Clause in a contract agreement that gives the subcontractor 48 hrs to complete a direction given by the General Contractor (GC), and if they do not comply, the GC is allowed to perform the work of the subcontractor with contractor forces. This is included in contracts to ensure authority of the general contractor. Example: Subcontractor does not clean up debris from job site, contractor enacts 48 hour notice, subcontractor does not comply, contractor can perform work on account of subcontractor.

Clause in a contract that allows the contractor to give a written notice to a subcontractor in default. The subcontractor must remedy this default within 72 hours of receiving the notice, otherwise the subcontract will be terminated. Example: Electrical contractor has not started pulling wire on a floor that needs to be hung with GWB, and thus is delaying project. Contractor gives 72 hour notice and subcontractor must comply otherwise their subcontract will be terminated.

Acceptance is the act of consenting or agreeing to an offer. In contracts, the buyer may offer a price for an item that is to be sold. If the seller agrees to that price, the seller accepts the offer. On the other hand, the seller may ask for a particular price for the item that is being sold. If the buyer agrees to that price, the buyer accepts the offer.

An interest rate charged on a loan or realized on an investment over a specific period of time. Most interest rates are quoted on an annual basis. The calculation is made by dividing the annual interest rate over the number of compounding periods. e.g. Annual Interest Rate = 6%, periodic interest rate per quarter = 6%/4 = 1.5%

A fixed amount of money that is paid at stated periods for a given time duration. e.g., $100 paid on the last day of every month for 20 years, starting on January 31, 2016 and ending on December 31, 2035.

Trading at par occurs when the bond is being traded at its face value. Since the market interest rates are always fluctuating, a bond can only be at par when interests rates are at its coupon rate, which can be a rarety. This has occurred before in our course when we were studying bond economics. For example, if a bond is being issued at 8% and the market interest rate when it is being sold is 8% also, then it is being traded at par.

Complete proposal (submitted in
competition with other bidders) to execute specified job(s) within prescribed times, for a proposed amount (that usually includes labor, equipment, and materials). The bid-receiving party may reject the bid, make a counter offer, or turn it into a binding contract by accepting it. EXAMPLE: Sub Contrators make bids to a construction management company or a general contractor in order to be hired to do part of a project.

Bid documents are documents required to be submitted in response to an invitation to bid. For example, these documents include the bid form, drawings, specifications and description of work, bond requirements, bid review time, price breakdowns and other important information. When a bid is not accompanied by all the required documents, it is considered incomplete and are rejected.

A contractor’s estimate of the cost of each portion of a project. Is important for estimating the scope of the project, defining what you want your project to contain, and to secure the financing of the project. For example, a bid estimate will include details such as the amount of area that will need to have dry wall for a project.

A deviation from the requirements of the bidding instructions in the format or content of a submitted bid. Put into two categories: major and minor. Bids including major irregularities are rejected, while bids containing minor ones may be waived by the owner. Major example: an unsigned bid, or other act that relievs bidder of contractural obligations. Minor Example: bidder did not acknowledge bid addendum, but addendum make contract requirments less stringent so may be deemed as minor. Various judicial cases and had different results for minor/major outcomes

Formal objections filed by the bidder to some aspect of the bidding process. The timing and nature of the protest can determine its success. If protests are about the terms and conditions of a contract, it is better to submit them before the bid opening. A bid protest can prevent a public owner from awarding a contract. If a bid protest is not resolved until after the work has begun, then the protesting bidder will most likely not get the contract but may be compensated for bid preparation and submittal costs. Example (from book): Contractors needed to be prequalified to submit bids on a project. Two contractors were prequalified, but then decided they wanted to bid as a joint venture. Owner said no, and a protest was issued by the two contractors. The protest was resolved and the two contractors were allowed to submit a bid as a joint venture.

The total from a schedule-of-bid-items in a unit price bid. In general, the unit price governs, so if there is a miscalulation of the bid total after the bid has already been submitted, the unit prices will determine the actual bid total. Example: Multiple bids submitted for a project. Mistake is discovered in one of the contracts bid totals, owner fixes this and uses that number as a basis for the award of the contract.

A purchase order from a supplier that contains multiple delivery dates for some time period, often negotiated to take advantage of predetermined pricing. It is normally used when there is a recurring need for expendable goods.

A financial instrument under which a person, corporation, or government ("the issuer") guarantees to make a payment, or series of payments, on or before a specified day or days. Potential purchasers of bonds offer to buy the bonds at prices that reflect their appraisal of the present value of the future income that the issuer is offering. For instance a government agency may commit to pay $100 per month for ten years plus a lump sum of $50,000 at the end of the ten years. The price paid for the bond would depend on how much purchasers are willing to pay for the offered income.

The value of a bond's coupons paid in a year expressed as a percentage of the face value. For instance, a $1,000 bond paying a single $80 coupon each year has a bond rate of 8%. A $1,000 bond paying $20 coupons each quarter also has a bond rate of 8%.

Present value of the bond's expect future cash flows, discounted at prevailing interest rates. e.g. A bond with a face value of $1000, 8% coupon rate paid annually, at current market interest rate of 6%, with 10 periods remaining, will be the sum of present value of $1000 after 10 periods and present value of the annuity ($80 per year for 10 years).

