limited in accordance with
the specified payment schedules.
3.3 Milestone Payments:
The contract shall define specific milestones, and payments shall be made accordingly upon
successful completion of each milestone. The parties shall mutually agree on the percentage of
work completion required for each milestone payment.
3.4 Retention:
The Client shall retain [insert agreed percentage] of each milestone payment as retention to be
released upon satisfactory completion of the project and the rectification of any defects during
the defects liability period.
3.5 Payment Certification:
Payments shall be certified by the Client's representative within [insert agreed number of days]
from the submission of a payment application by the Main Contractor.

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3.6 Dispute Resolution Mechanism for Payments:
In the event of any dispute related to payments, the parties shall attempt to resolve the issue
amicably through negotiations. If a resolution cannot be reached, the dispute shall be subject to
mediation or arbitration as per the laws of the Sri Lanka.
4.0 Variations and Change Orders:
4.1 Any modifications to the scope of work or specifications require written documentation and
agreement from both parties before implementation.
4.2 The procedure for pricing and managing variations and change orders shall follow the details
provided in the contract.
5.0 Project Delays:
5.1 In case of delays caused by the Client or events beyond the Main Contractor's control, the
contract time shall be extended accordingly, and the Contract Price adjusted as necessary, subject
to mutual agreement.
6.0 Insurance and Indemnity:
6.1 The Main Contractor shall maintain sufficient insurance coverage, including public liability,
professional indemnity, and works insurance throughout the Project duration.
7.0 Dispute Resolution:
7.1 Any disputes arising from this Contract shall be resolved through amicable negotiations
between the parties.
7.2 If amicable negotiations fail, mediation or arbitration may be pursued, as agreed upon by
both parties.
8.0 Applicable Law and Jurisdiction:
8.1 This Contract shall be governed by and construed following the laws of Sri Lanka.
8.2 Any disputes arising under or in connection with this Contract shall be subject to the
exclusive jurisdiction of the courts of Sri Lanka.
Please be aware that the provisions mentioned above are of a general nature and may need
further tailoring to align with the specific requirements and objectives of the Movenpick 5-star
hotel project in Battaramulla. We highly advise that you carefully review this revised contract
with the assistance of legal counsel to ensure its compliance with applicable local laws and
regulations. Customizing the contract in accordance with your project's unique needs will help
safeguard your interests and facilitate a successful construction process.

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Present the rationale for defining selected terms and conditions in the
preparation of a contract
The rationale for defining selected terms and conditions in the preparation of a contract is of
utmost importance to establish clear guidelines, mutual understanding, and effective risk
management for all parties involved in the contractual agreement. Properly defining the terms
and conditions helps to outline the rights, obligations, and responsibilities of each party,
mitigating potential disputes and ensuring the successful execution of the project. This
comprehensive approach ensures that the contract aligns with the specific requirements and
objectives of the project, leading to a transparent and collaborative working relationship.
According to [7], clearly defined terms and conditions in a contract are essential for minimizing
ambiguity and uncertainty, thus fostering effective project communication and collaboration.
Similarly, [8] argue that well-defined contract terms contribute to efficient risk allocation and
management throughout the construction process, enhancing project resilience and success.
Furthermore, [9] highlight that defining key aspects such as payment terms, scope of work,
timelines, and quality standards in the contract helps create a strong foundation for a successful
project, promoting client satisfaction and contractor performance. By carefully considering and
defining the various terms and conditions, the contract becomes a valuable tool for ensuring
project success, compliance with regulations, and fair distribution of risks and responsibilities
[10] [11]. Moreover, the proper definition of contractual terms allows for effective dispute
resolution and reduces the likelihood of costly conflicts during project execution [12].
Ultimately, a well-prepared contract with defined terms and conditions paves the way for a
collaborative and harmonious construction process that meets the client's specific needs and
expectations [13] [14].
For the upcoming 5-star hotel project in Battaramulla following the rationale for defining
selected terms and conditions in the preparation of a contract can be noted,

Payment Terms and Conditions:

Rationale: The selection of clear and well-defined payment terms and conditions is paramount in
construction contracts to ensure a harmonious financial relationship between the parties
involved. By providing transparency and fairness, these terms establish a shared understanding
of valuing and certifying the work performed. Moreover, a specific payment schedule with
well-defined milestones helps maintain project momentum and budget adherence. It is vital to
consider different contract pricing methods, such as lump sum, cost-plus, or unit rates, and to
address issues like retention amounts and claims resolution to avoid potential payment disputes.
Time-Related Conditions:
Rationale: Time-related conditions play a crucial role in construction projects, influencing
project schedules and timely completion. An agreed project timeline with clear commencement
and completion dates ensures project progress aligns with expectations. Additionally, procedures
for handling extensions of time due to uncontrollable events and addressing potential delays

