Contracts, Specifications, Ethics and CE Law - Cheat Sheet
Your last-minute revision companion for the non-technical but heavily-tested side of CE practice: contract types, specifications, Philippine laws, ethics, and the few computational items (retention, liquidated damages) that appear on the board exam.
Contract Types & Structure
Formulas
Retention = r% × Contract Amount
Meaning
r% = retention percentage (e.g., 10%); Contract Amount = total contract value in PHP
Watch out
Retention is a percentage of TOTAL contract value, not of each individual payment — applies to the full contract, released at final acceptance or completion
When to use
Calculate the amount withheld from progress payments to secure contractor performance
Liquidated Damages (LD) = Daily Rate × Days of Delay
Meaning
Daily Rate = ₱/day (e.g., 0.1% of contract ÷ 100); Days of Delay = calendar days overdue
Watch out
LD is a FIXED agreed-upon amount per day — it is NOT a claim for actual damages; it must be reasonable (not a penalty clause), and enforcement requires proof of delay beyond contractor's control threshold
When to use
Calculate penalty for contractor delay; a pre-agreed daily amount, not a dispute over actual losses
Common values
Value
5–10%
Symbol
r
Quantity
Typical retention percentage
Value
0.1–0.5% of contract/day
Symbol
LD_rate
Quantity
Typical LD daily rate
Value
2–5% of bid amount
Symbol
BB
Quantity
Bid bond
Value
5–10% of contract
Symbol
PB
Quantity
Performance bond
Important facts
- Lump-sum: contractor risk is HIGH; best for well-defined, stable-scope projects.
- Unit-price: quantity risk shared; ideal for uncertain earthwork, site investigations, or emergency repairs.
- Cost-plus: used when scope is unclear or emergency; requires cost transparency and audit clause.
- Retention typically ranges 5–10% of contract value; released 30–90 days after final acceptance.
- LD rate is usually 0.1–0.5% of contract value per day; must be genuine pre-estimate of loss, not a penalty.
- Bonds (bid, performance, payment) are required by most large contracts and government projects (RA 9184).
- A valid contract requires: offer, acceptance, consideration, legal purpose, and competent parties.
- Contractor NOT liable for delay if caused by force majeure (earthquake, typhoon, acts of God) unless contract explicitly includes such delays.
Key definitions
Lump-Sum (Fixed-Price) Contract
Example
₱100 M to build a 10-storey residential building with specified drawings and specs — one price, no adjustments for material changes.
Single fixed price for a fully defined scope of work; contractor bears all quantity and cost risk.
Unit-Price Contract
Example
Earthwork at ₱500/m³ for excavation; actual quantity measured in the field determines total cost.
Payment per measured unit (e.g., ₱/m³, ₱/m²) at bid rates; owner and contractor share quantity risk.
Cost-Plus (Reimbursable) Contract
Example
Emergency repair: reimburse all labour, materials, plant costs + 15% fee; suits urgent, uncertain-scope work.
Contractor reimbursed for all documented costs plus a fee (fixed fee or percentage); used when scope is undefined.
Retention
Example
10% retention on ₱10 M contract = ₱1 M held; released at defect liability expiry or final acceptance.
A percentage of each progress payment (or total contract value) withheld by the owner until final completion; ensures contractor performance.
Liquidated Damages
Example
₱5,000/day for 10 days delay = ₱50,000 LD; agreed in advance, not disputed unless unreasonable.
Pre-agreed daily penalty (₱/day) for contractor delay; not a claim for actual losses but a contractual obligation.
Bid Bond
Example
Bid ₱50 M, bid bond 5% = ₱2.5 M bond; forfeited if bidder refuses to sign after award.
A surety guarantee that the bidder will sign the contract if awarded; typically 2–5% of bid amount.
Performance Bond
Example
Contract ₱100 M, performance bond 10% = ₱10 M; surety pays owner if contractor fails to perform.
Guarantees the contractor will complete the work and remedy defects; typically 5–10% of contract value.
Payment Bond
Example
Ensures workers and suppliers are paid; owner's surety will reimburse if contractor defaults on payments.
Guarantees the contractor will pay all labour, suppliers, and subcontractors; protects 3rd parties.
Variation Order (Change Order)
Example
Additional excavation discovered = variation order issued, cost and time adjusted, signed by all parties.
A written change to scope, cost, or schedule; requires mutual agreement (client, contractor, engineer).
