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Owner's Obligations in Construction Projects: Understanding Fees and Payment Terms

Explore the various compensation methods for construction projects, including fee structures based on project needs, cost and time methods, and different project attribute methods. Learn about payment schedules and consequences for failure to perform. Discover how additional services and reimbursables can impact fee basis and understand the legal implications of unjust enrichment and forfeiture.

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Owner's Obligations in Construction Projects: Understanding Fees and Payment Terms

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  1. Construction Engineering 380 Chapter 13 Owner Obligations

  2. Owner Obligations • Fee structure is determined by the project needs • A variety of compensation methods are legally valid • Cost and time methods • Multiple of direct salary expense • Multiple of direct personnel expense • Professional fee plus expense • Hourly rates

  3. Owner Obligations • Project attribute methods • Fixed sum • Percentage of total project cost • Multiple of billings • Square footage • Unit cost • Royalty

  4. Owner Obligations • Additional services and reimbursables can add to fee basis • Compensation (fee) should be based on risk, owner attitudes, and technical difficulty • Payment schedules are articulated in the contract: • interim • packages • monthly • late

  5. Owner Obligations • Failure to perform is usually considered a material breach and cause for damage recovery • Prevention or hindrance (owner won’t answer questions required to complete design) does not prevent recovery • Unjust enrichment and forfeiture are well-established legally (process is clear)

  6. Owner Obligations • Procedure for completion of design in alternative delivery or fast-track is not as clear • Financial exigency • Bankruptcy • Repudiation • Unwillingness or inability to perform (death of a partner)

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