FAR Part 36

Construction and Architect/Engineer

Introduction

• This section is only used by a minority of CO’s so not many questions on Exam

• This is a specialized area of contracting and there are dedicated 40-hour courses covering only construction contracting so we will only scratch the surface in 1.5 hours

• Construction contracting and AE contracting are very different so again we’ll only scratch the surface.

Key Points

• Construction and AE contracts combined represent a significant percentage of total federal contracting.

• Special laws enacted dealing with Section 36– Miller Act. (requires bonds)– Davis Bacon Act. (requires payment of

prevailing wages)– Brooks Act. (Controlling AE services)

What is Construction?• “Construction” means construction, alteration, or repair (including

dredging, excavating, and painting) of buildings, structures, or other real property. For purposes of this definition, the terms “buildings, structures, or other real property” include, but are not limited to, improvements of all types, such as bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, cemeteries, pumping stations, railways, airport facilities, terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, canals, and channels.

• Construction does not include the manufacture, production, furnishing, construction, alteration, repair, processing, or assembling of vessels, aircraft, or other kinds of personal property (except that for use in subpart 22.5, see the definition at 22.502).

• Demolition is considered construction• If contract is mixed construction and other services the clauses used

shall be for the predominant part of the effort.

Types of construction projects

• Design – Bid – Build. Project is conducted in two distinct phases by two separate firms with (usually) a separate competition for the design followed by a (usually sealed bid) competition for the build.

• Design – Build. Typically done by a team that proposes a design which is selected followed by a negotiated price with the team for the second (build) phase.

General Characteristics of a Construction Project

• Typically (design-bid-build) bid to a set of plans and specifications provided by the Government.– Plans and specs usually prepared by commercial AE firm

• Usually a sealed bid competition– Government prepares Independent Estimate of cost that is used in

determining “fair and reasonable” price• FBO Announcement

– 30 day posting required– Must announce “magnitude of effort”

• Usually a fixed price contract– Lump Sum (for all the work)– Per Unit basis– May permit economic price adjustment

• Certain elements are negotiated– Change orders– Payment schedule (progress payments)

The Bid Process• General Announcement

– FBO– Commercial sources

• Interested bidders obtain a set of plans and specifications– Electronic distribution / web download taking precedence– Some ‘old school’ projects will send drawing sets at contractor’s

expense.• Inspection of site

– Usually accomplished via a scheduled site visit– May include a bidders meeting with a Question & Answer session– It is the responsibility of the bidder to be aware of the prevailing

conditions at the site and to understand the requirements of the plans and specifications before submitting their bid.

• Submittal of bids per FAR Part 14 (Sealed Bids)• Public Opening and abstracting of bids• Announcement of low bidder

The Award Process

• Prior to award of the contract the CO will:– Review the submitted bids vs. the Independent Government

Estimate and may request an analysis/explanation if there are significant differences.

– Examine all bids in context to determine if there has been collusion

– Perform Due Diligence on the successful bidder• CCR Registration• EPLS• May request financial statements or other documents to ascertain

capability to perform• Request Payment and Performance Bonds • Request Certificate of Insurance• Prepare a D&F documenting the above

After Award

• Pre-construction meeting– Review of the technical aspects of the project– Review/approval of schedule– Discussion of special contract requirements

• Subcontracting plan• Safety• Labor Laws• Role of the COTR etc.

Construction Contract Clauses• 52.236-1  Performance of work by the contractor.

– The CO will typically identify a percentage of the work that must be self performed by the prime contractor (e.g., 25%)

• 52.236-2  Differing site conditions. – Contractor must promptly notify CO if conditions at the site differ from that

specified or anticipated.– CO has right to make determination if conditions materially differ– Contractor may request equitable adjustment or may use be considered a

dispute. In either case work proceeds.• 52.236-3  Site investigation and conditions affecting the work.

– Contractor certifies (with their bid) that they have been afforded an opportunity to visit the site and explore conditions to their satisfaction prior to submitting their bid

– Government denies any responsibility for conclusions made by contractor in this process.

• 52.236-4  Physical data. – Government will provide to the contractor (to the extent they exist) any test data,

soil borings, etc. that relate to the site– Government not responsible for how contractor interprets this data.

Construction Contract Clauses• 52.236-5  Material and workmanship.

– All materials shall be new and the most suitable grade– Must comply with the plans and specs except that brand names are to be considered as

setting a standard.– All work under this contract shall be performed in a skillful and workmanlike manner. – The Contracting Officer may require, in writing, that the Contractor remove from the work

any employee the Contracting Officer deems incompetent, careless, or otherwise objectionable.

• 52.236-6  Superintendence by the contractor.– The contractor shall directly superintend the work and have a competent superintendent on

site at all times.• 52.236-7  Permits and Responsibilities.

– The contractor shall provide at no added cost to the Government all required permits and licenses

• 52.236-9 Protection of Existing Vegetation Structures, Equipment, Utilities, and Improvements

• 52.236-10 Operations and Storage Areas– Government will provide storage areas for materials as negotiated between the contractor

and the owner of the facility– The Contractor shall indemnify the Government for loss or damage to stored materials or

injuries caused by their storage– The contractor may (as permitted by the CO) erect temporary structures such as

construction offices etc.

Construction Contract Clauses

• 52.236-11  Use and Possession Prior to Completion. – The Government shall have the right to take possession of or

use any completed or partially completed part of the work.

• 52.236-12 Cleaning Up– The Contractor shall at all times keep the work area, including

storage areas, free from accumulations of waste materials. – Before completing the work, the Contractor shall remove from

the work and premises any rubbish, tools, scaffolding, equipment, and materials that are not the property of the Government.

– Upon completing the work, the Contractor shall leave the work area in a clean, neat, and orderly condition satisfactory to the Contracting Officer.

Bonds• Bonds required by the Miller Act for projects over $100K• Cost of bonds (usually 3 percent of value) included in bid price.• Types of bonds:

– Bid Bonds (Protect Government from contractor not accepting contract and performing work)

– Payment Bond (Protect Government from contractor failing to pay subcontractors or suppliers)

– Performance Bond (Protect Government from contractor’s inability to successfully complete the contract.

• Contractors must have bonding authority to bid project – Each contractor has ceiling to their bonding commitments based on

financial strength and other factors– Aggregate value of projects in-work count against that ceiling– Prevents contractors from over extending their capabilities.

Other related issues

• Privity of contract. (essentially the subcontractors can not recover for non-payment from the Government)

• Liquidated Damages. Liquidated damages are not punitive and are not negative performance incentives. Liquidated damages are used to compensate the Government for probable damages. – The CO will typically base liquidated damages on a

basis of estimate prepared by the technical manager.