Order of Precedence
Example
Typically: Special Conditions > General Conditions > Technical Specs > General Specs > Drawings > Bills of Quantities.
The contractual hierarchy that resolves conflicts between drawings, specs, bills of quantities, and general conditions.
Diagrams to know
- Contract structure flow: bid → award → performance bond → progress payments (minus retention) → defect liability → final payment.
- Change order process: identification → variation order issued → cost/time adjustment → signatures (client, contractor, engineer) → execution.
- Timeline of retention: progress payment less retention → held until final acceptance → then released (usually after defect liability period).
Specifications
Important facts
- Specs complement drawings; drawings show layout, specs define HOW it is built and WHAT materials/quality.
- Order of precedence typically ranks: Special Conditions → General Conditions → Technical Specs → General Specs → Drawings → BoQ.
- Specifications MUST align with applicable codes: NSCP (structural), PD 1096 (building), DOLE D.O. 13 (safety).
- A specification is a legal document; unclear specs lead to disputes; must be precise and measurable.
- Performance specifications define the END RESULT (e.g., 'wall must be watertight'); prescriptive specs define the METHOD (e.g., 'apply 2 coats sealant').
- Submittals (shop drawings, material certs, test reports) must comply with spec; engineer approves before use.
- Change in scope requires a variation order; mere clarification does not (unless it alters cost/time significantly).
Key definitions
General Specifications
Example
Payment terms, insurance coverage, labour wage rates, testing and inspection procedures, submittals, site conduct.
Administrative, contractual, and procedural clauses covering insurance, safety, labour, quality assurance, and site management.
Technical Specifications
Example
Concrete: f'c = 28 MPa, slump 100–150 mm, W/C ratio ≤ 0.55; curing for 28 days; air content 4–6%.
Materials, workmanship, methods, tolerances, and quality standards for each construction element.
Order of Precedence
Example
Conflict: drawing shows 300 mm slab, spec says 350 mm → spec governs (technical spec supersedes drawing for quality).
The contractual rule for resolving conflicts between drawings, specs, and other contract documents.
Specification Conflict Resolution
Example
Drawing: brick wall; Spec: reinforced concrete block wall → Spec governs; owner/engineer verifies intent and issues clarification.
When drawing and spec differ, the spec (technical requirement) takes precedence because quality matters more than dimension.
Diagrams to know
- Spec hierarchy: General Specs (broad, all projects) → Technical Specs (project-specific, detailed) → Submittals (contractor-prepared proofs).
- Conflict resolution: Drawing vs Spec → Engineer/Architect interprets intent → Issues clarification/variation order if needed.
Philippine Laws & Codes
Common values
Value
2.0 m²/person
Symbol
A_occ
Quantity
Occupancy load (Residential)
Value
0.5 m²/person
Symbol
A_occ
Quantity
Occupancy load (Commercial)
Value
40 m (PD 1096)
Symbol
d_exit
Quantity
Maximum distance to fire exit
Value
3 years
Symbol
T_renew
Quantity
CE License renewal period
Important facts
- RA 544: Only a licensed CE may sign CE documents; unlicensed practice is illegal and subject to penalties and confiscation of documents.
- PRC issues permanent licenses (P.E.) and renewable licenses (CE Licensure renewed every 3 years with CPD points).
- PD 1096 occupancy classes: Residential (2.0 m²/person), Commercial (0.5 m²/person), Industrial (varies), Institutional; determines exits, load, sprinklers.
- NSCP 2015 is the current structural design code; it incorporates ACI 318-14 (concrete), AISC 360-16 (steel), and IBC seismic provisions.
- DOLE D.O. 13 requires: safety officer on site, daily toolbox talks, incident reporting within 24 h, PPE for all workers, and monthly safety audits.
- RA 9184 public projects must have: sealed competitive bidding, performance bond 5–10%, liquidated damages clause, and transparent contract award.
- A CE is liable for design defects, non-compliance with codes, and negligent engineering; professional liability insurance is recommended.
- Violation of RA 544 (unlicensed practice) is a criminal offense; documents signed by unlicensed persons are void and not accepted by government.
Key definitions
RA 544 (Civil Engineering Law)
Example
Only a licensed CE (P.E., CE, or Engr.) can sign structural drawings, plans, reports, and CE documents submitted to government; violation is illegal.
Philippine law (amended by RA 1582) that defines civil engineering, establishes the PRC Board of Civil Engineers, mandates licensure, and prohibits unlicensed practice.
