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Lecture No. - 6 - Types of Contract

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Lecture No. - 6 - Types of Contract

Uploaded by

Juli Baker
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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LECTURE 9:

TYPES OF CONTRACT

CE ESE Laws, Ethics,


Specs and Contracts

ENGRINCS
◦ A mutual or legally
binding agreement between two parties
based on policies and conditions recorded in
document form.
◦ The two parties involved are one or
more owners, and one or more contractors.
◦ The owner has full authority to decide what
CONTRACT type of contract should be used for a specific
development to be constructed and to set
forth the legally-binding terms and conditions
in a contractual agreement.
◦ A construction contract is an important piece
of document that outlines the scope of work,
risks, duties, and legal rights of both the
contractor and the owner. `
I. Lump Sum Contract
II. Unit Price Contract
TYPES OF III. Cost Plus Contract
CONTRACT IV. Guaranteed Maximum Price Contract
V. Design-Build Contract
◦ A lump sum contract, sometimes called
stipulated sum, is the most basic form of
agreement between a contractor and a
LUMP SUM customer.
CONTRACT ◦ A contractor under a lump sum agreement
will be responsible for the proper job
execution and will provide its own means
and methods to complete the work.
◦ In a unit price contract, the work to be
performed is broken into various parts,
usually by construction trade.
◦ This contract type is based on anticipated
quantities of items which are counted in the
project in addition to their unit prices.
UNIT PRICE
◦ Unit price contracts are seldom used for an
CONTRACT
entire major construction project, but they
are frequently used for agreements with
subcontractors which involve accurate
identification of different types of items, but
not their numbers, in the contract
documents.
◦ The cost plus contract is an agreement
which involves the buyer’s consent to pay
the complete cost for material and labor in
addition to the amount for contractor
overhead and profit.
COST PLUS
◦ This contract type is favored where the
CONTRACT
scope of work is highly uncertain or
indeterminate in addition to the types of
labor, material, and equipment being
similarly uncertain in nature. Here, the
contractor's profit is set at a fixed amount.
◦ A Guaranteed Maximum Price (also known
as GMP, Not-To-Exceed Price, NTE, or NTX)
contract is a cost-type contract where the
contractor is compensated for actual costs
incurred plus a fixed fee subject to a ceiling
price.
GUARANTEED ◦ The contractor is responsible for cost
MAXIMUM overruns, unless the GMP has been
PRICE increased via formal change order (only as a
CONTRACT
result of additional scope from the client,
not price overruns, errors, or omissions).
◦ This is different from a lump-sum contract
where cost savings are typically retained by
the contractor and essentially become
additional profits.
◦ With a design-build contract, the owner
awards the entire project to a single
company. It is typically awarded to a
contractor, though architects or engineers
may be awarded one in some specialized
cases.
◦ Once the contract is signed, the contractor
DESIGN-BUILD is responsible for all design and construction
CONTRACT work required to complete the project.
◦ The owner is still given the right to approve
or reject design options, but is no longer
responsible for coordinating or managing
the design team.
◦ Most of these contracts are awarded
through negotiation rather than through a
“
“The joy of engineering is to find a
straight line on a double logarithmic
diagram.”
-Thomas Koenig

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