16-Civ-B8 Management of Construction · December 2016
Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)
Paper format. 98-Civ-B8 Management of Construction, National Exams December 2016. Three hours, closed book, one approved calculator (Casio or Sharp). Six questions of equal value (20 marks each); any five constitute a complete paper and only the first five presented in the answer book are marked. All six are solved here, because the set is a study resource rather than an examination script.
Reference texts.
Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.
The four approaches named by the question differ in one fundamental respect: how much of the project’s cost uncertainty is transferred from the owner to the contractor at the moment of award, and how completely the design must be finished before that transfer can honestly be made. Everything else — the administrative burden, the speed of delivery, the tenor of the relationship — follows from that single choice. In Canadian practice the four map onto standard CCDC documents: CCDC 2 for stipulated price, CCDC 4 for unit price, CCDC 14 for design-build, and CCDC 3 for cost-plus.
Lump sum (stipulated price). The contractor undertakes the whole scope for one fixed figure. It suits projects whose design is complete, whose site conditions are known, and whose scope is unlikely to move — a building on a well-investigated site, a treatment plant built to finished drawings. Because the price is fixed, the contractor carries essentially all of the quantity, productivity and market risk, and the owner carries only the risk of its own changes and of conditions it warranted. That risk transfer is not free: bidders load the price with contingency, and on a hard-bid job that contingency is real money the owner pays whether or not the risk occurs. Administration is the lightest of the four (progress payments follow a schedule of values rather than measurement), but change orders are adversarial because every one of them reopens a price the contractor fought for. Delivery is sequential — design, tender, build — so the calendar is the longest of the four unless the design was already finished.
Unit price (measure and pay). The contract fixes a rate for each item of work and the quantities are re-measured as executed. It is the natural form where the scope is well defined but the quantities are genuinely unknowable in advance: earthworks, rock excavation, dredging, pipeline and roadway construction, and most municipal servicing. Risk splits cleanly — the contractor owns the rate (productivity, wages, equipment, market) and the owner owns the quantity. That is an honest allocation, which is why unit-price bids on heavy civil work are usually leaner than lump-sum bids for the same scope: the bidder does not need to price a quantity contingency. The cost is administrative. Measurement must be agreed in the field, and the owner is exposed to unbalanced bidding, where a contractor loads the rate on an item it expects to overrun and starves an item it expects to underrun. CCDC 4 and the standard municipal specifications therefore prescribe measurement rules and variation clauses (typically a re-negotiation right when a major item varies by more than 15 or 20 per cent). Delivery time is comparable to lump sum, but the job can start on partial design because only the item list, not the total quantity, must be settled.
Turn-key (design-build). One entity takes both design and construction responsibility and hands over a completed, functioning facility. It suits projects that can be specified by performance rather than by drawing — a process plant of a proven type, a warehouse, a pumping station, a standard span bridge — and projects where speed matters more than the owner’s control of detail. The owner transfers not only construction risk but design risk and the interface risk between the two, which is the risk that generates the most claims on traditional projects: there is no longer a gap between “the design was buildable” and “the work followed the design” for the parties to argue in. What the owner gives up is control. Once the performance specification is signed, the design-builder chooses the means, and any owner change is expensive because it disturbs a package that was priced as a whole. Turn-key is usually the fastest of the four because design and construction overlap, and its outturn cost is the most predictable, but its bid price is normally higher than a lump sum for the same building because the contractor is pricing design risk it cannot yet see.
Cost-plus (cost reimbursable). The owner reimburses actual, audited cost and pays a fee — a percentage, a fixed sum, or a fixed sum with an incentive share. It is the right choice when the work genuinely cannot be priced: emergency repairs after a failure, remediation of an unknown contamination, renovation behind finishes that have not been opened, or a project that must start before the design exists. Here the owner carries essentially all the cost risk and the contractor almost none, which reverses the lump-sum position. That reversal removes the contractor's incentive to be efficient, so the form is rarely used raw: a guaranteed maximum price caps the owner’s exposure, and a shared-savings clause restores some incentive by splitting any underrun. Administration is the heaviest of the four, because every hour, invoice and rental must be audited against the agreed definition of reimbursable cost, and disputes shift from “what is the price?” to “is this cost allowable?”. Delivery is the fastest to start and the least predictable to finish.
| Aspect | Lump sum | Unit price | Turn-key (design-build) | Cost-plus |
|---|---|---|---|---|
| Best suited to | Complete design, stable scope, known site | Known scope, uncertain quantities (heavy civil, municipal) | Performance-specified, repeatable facilities; speed-driven work | Emergency, remediation, renovation, undefined scope |
| Design completeness needed at award | 100 % | Item list complete; quantities estimated | Performance specification only (often 10–30 %) | None |
| Owner’s risk | Low (own changes only) | Moderate (quantities) | Lowest for cost and schedule; highest for loss of design control | Highest (all cost risk) |
| Contractor’s risk | High | Moderate (rates only) | Highest (design + construction + interface) | Lowest (fee at risk only) |
| Relative bid price | Moderate, includes contingency | Lowest for the risk carried | Highest premium, most certain outturn | Lowest at award, least certain at completion |
| Relative delivery time | Longest (sequential) | Similar to lump sum | Shortest (design and build overlap) | Fastest start, least predictable finish |
| Administrative burden | Light | Moderate (field measurement) | Light on cost, heavy on design review | Heaviest (open-book audit) |
| Canadian standard form | CCDC 2 | CCDC 4 | CCDC 14 | CCDC 3 |
The comparison shows there is no universally superior form, only a form matched to what is known at the time of award. Risk that a party cannot control or price is not really transferred by contract — it comes back as contingency, as claims, or as a contractor in financial distress. The professional judgment being tested by this question is therefore the ability to read the state of the design and the site and to choose the form whose risk allocation matches it: complete design and stable ground argue for lump sum, uncertain quantities for unit price, a proven and performance-definable facility for turn-key, and genuine ignorance of scope for cost-plus with a guaranteed maximum price.