PRC (Professional Regulation Commission)
Example
PRC administers the CE Licensure Exam (board exam); issues licenses; enforces code of ethics; accepts complaints against engineers.
Government body under DAO that regulates licensed professions in the Philippines; PRC Board of Civil Engineers oversees CE practice, licensure, and ethics.
PD 1096 (National Building Code of the Philippines)
Example
A residential building must comply with occupancy load (2.0 m²/person), fire exits (every 40 m), electrical code, and structural safety per NSCP.
National code covering occupancy classification, fire safety, sanitation, structural design, electrical, mechanical, and administration; basis for building permits.
NSCP (National Structural Code of the Philippines)
Example
NSCP 2015 specifies φ values (0.9 for tension, 0.75 for shear), f'c = 21/24/28 MPa, seismic zone factors, wind load, live load.
Structural design code adopted in the Philippines; used for beam, column, foundation, seismic, and concrete design; references ACI 318, AISC 360.
DOLE D.O. 13 (Construction Occupational Safety & Health)
Example
Hard hats, safety harness at heights, scaffolding inspection, weekly safety meetings, incident report within 24 h, safety officer on-site ≥ 50 workers.
Department of Labour & Employment order mandating safety standards, PPE, training, incident reporting, and hazard controls on construction sites.
RA 9184 (Government Procurement Reform Act)
Example
Government project: open bidding, performance bond ≥ 5%, liquidated damages, variation order limits, and transparent award process.
Law governing public procurement (bidding, competitive selection, contracts) for government projects; requires transparency, competitive bidding, and performance guarantees.
Design Professional (Licensed CE)
Example
A licensed CE must sign all structural designs, foundation plans, and CE certifications; liable if design is unsafe or non-compliant.
A holder of a civil engineer's license issued by PRC; responsible for design safety, compliance with codes, stamping/signing plans, and professional liability.
Diagrams to know
- Regulatory hierarchy: PD 1096 (Building Code) → NSCP (Structural) → ACI 318, AISC 360 (Materials); all must be complied with in design.
- Licensing chain: PRC Board of Civil Engineers → Issues CE License → Renewed every 3 years → CPD points required.
- Public project procurement: RA 9184 requirements → Bidding → Performance Bond → Liquidated Damages → Payment bond → Variation Order limits.
Engineering Ethics & Code of Conduct
Important facts
- PUBLIC SAFETY is the #1 paramount duty — it overrides client interest, employer directive, and personal profit.
- An engineer must REFUSE unethical directives (e.g., falsify test, ignore safety code) and may report to PRC if necessary.
- Competence: do not practice outside your field of expertise; always acknowledge limitations and seek specialist advice.
- Honesty: all reports, certifications, cost estimates, and test data must be truthful; falsification is grounds for license revocation.
- Confidentiality: client data is private; disclosure without consent is unethical and may breach contract law.
- Conflicts of interest must be disclosed upfront; if material, the engineer should recuse themselves from the project.
- Fair dealing applies to all stakeholders: contractor, suppliers, workers, public; favouritism or deception is unethical.
- PRC enforces the Code of Ethics; violations can result in license suspension, revocation, fines, and criminal charges for serious breaches (e.g., falsification, gross negligence).
- An engineer has a MORAL and LEGAL obligation to report unsafe conditions, non-compliance with code, and unethical practices.
Key definitions
Professional Ethics (CE Code of Ethics)
Example
If a client orders a substandard design that violates code, the engineer must REFUSE and report the safety issue, even if it costs the contract.
A set of moral principles governing the conduct of civil engineers; mandates that public safety, health, and welfare are PARAMOUNT above all other interests.
Public Safety, Health, and Welfare
Example
Engineer discovers structural deficiency in a building under construction → must immediately notify owner and halt work, regardless of cost impact or client anger.
The PRIMARY duty of the engineer; supersedes loyalty to employer, client, or personal financial gain.
Competence
Example
A junior engineer (fresh grad) should NOT stamp a complex seismic design without mentorship; must declare lack of experience and defer to a senior CE.
The engineer must practice only within the scope of their knowledge, training, and experience; must not take on work they cannot competently perform.
Honesty and Integrity
Example
An engineer cannot falsify a material test report or misrepresent soil bearing capacity to the client; must report facts, even if they delay or increase cost.
The engineer must be truthful in all professional dealings: cost estimates, schedules, test results, certifications, and conflicts of interest.
Confidentiality
Example
An engineer must NOT share a client's structural design, foundation details, or cost estimate with a rival bidder; breach is a serious ethical and legal violation.
