TYPES OF CONTRACT IN CONSTRUCTION MANAGEMENT

What is Construction contract ?

• An exchange of promises between two or more parties to do, or refrain from doing an act, which resulting contract is enforceable in a court of law.

• A legal agreement document between two parties (client (Owner) & Contractor) that binds the contractor to do the job with the specified requirements and the client to pay for it.

• Exchange of money in return for construction material and building services.

• Buying from external organizations and 3rd parties to start construction project

Which types of Contracts not used in Construction

• Design Build

• Unit price Contracts

• Lump-sum Contract

• Express and Implied Contracts

The total cost of work in Unit Price Contract can be calculated

• After the sign the contract

• Before the sign the contract

• After the completion of the work

• Before the completion of the work

Advantages of Unit price Contracts

• Tenderers prices are on exactly the same basis

• Owner does know the exact cost of the work.

• Avoid a lot of detailed accounting & measurement.

• Project scope and limits are defined prior to the start of construction.

Which is not of disadvantages of Lump-sum Contract

• Plans & specifications must be every detail.

• Highly skilled Architect or Engineer is needed.

• The lack of time flexibility in this method may result in delayed project implementation.

• Plans & specifications do not need to be completed in detail

Total cost of Cost Plus fixed fee Contract (CPFF)

• Total cost = Cost for the work X Fixed Fee

• Total cost = Cost for the work + Fixed Fee

• Total cost = Cost for the work + Percentage of cost

• Total cost = Cost for the work X Percentage

In Cost plus incentive fee (CPIF) Contract, the compensation is based on contracting performance according to

• Budget

• Schedule

• Quality

• Budget, schedule and quality

Advantage of Cost Plus Contract

• They allow the focus to shift from the overall cost to the on the quality of work being done.

• They may leave the final cost up in the air since they can't be predetermined.

• They may lead to a longer timeline for the project.

• The all risk on the contractor.

Which sentence is true about Guaranteed Maximum Price (GMP) Contract

• The contractor agrees to perform work up a price ceiling.

• The contractor agrees to perform work within a price ceiling.

• This method gives greater flexibility for the contractor.

• All sentence not true

In the Negotiated Contract The owner can negotiating with the contract including method of payment for the work, Bid, etc.

• True

• False