Value of an asset calculated for tax purposes, calculated as the initial purchase price minus all depreciation allowances. E.g. A tractor purchased for $100,000 depreciated over 5 years to $0 via a straight line method would have a book value of $60,000 after 2 years. ($100,000 - 2 X $20,000 depreciation each year)

A callable, or redeemable, bond is a bond that has a provision that allows the issuer to buy it back at any time for a premium (normally the face value) before maturity. For instance a government agency may issue a 10-year bond with a $50,000 face value. If the bond is callable, the agency may buy that bond back at any time in the 10 years for $50,000.

A capital project is a project that adds to the durable physical assets of a person or organization (capital is durable wealth). Capital projects are normally projects for the construction of buildings and fixed infrastructure, but they can also be projects for the construction or purchase of moving equipment and machines that are expected to last for a considerable amount of time.

"A change to the contract that, because of its size or the nature of the changed work, is clearly beyond the general scope of the contract. Additive cardinal changes are illegal on public contracts and in the private sector, a cardinal change cannot be forced upon the contractor. For example, a situation which would likely warrant a cardinal change to a contract is that during the process of an underground contractor repairing and replacing 50 feet of broken storm drain pipe, the owner then requests the contractor to install approximately 400 feet of new storm drain laterals. "

The total amount of money that goes in and out of a business. It is often represented pictorially with a cash flow diagram. For example, the initial purchase price, annual maintenance, annual profit, and salvage value may be part of a cash flow.

Instruction from the owner or contractor to make a change from the original contract. Example: There is a shortage of the material originally specified in the contract, so a new material has to be chosen, then incorporated as a change order.

A change clause establishes an owner’s right to change the contract one-sidedly, and limits the right to be paid for these changes. For example: Changes Clauses are required in government contracts, and help to make changes without going through longer procedures with more paperwork.

System of laws that governs private relationships between people. It is completely separate from criminal law. For example, disputes about fair pay for construction workers may be settled in civil court.

CM-at-Risk is a delivery method which entails a commitment by the Construction Manager (CM) to deliver the project within a Guaranteed Maximum Price (GMP). The CM will typically assist the designers during the design phase and then offer the GMP when the design is sufficiently well developed. The CM is paid their costs and profit in a mrthod described in their contract up to the GMP. If the actual cost exceeds the GMP, the CM receives no payments in excess of the GMP.

CM-for-Fee is a delivery method in which the Construction Manager (CM) is paid their actual costs plus a fee, or sometimes their fee as a percentage of the construction cost. The CM firm works under the direction of the Owner and there is no maximum price for the CM's work. For instance, if the Owner has limited in-house CM expertise, they might hire a CM firm to act on their behalf to hire and supervise General Contractors who perform the work. This CM-for-Fee firm functions as part of the owner's inner team and does is paid its actual costs plus an agreed markup to cover their overhead and profit.

A commitment is a declaration that some task will be undertaken to the agreed standard by an agreed deadline. Example of commitment: "I will finish this assignment in accordance with the specified requirements by 11 am on Friday."

A delay in the completion of a project specifically caused by the owner and not under any fault of the contractor, so that the owner must pay damages to the contractor for extra costs caused by the delay.

Transparent' procurement method in which bids from competing contractors, suppliers, or vendors are invited by openly advertising the scope, specifications, and terms and conditions of the proposed contract as well as the criteria by which the bids will be evaluated. After collecting competitive bids from several underwriters, the issuer awards the contract to the underwriter with the lowest, responsible price and contract terms. Competitive bidding aims at obtaining goods and services at the lowest prices by stimulating competition, and by preventing favoritism. An example of a competitive bid is when a government building project is started and a qualified construction company submits an offer to do it for a certain price.

The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings.

Criteria set by the customer to determine whether the products of a contract or project meet their expectations.

Consideration is a payment for work done. It is anything of value promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, abstinence from a future action, and much more. It is one of the 4 main components in establishing a contract, without which a contract cannot exist. In contracts, consideration must be adequate, but may not be fair.

A legally binding agreement between two or more parties, verbally or on paper, voluntarily entered by all parties. For example: If your bid is chosen, the owner and you will form a contract, hiring you for the job in a legally binding way.

A contract in which the owner reimburses all of the contractor's costs and pays a fee that is fixed at the beginning of the contract. For example, it is used when for some reason the project scope is not definitive enough to permit firm pricing.

A contract in which the owner reimburses all of the contractor's costs and pays a fee that is based upon the degree to which the contractor meets the owner's targets. The contractor therefore has an incentive to meet the targets. For example, there may be incetives for meeting specific schedule targets, exceeding quality standards, or keeping overall costs below specified limits.

a contract performed almost entirely on the owner's funds. The owner periodically reimburses the provider as they incur costs in providing the contracted services. The payments received from the owner are directly dependent on the costs incurred. In construction management these types of contracts are fairly common between owners and A/Es or owners and CMs because they shift much of the risk to owners allowing for lower contractor bids. Anytime firm pricing is not easily determined, this is a way in which owners may opt to conduct business.

In this type of contract, the contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit. What this means is that money is provided to cover material, for example, and then an additional amount apart from that is added. An example of this would be if a large scale project was given some amount to cover the costs for construction and in addition to that, some more monies was provided to be able to provide a profit for the contractor.