The engineer must not disclose confidential client information (design, costs, schedules, weaknesses) to competitors or the public without consent.
Conflict of Interest
Example
An engineer designing a building for a client must DISCLOSE if the engineer's family owns the adjacent property or has a financial stake; must recuse if conflict is material.
The engineer must avoid situations where personal, family, or financial interests could compromise their professional judgment or duty to the public.
Fair Dealing
Example
During a site inspection, the engineer must be fair in assessing contractor compliance; cannot favor one contractor over another based on personal relationship.
The engineer must treat all parties (client, contractor, workers, public) fairly and without deception; must honor contractual obligations.
Diagrams to know
- Ethics hierarchy: Public Safety/Health/Welfare → Competence → Honesty → Confidentiality → Fair Dealing → Conflict Avoidance.
- Decision tree for ethical dilemma: Is it safe? → Is it legal? → Is it honest? → No conflict of interest? → If all YES, proceed; if any NO, refuse and report.
Worked Computational Examples
Formulas
Retention = r% × Contract Amount
Meaning
r% = retention rate (e.g., 10%); Contract Amount = total contract value
Watch out
Retention is withheld from TOTAL contract, not each payment; it is held until final acceptance (may take 30–90 days after completion)
When to use
Calculate the amount held from progress payment to secure performance
Liquidated Damages = Daily Rate × Days of Delay
Meaning
Daily Rate = fixed daily LD amount (₱/day); Days of Delay = calendar days beyond completion date
Watch out
LD is NOT actual damages claimed — it is a FIXED amount agreed upfront; must be reasonable, not a punitive penalty
When to use
Quantify contractor penalty for delay; pre-agreed in contract to avoid disputes
Important facts
- Example 1: ₱25 M contract with 5% retention → Retention = 0.05 × 25 M = ₱1.25 M withheld.
- Example 2: ₱10 M contract, 15-day delay at ₱8,000/day LD → Total LD = 8,000 × 15 = ₱120,000.
- Example 3: ₱100 M contract with 0.1% LD per day, 20-day delay → Daily LD = 0.001 × 100 M = ₱100,000; Total = 100,000 × 20 = ₱2 M.
- Common pitfall: confusing total retention with retention PER PAYMENT — retention is usually a lump sum held until final completion.
- LD calculation: always check the contract for the EXACT rate (₱/day or %/day); rates vary by contract type and client policy.
Must remember
- RA 544: ONLY a licensed civil engineer can sign CE documents; unlicensed practice is illegal and documents are void.
- PUBLIC SAFETY/HEALTH/WELFARE is the #1 paramount duty — overrides client, employer, and personal interest; refuse unsafe directives and report violations.
- Retention = r% × Contract Amount (typically 5–10%); withheld from progress, released at final acceptance; NOT per-payment, but total contract amount.
- Liquidated Damages = Daily Rate × Days of Delay; pre-agreed fixed penalty for delay (not actual damages claim); must be reasonable, not punitive.
- Contract types: Lump-Sum (defined scope, contractor risk) → Unit-Price (uncertain quantity, shared risk) → Cost-Plus (undefined scope, owner risk).
- PD 1096 (Building Code) sets occupancy loads (2.0 m²/person residential, 0.5 m²/person commercial) and fire exits (max 40 m); NSCP 2015 is structural design code.
- DOLE D.O. 13: Safety officer required on site, hard hats/harness mandatory, incident reported within 24 h, weekly toolbox talks; non-compliance is a site shutdown risk.
- Order of Precedence: Specs OVERRIDE drawings for QUALITY; conflict resolved per contract hierarchy (typically: Special Conditions → General Conditions → Tech Specs → Drawings).
- Bonds: Bid Bond (2–5% guarantee to sign contract) → Performance Bond (5–10% guarantee to finish) → Payment Bond (5–10% guarantee to pay workers/suppliers).
- Competence & Honesty: Never stamp work outside your expertise; all certifications, test reports, and estimates must be truthful; falsification = license revocation.
Last minute tips
- If asked 'which contract type?' — think QUANTITY: lump-sum (known quantity, contractor risk) vs. unit-price (unknown quantity, measured in field) vs. cost-plus (scope undefined, emergency).
- Retention & LD are FIXED amounts in the contract; they are NOT disputes — calculate directly from the rate given; always multiply by total contract value or days of delay, not per-payment.
