Bonus Clauses

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Author Message Edward J. Dvorak PE CCS FASCE SCIP New member Username: eddvorak Post Number: 1 Registered: 03-2004 Posted on Tuesday, March 23, 2004 - 10:43 am:    Gentlemen: I need to obtain a contract "incentive clause" (bonus clause) specification for client who needs a project completed swiftly. Anonymous   Posted on Tuesday, March 23, 2004 - 12:05 pm:    Edward: Do you mean that you don't want any assistance from the female specification writers? David Axt, AIA, CCS, CSI Senior Member Username: david_axt Post Number: 251 Registered: 03-2002 Posted on Tuesday, March 23, 2004 - 12:06 pm:    Just use the liquidated damages clause and reverse it. That is for every X days the contractor finishes early he/she gets X dollars. Lynn Javoroski Senior Member Username: lynn_javoroski Post Number: 82 Registered: 07-2002 Posted on Tuesday, March 23, 2004 - 12:33 pm:    At the risk of overstepping my bounds: What I have used in the past is 1/2 the amount established for liquidated damages is the amount used for incentive. Of course, you have carefully calculated the amount for liquidated damages based on Owners actual losses. If the incentive clause gives the Contractor that same amount, the Owner will lose instead of gain. But if that amount is split 50%-50%, everyone wins. Sorry anonymous, I had to break silence even though I am not a gentleman. Lynn Javoroski Senior Member Username: lynn_javoroski Post Number: 87 Registered: 07-2002 Posted on Thursday, March 25, 2004 - 06:40 pm:    Here's some verbage that I wrote a while ago. Adjust the dollar mounts according to the project and determinations. "8.2.3 Supplement Subparagraph 8.2.3 as follows: .1 It is agreed that date of beginning, rate of progress, and time for completion of Work to be done are essential conditions of this Contract, and that Work shall be commenced when Owner gives Contractor written Notice to Proceed. .2 Incentive Pay for Substantial Completion of Work: Owner will pay Contractor Two Hundred Fifty Dollars ($250) per calendar day or hourly portion thereof as incentive for each calendar day preceding the date established for Substantial Completion in the Contract Documents, or extension granted by Owner, that the Work is determined to be substantially complete by Architect/Engineer. In no event will incentive payment exceed Four Thousand Dollars ($4,000). Incentive payments will not be considered part of the Contractor’s bid price. OR Incentive payments will be deducted from the Contract Miscellaneous Allowance. .1 Under this Incentive Plan, no time extensions will be granted for adverse weather conditions, for delays in material deliveries, or for labor disputes unless it can be shown that such disputes are industry wide. .3 If Contractor neglects, fails, or refuses to complete Work within time specified or extension granted by Owner, Contractor agrees to pay Owner Two Hundred Fifty Dollars ($250) per calendar day, not as penalty but as liquidated damages, for each day of default. This amount is agreed upon because of the impracticality and difficulty of ascertaining actual damages to Owner with respect to inconvenience to public, added cost of engineering and supervision, and other items, such as rent, interest, services, and user benefits. .4 Contractor shall not be charged with liquidated damages when delay in completion is due to: .1 Preference, priority or allocation order fully issued by Government; .2 Acts of God or of public enemy, acts of Owner, acts of another Contractor in performance of Contract with Owner, fires, floods, epidemics, quarantine restrictions, strikes - labor disputes, freight embargoes, and unusually severe weather and; .3 Delays of Subcontractors or suppliers occasioned by the causes specified in Subclauses .1 and .2 of this Clause; .4 Within seven days from beginning of such delay, Contractor shall notify Owner, in writing, of cause of delay. Owner shall ascertain justification for delay and notify the Contractor within reasonable time of its decision regarding imposition of liquidated damages. .5 If Contractor cannot complete Work on or before time specified, written request for extension of time may be made. Reason justifying extension shall be set forth fully. If Owner finds that Work was delayed because of conditions beyond control of Contractor, or that quantities of Work to be done are in excess of estimated quantities by amount sufficient to warrant additional time, it may grant extension of time for completion. Extended time for completion shall then be considered as in full force and effect as if it were original time for completion. .6 Should Contractor fail to complete Work within time agreed upon or within such extra time as may be allowed by extensions, there shall be deducted from monies due or that may become due Contractor sum of liquidated damages sustained. .7 Permitting Contractor to continue and finish Work or part thereof after time affixed for its completion or after date to which time for completion may have been extended shall in no way operate as waiver on part of Owner or Owner's rights under Contract." Doug Frank FCSI CCS Senior Member Username: doug_frank_ccs Post Number: 68 Registered: 06-2002 Posted on Friday, March 26, 2004 - 09:02 am:    There is a significant caveat to this discussion as regards A/E liability when penalty / bonus clause is tied to the date when "the Work is determined to be substantially complete by Architect/Engineer". If the A/E doesn't respond promptly to the Contractor's request for Substantial Completion, or if the A/E denies the request due to some (perhaps minor)deficiencies, the Contractor can loose significant dollars. I can see that ending up in court, with A/E as defendant. John Bunzick, CCS, CCCA Senior Member Username: bunzick Post Number: 201 Registered: 03-2002 Posted on Friday, March 26, 2004 - 09:24 am:    Doug, I agree with the caveat, but I'm not so sure it's that different from an Architect's determination of Substantial Completion that leaves the contractor liable for liquidated damages, even when there is no bonus clause. Richard Hird (Unregistered Guest) Unregistered guest Posted on Friday, March 26, 2004 - 09:46 am:    I agree with Doug that the professional is put in a real bind when speed becomes the overiding concern. You might as well throw quality out the window and ignore all but the most critical deficiencies. Then, of course, you and the Contractor get hauled into court over the poor workmanship. On public projects you may have no choice, but a prompt pay policy for acceptably completed work with full time field inspection is more effective than a bonus or liquidated damage clause. You can get speed and quality without rancor. It is a WinWin situation.