Multiple agreements or contracts set to expire at the same time. For example: If multiple steps of a project are scheduled to end at the same time, or maybe the project has a strict deadline, then co-termination can help wrap things up neatly.

An offer of acceptance if significant changes are made. For example: if a person offers to do the job for $50,000, and the owner replies that he will accept if he lowers his price to $40,000, that is an example of a counteroffer.

The periodic amount paid on a bond. Example: Suppose we have a bond of face value $1000 and nominal interest rate of 8%. A quarterly coupon would pay the holder of the bond $20 per quarter."

A profession that requires particular skills and knowledge of skilled work. Basic craft: operating engineers, teamsters, carpenters (including piledrivers and millwrights), ironworkers, masons (cement finishers), and (although strictly speaking, not a craft), laborers. Specialty craft: all crafts in construction other than the basic crafts are specialty crafts, e.g., electricians, plumbers, sheetmetal workers, tile settlers, and boilermakers.

The Davis-Bacon Act is a US federal law that required employers to pay the local prevailing wages for laborers and mechanics in any construction, alteration, or repair of public buildings or public works. The Davis–Bacon act was passed by Congress and signed into law by President Herbert Hoover on March 3, 1931 and has been amended several times since. It covers the 4 main areas of construction. The Wage and Hour Division of the US Dept. of Labor is responsible for collecting the prevailing wage data and disseminating it. The Davis-Bacon Act is prevalent in any form of construction work done in the public sector. Contractors have to account for its provisions in their cost estimates and bids anytime they enter public projects, or ones even partially funded by government, this includes any type of roadwork, military facilities, or public buildings.

The exhaustion of the abundance of a supply. Example: The depletion of the rare Komatiite left the owner with a difficult decision to continue with a visibly fake version of komatiite or to scrap what they had and start over with a different type of stone.

A way to allocate the decreasing cost of a tangible asset over the course of its useful life. Example: Tractors are considered 3-year properties, and follow the straight-line depreciation method. If I purchase a tractor that costs $6000, assuming it has no salvage value, for the next 3 years, my annual depreciation charge will be $2000, and the book value of the tractor decreases by $2000 each year. This depreciation charge is also deducted from my taxable income, reducing the amount of tax I need to pay

An amount deducted from gross income in one's tax return to compensate for the depreciation of a property. This is one of the adjustments that is made to determine one's taxable income. It is calculated based on the original cost of the property, and is often a fixed percentage of that cost. Example: A $6000 tractor with no salvage value (3-year straight line depreciation) will result in a depreciation charge of $2000 a year for the next 3 years. This means that the book value of the tractor decreases by $2000 a year, while my taxable income decreases by $2000 a year, resulting in me paying less taxes.

An estimate of the specific amounts of labor, equipment and materials that will be needed for each element of a project such as earthwork, concrete, masonry, etc. For example, to construct the vertical superstructure of a new classroom building, a contractor will provide a detailed estimate essentially indicating the cost that it will take to construct the proposed plans, with consideration of the contractor’s overhead and profit.

A clause describing how the contract will address any physical site condition found during contract performance that materially differs from those indicated in the contract documents or from conditions normally encountered in the type of work of the contract. An example of this is if the site has hard rock and the owner’s documents indicated that it had soft soil.

The cost of materials, labor, and expenses related to the production of a product that the producers charge directly to that product. Other costs, such as depreciation or administrative expenses, are more difficult to assign to a specific product, and therefore are considered indirect costs.

A payment of money. Disburse has the same orgin as the word "purse". To disburse is to remove from the purse. In a contract, payment of compensation to a contractor for its services, usually done on a monthly basis.

A discount rate is a percentage deduction in the value of money over a period of time. It is a way to calculate the future value by translating it to an equivalent amount today. Example: If I have a US treasury bill that will pay $100 one year from now and my discount rate is 10%, then I would be willing to sell that treasury bill today for $90.

The present value of a future flow of cash. Example: If I have an investment that will pay $100 one year from now and my discount rate is 10%, then I would be willing to sell that investment today for $90.

A valuation method which reduces the face value attractiveness of an investment opportunity by recalculating future cash flows using a discount rate in terms of present value estimates. E.G: discounting using interest rate when calculating PV of cash flows.

The conversion of periodic interest payments to an annualized interest rate. for example, If I I have a 12% nominal interest rate compounded quarterly, my actual periodic interst is 12/4 = 3% and my effective interest rate is (1.03^4 - 1) = 12.55%. If the compounding is monthly my actual periodic interst is 12/412= 1% and my effective interest rate is (1.01^12 - 1) = 12.68%.

Using many of the same concepts, parameters, and equations that govern the calculation of net present value (NPV), the equivalent annual worth takes a sum of a number of cash flows over time and, using the interest rate parameter i and the number of periods n, calculates what this sum of cash flows would amount to on a repeated yearly basis, taking into account the time-value of money.

"A provision that addresses how the contract will manage inflation of other changes in the market or economy. For example, a contractor is about to enter into a contract to construction 100-miles of railroad in which the project is anticipated to take 5 years. Considering the contractors costs may be subject to market escalation, the contractor may include this anticipated cost in the original bid. Alternately, the owner may include an escalation provision to relieve the contractor of the additional costs due to escalation, if escalation were to occur. Such a provision would shift the risk from the contractor to the owner."

