Contracts are the basis of all projects. Together with the drawings and specifications they make up the
contract documents. The contract documents form a written agreement between all parties performing
work on a project.
There are many different types of contracts, Prime, Subcontract and Purchase Orders. The form of the
contract will vary depending on the project and the owner.
Prime Contracts
Definition
The prime contract forms the written agreement between the owner and the prime (general) contractor. The
Prime Contract will give information on the Contract Price, Project Duration, Bonding, Insurance, Liquidated
Damages, Progress Billing, Changed conditions and other legal information related to the project. The
contract should also reference the Specifications and Drawings as being a part of the contract itself. Finally
the contract usually states that any subcontracts written by the Prime contract shall include all of the
provisions of the prime contract.
As the Project Administrator it is your responsibility to review and understand the Prime Contract and all
provisions. When processing information, there will be many occasions the information in the prime
contract will be used.
Procedures
The owner will issue the Prime contract for signature to the Prime Contractor.
Depending on the structure of the Construction Company, the Contract Administration Department,
Estimating Department, or Project Manager will process the Prime Contract gather bonds and insurance
along with the signature of a principal of the company.
Until the Prime Contract has been fully executed by the owner and the contractor, no subcontracts should be
issued and no work should be started. By entering into an agreement with a subcontractor to perform work
with out a fully executed prime contract your company may be liable for payment of part of the contract
amount depending on the language of the contract. By performing work without a contract, the owner is not
responsible for any payment for work competed. Now everything can go to court and costs can be
recovered, however, the costs of the legal fees will be high. Bottom Line: get the fully executed contract first.
While it may be the responsibility of the Main Office to execute the contract, the responsibility still lies with
the field to confirm that the Prime Contract has been fully executed prior to proceeding with the work.
File a copy of the Prime Contract at the jobsite where it can be easily referenced throughout the project.
Subcontracts and Purchase Orders
Definition
The Subcontract is the written agreement between the prime contractor and the subcontractor. It should
include all provisions noted in the Prime contract, drawings, and specifications. Subcontractor Contracts &
Purchase Orders are normally based on the subcontractor’s bid and scope sheet.
The subcontracts are normally drafted by the Estimating Department, Contract Administration Department,
or Project Manager of the construction company. While these departments are usually very experienced at
writing contracts, it always pays to have the field staff review the drafts prior to sending the final
subcontractors to the subcontractors. Field and office personnel have different perspectives and
experience when it comes to constructing projects. The field knowledge and review is invaluable and will
help to make a more complete subcontract thereby eliminating holes that will cause problems during a
project.
Field staff should review all subcontracts during the draft stage for any corrections that may need to be
made. This review should include a written list of all inclusions and exclusions that must be compared to
each other to be sure that all of the items are covered by another subcontractor or Prime Contractor.
Procedures
The following is a list of items that should be completed relative to subcontracts. References to "Contract"
will include the reference "Purchase Order"
Review the contracts for information relative to the contract documents. Many times the specifications will
call for the complete provisions of a scope of work. However, the subcontractor's bid might only include a
portion of the work. The contract documents must be reviewed against the contracts to confirm that all work
is included in the estimate or quote.
Review the contracts for inclusions and exclusions. The contractors will list inclusions and exclusions in
their bid. This should have been reviewed at bid time to confirm that there are no double ups (2 subs have
the same work) or holes (no one has the work). However, it should be done during the draft phase of
subcontract writing.
Create a written list of all exclusions. This will enable the items to be easily compared and will serve as a
record of the review. As the list is being created, compare inclusions of quotes to the listed exclusions and
note which contractor has the exclusion included in the quote. Provide a list of unresolved exclusions and
comments to the appropriate department for resolution prior to issuing the subcontracts to the
subcontractors.
File the preliminary contract in the subcontractor file. Once all of the comments and exclusions have been
addressed, a copy of the original contract (for signature) should be transmitted to the Field Staff. The copy
should be filed in the subcontractor’s folder and will stay in the file even after the fully executed color copy
has been issued. The copy should include the scopes and bids from the low contractors as well as all of
the other contractor's bids and scopes. Having the copy of all of the information will allow the field to
understand the full history of the bid, which is beneficial when scope issues arise during the construction of
the project.
Confirm the date it was sent to the subcontractor is logged. No contractor should perform work at the
jobsite without a signed contract. The field staff should track and log contracts until all contracts have been
fully executed.
Call to check on contracts that have not been returned. The field staff should send notices to the
subcontractors reminding them that the contract is outstanding after 30 days. However, to speed up the
process, all subcontractors must be called. The call will serve as a reminder or if the subcontractor has a
problem with the contract and will not sign it, the phone call allows you to catch the problem early.
Document all telephone calls with the time date and person you talked to.
When the signed contract is returned, review the contract for any changes. The main office will receive the
signed contracts from the subcontractors. Any changes may be initialed at that time. The field staff should
review the copy of the signed contract when it is sent to the field to be aware of any potential changes. Be
sure that all of the jobsite personnel know that these changes have been made.
Confirm the returned date of the contract is logged. This will be valuable information if there are any issues
during the project relative to start date or schedule delays.
File the copy of the signed contract on top of the copy of the unsigned contract.
The Contract and Insurance must be returned and signed prior to the subcontractor performing any work.
advice and does not represent advice with regard to specific practices or undertakings and construction reference.com shall not be responsible for any damages of
any kind including direct, indirect, incidental, special or consequential damages that may arise out of or result from reliance on the information provided on this
web site.