- Conflict between Drawing and Spec? → SPEC WINS for technical/quality (materials, workmanship, standards); Drawing wins for layout/dimensions ONLY if explicitly stated in order of precedence.
- Ethics question? → Ask: 'Is it safe? Is it legal? Is it honest? Any conflict of interest?' If ANY answer is NO, the engineer must REFUSE and may report to PRC.
- For RA 544, PD 1096, NSCP, DOLE, RA 9184 — memorize which law governs WHAT (CE licensure, building code, structural design, site safety, procurement) to pick the right one in scenario questions.
Comparison tables
Contract Types — Quick Comparison
| Type | Price | Quantity Risk | Best For | Example |
|---|---|---|---|---|
| Lump-Sum | Fixed, one total price | Contractor | Well-defined scope, stable design | ₱100 M to build 10-storey office (fixed drawings, fixed specs) |
| Unit-Price | ₱/unit (m³, m², m, kg) × measured quantity | Shared | Uncertain quantities, site-dependent work | Earthwork at ₱500/m³; actual quantity per survey |
| Cost-Plus | Reimbursable cost + fee (fixed or %) | Owner | Undefined scope, emergency, urgent work | Emergency repair: reimburse cost + 15% fee; scope unknown upfront |
Philippine Laws — Jurisdiction & Scope
| Law/Code | Governs | Key Content | Enforced By |
|---|---|---|---|
| RA 544 (Civil Engineering Law) | CE practice & licensure | Define CE; PRC board; license issuance; prohibited unlicensed practice | PRC Board of Civil Engineers |
| PD 1096 (National Building Code) | Building design & construction | Occupancy, fire, sanitation, structural, electrical, mechanical requirements | Local Building Officials, City Engineers |
| NSCP 2015 (Structural Code) | Structural design methodology | Load factors, resistance factors, material properties, seismic design, codes of practice | Structural engineers, building officials (design review) |
| DOLE D.O. 13 (OSH in Construction) | Construction site safety | PPE, hazard control, training, incident reporting, safety officer, toolbox talks | DOLE, Labor Inspectors, Project Management |
| RA 9184 (Government Procurement) | Public project bidding & contracts | Transparent bidding, performance bond, liquidated damages, variation order limits | DBM, COA, Project Owner (Government Agency) |
Bonds — Purpose, Amount, Timing
| Bond Type | Amount | Purpose | When Released |
|---|---|---|---|
| Bid Bond | 2–5% of bid | Guarantees bidder will sign contract if awarded | At contract award (forfeited if bidder refuses to sign) |
| Performance Bond | 5–10% of contract | Guarantees contractor will complete work and remedy defects | After final acceptance & defect liability period (usually 30–90 days) |
| Payment Bond | 5–10% of contract | Guarantees contractor will pay labour, suppliers, subcontractors | After all claims settled (usually 30 days after final payment) |
Specifications vs Drawings — Common Conflicts
| Conflict Scenario | Drawing Says | Spec Says | Which Governs? | Reason |
|---|---|---|---|---|
| Concrete slab thickness | 300 mm | 350 mm, f'c = 28 MPa | Spec (350 mm, f'c = 28 MPa) | Technical requirement (quality & strength) supersedes dimension |
| Rebar size | 16 mm dia bars | 12 mm dia bars, grade 40 | Spec (12 mm dia, grade 40) | Spec defines material quality & standards; drawing is visual aid |
| Masonry wall material | Clay brick | Reinforced concrete block, Type III | Spec (RC block, Type III) | Spec prescribes material & performance; drawing is layout |
Diagrams
Contract Type Selection Decision Tree
A decision tree to help select the appropriate contract type based on scope definition and quantity certainty. Lump-sum for well-defined projects, unit-price for uncertain quantities, and cost-plus for emergency or undefined-scope work.
Philippine CE Laws & Standards — Hierarchy & Scope
A mind map showing the hierarchy and scope of the major Philippine laws and codes governing civil engineering practice, design standards, safety, and public procurement. This visual aid helps students quickly identify which law applies to a given scenario.
Ethical Decision Framework for Engineers
A decision framework for engineers facing ethical dilemmas. The flowchart prompts checking safety compliance, legality, honesty, and conflicts of interest. If any check fails, the engineer must refuse and report; if all pass, proceed with public safety as paramount.
Retention & Liquidated Damages — Calculation & Release Timeline
Timeline showing how retention is withheld from progress payments, held until completion, and then released after final acceptance. If there is delay, liquidated damages are calculated and deducted before final release of retention.