The general definition of estimating is to approximate or roughly calculate the value of something. In this class, the term 'estimating' would be used on almost every engineering project possible. For example, in construction, there are design, bid, and control estimates. Design estimates cover detailed estimates regarding the project from the engineer/designer to the owner. Bid estimates are what a contractor will present to an owner (or maybe from a subcontractor to a GC) as their price for how much the project will cost including overhead and profit. Control estimates are a separate estimation that is used to track finances once a project has been contracted out.

"Relieves one party from liability. It is a provision in a contract which is intended to protect one party from being sued for their wrongdoing or negligence. For example, owners may include an exculpatory clause in relation to the contractor’s reliance on reports of physical conditions. "

The expected monetary value of an asset or project upon analyzing use, cost adjustments, and probability of different outcomes. For example, one might weigh the probabilities for each potential path of a project and the value or return associated with each. If a project path is to be selected with respect to expected value, the path with the highest return is selected.

A face value, when referrring to bonds, is the final amount paid when the bond matures. For example, a bond might pay a $100 coupon each month for twn years and then pay a lump-sum face value of $50,000 at the end of the ten years.

This type of construction is one in which the construction phase is begun with only limited design work completed. An example of how this works is for site grading and structure excavation to begin before foundation design work is complete.

A rule in common law that disallows a contractor to withdraw its bid once the contractor's offer has been accepted by the owner.

A Force Majeure is also called "An Act of God". In a contract, it refers to an extraordinary event that is outside of the control of both parties. For example, a hurricane would be a Force Majeure.

Functional organizations are structured in highly specialized groups that report to a single authority. An example of how these are divided is that they have functional groups that include engineering, marketing and development.

These are expenses that are required to administer the business practice. For example, companies typically have accounting. payroll, human resources, and other costs that are are essential for them to function.

Standards clauses in a contract that are used in all of an organization's contracts, or all contracts of a particular type. For example, many of these standard clauses in federal contracts pertain to the requirements of the Federal Acquisition Regulations, which by law must be included in every federal construction contract.

A grievance procedure defines how a dispute is settled between a contractor and union in the event of a disagreement. It defines exactly which steps to be taken at each step of the resolution. If an agreement cannot be reached between the two parties on their own, an arbitrator can be hired to help.

Total revenue received before any deductions or allowances, as for rent, cost of goods sold, taxes, etc. It refers the the raw sales income that is received from the customers.

A GMP contract stipulates that the contractor will not be reimbursed for more than an agreed maximum price. The CM is paid their costs and profit in a method described in their contract up to the GMP. If the actual cost exceeds the GMP, the CM receives no payments in excess of the GMP.

Heavy civil is a subset of the field of engineering which includes the construction of major infrastructure projects such as highways, dams, and pipelines. Heavy civil projects are unlikes most building projects into that they are publicly funded and thus owned by the United States of America.

A physical place, or online site, where union workers can wait for job openings that come up in construction projects where contractors have need for extra workers, which is expressed by the contractor contacting the union hall requesting referral for a specific amount of specialized union workers for a short duration of time.

A hiring hall provision dictates who a contractor can hire. A common provision requires that a contractor exclusively hires from that union.

Hours worked refers to the number of hours that a person worked. Hours paid is the number of hours for which they were paid. The difference results from overtime - Two hours of overtime worked at time-and-a-half would result in three hours paid.

In perpetuity means "without end". It is normally used to address something for which there is no foreseeable end. An example is when someone leaves land to the City for a public park with a provision that no buildings shall be built on that land in perpetuity.

Indirect costs are expenses that are not directly related to the project costs. For example, in a construction project, indirect costs include scaffolding, site supervision, field office costs, safety costs, etc, while excluding main project costs such as material, labor, and equipment costs.

Industrial construction is a type of construction projects that associated with manufacture and production of commercial products and services. Example: the construction of electric power generating stations needed to power the city.

An interest rate is defined as the proportion of a loan that is charged to the borrower, typically expressed as a periodic percentage of the remaining loan. For example: I borrow $100 at a 5% interest rate compunded annually. At the end of a year, I must pay $105.

The internal rate of Return is the rate of return where it makes the net present value zero. If the cost of capital is greater than the IRR the investment should not be taken. However this generally applies if the negative cash flows preceded the positive cash flows. The IRR rule might disagree with the NPV rule if expenditures occur after the revenue. There might not be any IRR there is none which makes the NPV 0. Multiple IRR’s can also exist and give conflicting answers hence NPV rule is more accurate. However the IRR is useful as it can tell the user the average return of the investment and the sensitivity to any estimation error.

Issuer of a bond is a legal entity that sells bonds for the purpose of raising money. Example: the San Francisco Airport Commission issues bonds to finance projects for San Francisco International Airport.

Bonds that offer speculative high yields due to their high default risk. They are graded BB/Ba or lower. For example: to finance a project with high risk, the owner may issue junk bonds with very high returns to attract investors. Junk bonds can increase and decrease a lot in value and hence, present the investors more risk than usual.

A labor agreement is a contract between labor, typicaly represented by a union, and management governing wages and benefits and working conditions. For example, the GSIs and Readers in the University of California are represented by the United Auto Workers and have a labor agreement with the University.