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through liquidated damages are essential to promote accountability. Proper documentation and
dispute resolution mechanisms enhance project efficiency and ensure timely completion.
Variations and Change Orders:
Rationale: Given the dynamic nature of construction projects, variations and change orders are
common occurrences. Clearly defining the process for submitting, reviewing, and approving
modifications is critical to maintain project clarity and minimize disruptions. A well-structured
mechanism for valuing variations and change orders, as well as their impact on contract price
and timeframes, helps manage evolving project requirements effectively. Moreover, provisions
for dispute resolution contribute to maintaining a positive working relationship between parties.
Liquidated Damages for Delay:
Rationale: Time-related conditions are essential in construction projects, and delays can have
significant implications. By defining liquidated damages for delays in the contract, the parties
agree on a predetermined amount that the Main Contractor will be liable to pay the Client for
each day of delay. This provision incentivizes timely project completion and ensures
accountability for meeting the agreed-upon project timeline. Furthermore, it helps to avoid
disputes arising from the calculation of actual damages caused by delays.
Change Order Procedure:
Rationale: Given the dynamic nature of construction projects, changes to the scope of work are
common. By clearly defining the change order procedure, the contract establishes a structured
mechanism for submitting, reviewing, and approving modifications. This helps maintain clarity
in project scope, minimizes disruptions, and provides a basis for valuing variations and change
orders. A well-defined change order process also contributes to efficient project management,
cost control, and client satisfaction.
Payment Schedule and Retention:
Rationale: Payment terms and conditions are fundamental to a harmonious financial relationship
between the Client and the Main Contractor. By establishing a specific payment schedule based
on milestone achievements, the contract ensures that the Main Contractor receives timely
payments for work completed. Moreover, defining retention amounts (a portion of each
milestone payment retained by the Client) incentivizes the Main Contractor to address defects
during the defects liability period, fostering a focus on quality and timely rectification.
Collaborations between Contractors and Subcontractors:
Rationale: Collaboration between contractors and subcontractors is essential for many
construction projects. In this context, the contract must address the Main Contractor's obligations
concerning subcontractors to ensure smooth project execution. This includes aligning
subcontract agreements with the main contract and establishing clear communication channels.
Defining roles, responsibilities, payment terms, quality requirements, and dispute resolution
mechanisms fosters a cohesive and productive project team.

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Selecting the most appropriate contract for the construction of the Movenpick 5-star hotel in
Battaramulla requires careful consideration of various factors. By analyzing and comparing
payment terms, time-related conditions, variations and change orders, and collaborations with
subcontractors, a comprehensive and tailored contract can be devised. Ensuring compliance with
legal regulations and addressing specific project requirements will contribute to successful
project management and delivery.

References
[1] Chartered Institute of Building. (2019). Code of Practice for Project Management for
Construction and Development (6th ed.). John Wiley & Sons.
[2] Forsythe, P. (2018). Construction Contract Selection and Risk Allocation. Proceedings of the
Institution of Civil Engineers - Management, Procurement and Law, 172(1), 3-10.
doi:10.1680/jmapl.18.00005
[3] Uher, T. E. (2016). Standard Forms of Construction Contracts: Red Book (4th ed.). Chartered
Institute of Building.
[4] Enshassi, A., Mohamed, S., & Mustafa, M. A. (2018). Factors Influencing Selection of
Contract Type in the Gaza Strip Construction Industry. International Journal of Construction
Engineering and Management, 7(2), 25-36. doi:10.5923/j.ijcem.20180702.01
[5] Halpin, D. W., & Woodhead, R. W. (2018). Construction Management (5th ed.). John Wiley
& Sons.
[6] Rycroft, M., & Walter, A. (2019). The Role of Construction Project Management in the Built
Environment. Routledge.
[7] A. AbouRizk and T. Halpin, "Analysis of ambiguous contract terms," Journal of Construction
Engineering and Management, vol. 130, no. 2, pp. 145-152, 2004.
[8] C. Arditi, S. A. Polat, and T. S. Dikmen, "Factors affecting contractor performance on
lump-sum projects," Journal of Construction Engineering and Management, vol. 131, no. 3, pp.
273-282, 2005.
[9] J. Smith and P. E. Love, "Uncertainty and project management: Beyond the critical path
mentality," Project Management Journal, vol. 32, no. 1, pp. 5-12, 2001.
[10] N. Carr and K. Tah, "An integrated model for risk management," International Journal of
Project Management, vol. 19, no. 8, pp. 435-444, 2001.
[11] M. Mahamid and K. Dainty, "A case study of risk management in practice," International
Journal of Project Management, vol. 26, no. 1, pp. 75-87, 2008.
[12] M. Kamali and M. Eadie, "Construction contract dispute resolution practices in the UK,"
Engineering, Construction and Architectural Management, vol. 17, no. 3, pp. 253-271, 2010.

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[13] Q. Liu, X. Wang, and Y. Ning, "Risk assessment and management for international
construction projects: A case study," International Journal of Project Management, vol. 31, no. 6,
pp. 820-830, 2013.
[14] Z. Zhang, J. K. Y. Ho, and C. S. Poon, "Assessment of clients’ objectives and criteria for
construction project success in China," Building and Environment, vol. 147, pp. 1-12, 2019.

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