A lien is the right to keep or sell property belonging to a debtor until the obligations of the contract is met. For example, a mechanic's lien gives a construction firm that is remodeling a structure legal recourse to receive payment for their work and materials in case payment disputes arise.

Damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach such as late performance.

The bid that has lowest dollar figure written in the space for the total bid price. In low bid contracting, the contract is awarded to the qualified bidder who offers the lowest price. Factors such as unit price or written price extention determines the intended bid price for a bid item in a schedule-of-bid-items bid.

A magnitude estimate is a rough estimate of the project cost that is used by the owner to help in capital budgeting. This usually occurs near the beginning of a project, and as such may lack complete details. For example, a real estate developer may use his desired property's square footage, type of construction, building quality, and other requirements along with historical data to come up with a magnitude estimate to build a business case and raise capital.

Manning provisions are rules contained in labor agreements that address the number of workers needed (manning) for different tasks. For example, manning provisions include mininum work crew sizes, the required presence of equipment operators while damaged equipment is repaired, the required presence of oilers for large cranes, etc.

The marginal tax rate is the tax percentage that is paid on the next dollar earned. If you earn one more dollar, you pay your marginal rate on that dollar. In a progressive tax system, the marginal rate increases as income rises. For example, a worker might pay 1% on the first $7,749 of income, 2% on the income between $7,750 and $18,371, 4% on the income between $18,372 and $28,995, 6% on the income between $28,996 and $40,250, and 8% on the income between $40,251 and $45,000 in state taxes.

A material impropriety is a significant lack of conformity to established standards. Examples in bidding include such acts as bribery, bid rigging, offering private clarification of bid document requirements to selected bidders, or anything else that would impugn the integrity of the bidding process

Mutual agreement not made under duress. It is part of the conditions for the acceptance of an offer. Both parties must understand and accept that they have mutually agreed to be bound by the same set of terms and conditions. It is required for a contract to be legally binding.

The Miller Act requires that, before any contract exceeding $100,000 is awarded for the construction, alteration or repair of any building or public work of the US, the construction contractor must furnish a payment bond and a performance bond. The Miller Act has successfully protected the interests of the federal government, taxpayers, and subcontractors and suppliers by ensuring that construction contractors are qualified to perform their contractual obligations to the government, that precious taxpayer funds are protected through third-party guarantees of contract performance and payment, and that subcontractors and suppliers have a payment remedy in the event the prime contractor becomes insolvent or fails to pay them. Therefore, Miller Act bond requirements ensure that, when the federal government seeks to procure construction, it will select from a pool of contractors qualified to perform the project.

The minimum acceptable rate of return, often abbreviated MARR, or hurdle rate is the minimum rate of return that an investor expects from an investment, given its risk and the opportunity cost of forgoing other projects. The MARR is often a sum of inflation-free interest rate, expected inflation rate, risk of default, and risk of the particular venture.

The maximum amount that the contractor is permitted to bid on the mobilization item in a contract.

A labor agreement that sets the conditions of employment for more than one type of craftsman. For example, there might be an agreement that covers all workers on a particular project or worksite, regardless of their craft.

Multiple prime contracts: A contract used when one or more constructors are employed under separate contracts to perform work on the same project, either in a sequence or coincidentally. Example in context of this course : ( page 20 Bartholomew) Suppose that a plumbing contractor A and an electrical contractor B each contract directly under a common owner C, on the same project, requiring both A and B to be on the site simultaneously. If the owner does not explicitly mention third party beneficiary clauses in either of the contracts, and Contractor A ends up damaging Contractor B, Contractor B would have no right of recovery directly against Contractor A. Multiple Prime Contracts are a good way for an owner to pass on liability to the contractors if he/she inserts similar clauses into their contracts such as if one prime contractor damages any of the others, their only recourse is to seek recovery from the contractor(s) who caused the damage.

Negotiation is a discussion between two or more parties aimed at reaching agreement. EXAMPLE: When there there is an monetary issue for a change order between two parties, both parties will need to negotiate how the cost will be split.

The net present value is the total of all cash flows, both positive and negative, expressed in terms of the value to the investor at the present time. This value accounts for the time-value of money by requiring an interest rate parameter, i, in its calculation. Cash flows that occur at the time of calculation, occur on a repeated basis, or occur at a point in the future are 'brought to today's value' using this interest rate, along with the point in time in which these cash flows occurred

Net revenue is the amount of cash flow that an individual or corporation brings in after subtracting any discounts or credits given during sales. For example, if a company that sold bulldozers for $10,000 each sold 100 bulldozers, but discounted 50 of them to $4000 because some customers were members of the 'frequent bulldozer buyers' program', the company's gross revenue would be $10,000 x 100, but their net revenue would be $10,000 x 100 - ($10,000 - $4000) x 50

The "no pay until paid" provision stipulates that the prime contractor does not have an obligation to pay subcontractors until the prime has been paid by the owner. This is important in the context of this course because subcontractors must be careful in how they plan to fund their work during a project.

a contract provision where the contractor's sole remedy for delay is an extension of time without any monetary compensation even if the delay is caused by the owner or its agent. It is one of the "red flag" clauses that deal with delays and suspension of work. It is an example of an exculpatory clause.

Non-enforceable contract is contract that cannot be enforced in the court of law does not meet the necessary conditions in order for it to be legal. Example: a mafia leader forces a general contractor to sign a construction contract. The contract is non-enforceable in law because the general contractor did not willingly sign the contract.

The normal duration of an activity is the maximum duration of the activity which "is equal to the minimal expected duration when the activity is performed with the lowest possible amount of resources leading to the lowest total activity cost" (pmknowledgecenter.com). Typically, bids in construction tend to assume that all activities will be completed under normal duration since this would lead to the lowest cost. For example, the duration to build a floor of a high rise tower would assume there are no delays, no complications in procurement, and minimal labor costs.

Document that gives the official start date of the contract. The performance period begins from the NTP.

An offer is an expression of willingness to contract on certain terms with the expectation that upon acceptance it will be legally binding. An offer can be made to a particular offeree, a group of people or the whole world. In our context, most offers are made to a company or an individual contractor.

Overhead costs: expenses that are incorporated into a bid but are not part of the labor, equipment or materials that are billed directly to the contract items. They can be split up into 2 categories: Direct/project (e.g., temporary office space, on site utilities, site specific salaries) and indirect/headquarters (e.g., office salaries, marketing materials, depreciation values, and other expenses that allow the company to run).

Time in addition to what is normal, as time worked beyond one's scheduled working hours. EXAMPLE: If the normal time is 8 hours per day, any time worked beyond the eight hours in a day is overtime.

Entity that initiates a project, finances it, contracts it out, and benefits from its output(s).

The nominal value of a bond, share of stock, or a coupon (any fixed-income financial instrument) as indicated in writing on the document. Par determines maturity value and the dollar value of coupon payments. Market price of a bond may be above or below par, depending on level of interest rates and the bond's credit status. E.g. a bond is below par if current interest levels are above the par value.

A surety bond posted by a contractor to guarantee that its subcontractors and suppliers will be paid. For example, if a contractor leaves a contract a payment bond will insure that the subcontractors will not be adversely affected as well so that the owner won’t lose its contractor and subcontractors.

How long an asset will be functioning. This is often not the same as its useful life. Example: A machine which has a useful life of 5 years may still be functioning in the 6th year, but by then, it might be inadequate due to increased production or obsolete due to technological advancements.

The pre-design phase is the work that occurs before formal design begins. It typically sets up conceptually what the project will be, what the scope and rough budget will be, what the user function will be, and how feasible this project is. Predesign phases of projects are typically set by the owner and can vary depending on the project. The purpose of the predesign phase is to lay out the purpose and the feasbility of the project early on since the earlier you catch a critical flaw in the project, the less you lose money. An example is from the University of California. According to their facilities manual, predesign phases include Design Professional Services, Project Program (scope, budget, user function, square footage), Review of Conceptual Design (going over issues with interested parties), and Preliminary Evaluation (feasibility analyses).

"Definition: Premium of a bond is the present value of both the future interest payments and the maturity amount minus the bond’s undiscounted maturity amount. Example: If a bond pays $100 per year in interest per $1,000 of face amount (10 percent coupon) and the current market yield is 7 percent, calculate 100 divided by 0.07. In this case, a $1,000 bond has a premium value of $1,428.57. Hence the premium of this bond is $428.57"

Estimated current value of a future amount to be received or paid out, discounted (see discounting) at an appropriate rate, usually at the cost of capital rate (the current market interest rate). EXAMPLE: Present worth, or present value, provides a common basis for comparing investmen alternatives.

The principal of a loan is the sum of money upon which interest is paid. The principal decreases as the loan is paid off, and the principal's value at any given time corresponds to the original borrowed amount plus the sum of the interest charged minus the sum of the payments that have been made.

the lilfe over which the machine can earn profit; retention beyond that point will create loss. It is generally lesser than the physical life, but greater than the economic life. For example: if a bulldozer has a profit life of 5 years, it can only earn profit within 5 years. Beyond that, even if it is still usable, it will create a loss for the owner, which could come in the form of repairs/maintenance

"A project is a temporary endeavor undertaken to create a unique product, service or result. (ANSI/PMI 99-001-2013) or A project consists of a unique set of processes consisting of coordinated and controlled activities with start and end dates, performed to achieve project objectives. (ISO 21500:2012)"

The provider is the entity entrusted with carrying out a commitment. This is relevant to our class because requests will be made for various tasks to be undertaken, and providers will commit to undertaking them. An example is, "I want you to write five definitions by Tuesday, and I as the provider will complete them."

Public construction is construction done for public purposes and paid for with public funds. In the context of this course, we have referred to public construction because somewhat different rules apply when a project is public. For example, public projects are always awarded to the lowest responsible and responsive bidder. Bidders are allowed to pull bids for clerical mistakes, but they are not allowed to pull bids for judgment mistakes.

A purchase order is an order from a buyer to a seller in which the types, quantities and prices of products or services is specified. A purchase order becomes a contract if it is accepted by the supplier. An example of this is if cement is needed for a project and the contractor gives a purchase order to a cement supplier.

The gain or loss on an investment over a specified period of time, expressed as a percentage increase over the initial investment cost.

To satisfy a debt by taking out a new loan. Example: Jimmy's travels abroad cost us more than we had expected so we had to refinance our home mortgage to pay for the rest of his trip.

A reliable promise is a promise that we know with confidence will be fulfilled. Very often, we may not know the provider very well, and so we will have to assess the reliability of his or her promise to complete a task, which can be establish through clear communication and transparent strategy and decision-making. This is relevant to our class because we want to always make reliable promises to do our work well and on time.

A request is a something asked for. In the context of language-action theory, the request must be clear, specific and unambiguous. This is relevant to our class because project managers will make requests for workers to commit to. An example of a request is that each person should complete five definitions for homework by Monday at 10 am.

A Request-for-Proposals is a solicitation by an agency or company interested in procurement of a commodity, service or asset with an uncertain scope, asking potential suppliers to submit proposals. Because its scope is uncertain, an RFP is not a bidding process. By contrast, an Invitation for Bids (IFB) has a definite scope and normally ends in a contract award to the lowest qualified bidder.

The resale value of an item, piece of equipment, or even a project is the estimated worth of that item after its lifetime with the owner is over. For example many construction firms may need specialized heavy equipment for certain projects but then sell them afterwards. That value after the project is the resale value and is important to this class because it can make the purchase more economical.

Retention is a deduction made from each progress payment prior to paying over the balance to the contractor. This money is held until satisfactory completion of the contract.

Risk has a dictionary definition of “exposure to danger, harm, or loss.” Risk can come from anything (i.e. geographic location, social climate, weather, political conflict, disease, economic stability, competition, etc.). Some of these sources of risk may be predicted, allowing an accurately calculated financial cushion to accounted for any potential loss. Some contracts may even involve a specified financial cushion or a specific contractual agreement that take unforeseen risk into account. Risk is a major factor in both bidding a contract and speculating/developing a project.

The estimated resale value of an asset at the end of its useful life. This value is used to determine depreciation amounts, which in turn determines tax deductions. Example: If the $6000 tractor I purchased (3 year straight line depreciation) has a salvage value of $1200, my yearly DC will then be $1600 instead of $2000 (when we assumed it had no salvage value)

The work that must be performed to deliver a product, service or result with the specified features and functions.

Shift work is, by definition, "work comprising recurring periods in which different groups of workers do the same jobs in rotation" (Google). The intention of shift work is to use all 24 hours in a day to perform work. This can dramatically shorten a project schedule but also add significant cost since off-hour work costs more and typically has lower productivity. Shift work is also often frowned upon due to the health effects it can have on the laborers. There are three types of shifts: day shift, swing shift, and graveyard shift. Day shift occurs during normal working hours, swing shift occurs from mid afternoon to around midnight, and graveyard shift is from midnight to 8 AM. Construction projects that have very critical schedules will choose to complete the work through "shift work." This is jointly decided with the owner typically since it increases the cost of the project. However, it is chosen when there is a strict deadline to begin user functions and moving that deadline would cost more than not adding shifts.

The technical requirement(s) for each division of work in the contract, fully expressed and detailed. May conform to the Uniform Construction Index.

Staging of work is a plan that outlines spacially and logistically how the project site will function. This plan will cover where each major area will be, where the access points are to go in and out of site, and what the emergency procedures are. This is a safety requirement as the staging plan typically also covers hazards presented by the site and how those hazards will be mitigated. The plan must be extremely detailed covering topics such as walkways, barriers, fences, fall protection, protection, knox box (key for firemen), dumpster, cranes, hoists, bathrooms, and so much more. It is a critical and absolutely necessary plan for every project in construction especially since construction has a high safety risk. This allows a project to run more smoothly and to keep people informed on how to move around site while minimizing risk.

A form of contract published by a government agency or by a private organization that the agency requires or the organization recommends to be used on all contracts of a particular type. For example, the US federal government construction contract is used by all branches of federal government for construction work.

A written law created by a government

Liability that comes directly from laws statutes- can be explicit and implicitly defined. Example: when I caught the welding foreman telling his apprentice to proceed without his facemask I knew I had to get rid of him on account of statutory liabilty

A clause allowing for a union individual to act as the union shop steward, who acts as a normal employee except with the authorization to do some level of union business during working hours. Care in the negotiation process must be taken to ensure that the employee is still performs a full day's work.

A method of depreciation which assumes the asset will lose an equal amount of value per year. The annual depreciation charge is computed by taking purchase price of the asset minus its salvage value, divded by the no. of years of its useful life. Example: If my company purchases a bus (5 year property, straight line depreciation) for $250,000, and it has a salvage value of $50,000, annual depreciation = ($250,000-$50,000)/5 = $40,000

Liability that exists whther or not a person is at fault. The mere fact that the act or failure to act occurred is all that is necessary to establish liability. Contract liability, tort liability, and statutory liability are all strict liability. For example, an owner of an animal is liable for injuries if the animal causes injury to another person or animal.

To subcontract is to hire another company to do part of the work you have contracted to do. In this course, subcontracting is commonly referred to because it frequently an owner will hire a general contractor who will oversee the work and perform some of it but who whill usually hire other companies to do some portion of the work.

This is a clause in a labor agreement that binds the contractor to employ only subcontractors who agree to the terms and conditions of the contractor's labor agreement.

Sum-of-year-digits is a method of calculating depreciation. Say the total depreciation expected is X. The depreciation each year would be calculated as the number of years of expected life remaining divided by the sum of the years digits and multiplied by X. For example, if you were purchasing a machine which depreciated $100,000 at an accelerated rate over the course of 3 years, you would calculate the depreciation at the beginning of the first year as 3/6*$100,000 because it has 3 years of life remaining, and the sum-of-year-digits is 3+2+1=6.

In economics and business decision-making, a sunk cost is a cost that has already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future coststhat may be incurred or changed if an action is taken. For example, the costs of purchasing machinery or capital for a project in the past is considered as sunk costs, and cannot be recovered.

A bond guarantees the performance of a contract or other obligation. Surety bonds are 3 party instruments by which 1 party (surety) guarantees or promises a 2nd party (obligee) the successful performance of a 3rd party (principal). The Surety, which is a financial institution possessing great wealth and stability, determines if an applicant (principal) is qualified to be bonded for the performance of some act or service. If the bonded individual does not perform as promised, the surety performs the obligation or pays for any damages. The purpose of a surety is to protect public and private interests against financial loss. For example, if Joe is the principal and has promised someone (obligee) that he will do something, and Joe fails to perform, financial loss could result to the obligee. The obgliee could say to Joe, “If you can be bonded, I’ll accept your performance promise.” Joe then goes to a surety and asks to be bonded. If the surety determines that Joe is qualified and will live up to his promise, it will just the bond and charge Joe a “premium” for putting its name behind Joe’s promise. Joe is still responsible to perform as promised. The surety is responsible only in the event that Joe does not fulfill his promises.

an involuntary fee enforced by a government entity that individuals or corporations have to pay. Example: assume that a machine that costs $10,000 has a useful life of 5 years and is expected to produce gross earnings of $5,000 each year. With straight-line depreciation and a 20% income tax rate, the amount of tax pays out annually would be $600 [Gross earning ($5,000) – Depreciation ($2,000) = Taxable Income ($3,000); Income tax = Income Tax Rate (0.20) * Taxable Income ($3,000) = $600].

a person or organization who is not a party to the contract but who benefits for the contract (A third party is a person or organization that is not a party to a contract). For example, if contractor A has valid contract with owner C to repair an apartment, and renter B has a valid contract with owner C to rent the apartment, it may be possible for renter B to sue contractor A for failure to complete the contract.

a contract in which the contractor is paid for the time spent by its employees, the rental cost of equipment, and the materials used together with a markup. For instance, the a contractor's laborers might work 8 hours, a crane might be used for 4 hours, and 10 coubic yards of concrete might be used. The contractor would be paid for these items together with a markup.

The clause in a contract that says how much time, normally expressed in days, is permitted to complete the work. It might also include limits on that time (e.g., no Saturday work or no night work). e.g. In field trip, we learned that the Emeryville Community Center was to be completed in milestones, the first of which would be in time for the start of the 2016-17 school year.

A situation where the issuer buys back the bond, normally at face value, without waiting for the maturity date. It no longer has the commitment to regularly pay the stated interest on the bond.

When issuers issue new bonds at a lower coupon rate and use the proceeds to buy back the older bonds. This allows the company to capitalize on the lower interest rate, which allows it to pay a smaller interest charge.

A law that says people, without exemption, cannot do things that may damage or injure others. It is a civil wrongdoing. For example, a geotechnical engineer cannot misrepresent the quality of soil for a foundation when providing a report.

When a bidder places a high price on some items and a low price on other items in a unit price contract. For example, a contractor may want to increase the unit price of placing formwork in an attempt to receive a larger sum at the beginning of the work, and to compensate for the increased cost may lower costs of concrete finishing which is expected to occur later in the project.

A cash flow that has equal amounts for each given time period. For example, if a machine requires $200 of upkeep every year over its lifetime, then this will be a uniform cash flow.

A law whose purpose is to establish fair and uniform trade practices applying to the sale of goods as distinct from the performance of construction services. In other words, this provision covers the sale of goods that are used in the construction, but it does not cover the provision of services by the construction industry (covered under a different law). This law hence requires the court to determine whether the product in question is considered a goods or a service.

A clause in a labor contract specifying the types of work that only union members can perform and the geographic limitations of this restriction.

Union labor is labor hired through a union, whereas non-union labor is labor hired directly instead of through a union. An example of how union labor might work in the context of scenarios related to this class is someone doing a building project might need to hire a certain number of electricians. They could call the union and ask for electricians. They would then pay the electricians hourly wages and also pay the union to provide the electricians with benefits according to a contract made with the union. If they instead hired non-union labor, they would have to seek out electricians to hire and pay the electricians' benefits directly.

A contract iin which the owner pays a fixed sum for each completed unit of work. One example of this is when an owner who may have a limited budget and wants a firm fixed unit price in order to complete the project.

Programs such as health insurance, pension, vacation, etc. that are taken out of a workers salary. These programs are paid into and can be used by all employees. It is importnat to this class because they help protect both employees and employers but also take away from the overall hourly pay a worker may be earning.

A negotiated stipulation in a labor contract that limits the conditions under which management may direct the performance of labor. THey may address items such as documentation, procedures, job safety, etc. E.g, In the field trip, we learned that workers were expected to perform certain operations in a specific order so that the sequential processes would be completed promptly safely and efficiently.

A bond that has no periodic coupon payments. As example is US savings bonds, which one buys, holds, and then redeems. There is no interim payment.