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Contract and Its Types: Prepared by K.Mukilan AP-I /civil, KLU

The document discusses different types of construction contracts. It defines a contract as a written agreement between two parties to complete work or supply materials according to the agreed terms. The main types of contracts covered are lump sum, item rate, lump sum and schedule, cost plus fixed fee, cost plus percentage of cost, and special contracts such as turnkey, package, negotiated, continuing, and running contracts. Each type has different characteristics in terms of payment structure, suitability for projects, and advantages and disadvantages.

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Balaji v
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© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
21 views

Contract and Its Types: Prepared by K.Mukilan AP-I /civil, KLU

The document discusses different types of construction contracts. It defines a contract as a written agreement between two parties to complete work or supply materials according to the agreed terms. The main types of contracts covered are lump sum, item rate, lump sum and schedule, cost plus fixed fee, cost plus percentage of cost, and special contracts such as turnkey, package, negotiated, continuing, and running contracts. Each type has different characteristics in terms of payment structure, suitability for projects, and advantages and disadvantages.

Uploaded by

Balaji v
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CONTRACT AND ITS TYPES

Prepared by K.Mukilan AP-I /Civil, KLU


DEFINITION
• It is an written agreement signed between
two parties.
• For doing some work/Supply of materials
within the time required, money and
condition of agreement.
• Agreement cannot be changed.

Prepared by K.Mukilan AP-I /Civil, KLU


TYPES OF CONTRACTS
• Lump sum contract
• Item rate contract
• Lump sum and schedule contract
• Cost plus fixed fee contract
• Cost plus percentage of cost contract
• Special contract

Prepared by K.Mukilan AP-I /Civil, KLU


LUMP SUM CONTRACT
Definition:

• The contractor offers do to the whole work as shown in drawing


and described by specifications, for a total stipulated sum of money.

• Difficult to make adjustments.

• A project finished within the agreed lump sum amount as per


drawings and specifications.

Suitability:

• Having prior construction experience.

• Suitable for more realistic bid.


Prepared by K.Mukilan AP-I /Civil, KLU
LUMP SUM CONTRACT
• MERITS:
 Can earn more profit by in depth of planning and effective
management.
 The owner can know the total lump sum price.

• DEMERITS:
 it is not suitable for difficult foundation and excavation.
 Didn’t specified unforeseen work details.

Prepared by K.Mukilan AP-I /Civil, KLU


ITEM RATE CONTRACT
Definition:
• Called as schedule contract.
• Item rate basis.
• Amount received by the contractor.
• The payment to the contractor, depends upon the quantities of
work actually done by him.
Suitability:
• All types of works financed by public or Govt.
• Split into various items or quantity of work.

Prepared by K.Mukilan AP-I /Civil, KLU


ITEM RATE CONTRACT
• MERITS:
 No need for detailed drawings.
 Drawings and specifications can be changed.

• DEMERITS:
 the cost estimated can only be know upon completion.
 Additional staff is required for releasing payment to the
contractor.

Prepared by K.Mukilan AP-I /Civil, KLU


LUMP SUM AND SCHEDULE CONTRACT
Definition:
• Similar to the lump sum contract.
• Except schedule of rates is also included in the contract
agreements.
• the extra amount to be paid or deduction is made during the
progress of work
Suitability:
• Having prior work experience
• Consequently estimate the project cost more realistically.

Prepared by K.Mukilan AP-I /Civil, KLU


LUMP SUM AND SCHEDULE
CONTRACT
• MERITS:
 Detailed measurement of original item of work is not
required for making payment to the contractor
 Owner know the tenders and know the financial
implications.
• DEMERITS:
 studied thoroughly and all the contract documents.
 rate may higher than the prevailing market rate.

Prepared by K.Mukilan AP-I /Civil, KLU


COST PLUS FIXED FEE CONTRACT
Definition:
• It is desirable when the scope and nature of the work can atleast be
broadly defined.
• The amount of fee is determined as a lump sum from a consideration of
the scope of work, its approximate cost, nature of work, estimated time of
construction , manpower and equipment requirement etc.,
Suitability:
• Suitable for important structures where the cost of construction is
immaterial.
• Suitable for works required to be completed expeditiously.

Prepared by K.Mukilan AP-I /Civil, KLU


COST PLUS FIXED FEE CONTRACT
• MERITS:
 Actual cost is to be borne by the owner.
 Resulting good quality.
 Easy to changes in design and methods.
 Work can be executed speedly.
• DEMERITS:
 cannot be adopted normally.
 In case of public or Govt. departments.
 Financial difficulties. (Final cost of the work is not known by the
owner)
Prepared by K.Mukilan AP-I /Civil, KLU
COST PLUS PERCENTAGE OF COST
CONTRACT
Definition:
• Instant of awarding the work on lump sum or item rate basis.
• It is given on certain percentage over the actual cost of
construction.
• Cost percentage is agreed earlier both together.
• Proper
Suitability:
• Suitable for important structures where the cost of construction is
immaterial.
• Suitable for works required to be completed expeditiously.
Prepared by K.Mukilan AP-I /Civil, KLU
COST PLUS PERCENTAGE OF COST
CONTRACT
• MERITS:
 Detailed measurement of original item of work is not required
for making payment to the contractor
 Owner know the tenders and know the financial implications.
• DEMERITS:
 studied thoroughly and all the contract documents.
 rate may higher than the prevailing market rate.
 Earn more profit by the contractor causes increasing the cost of
work.

Prepared by K.Mukilan AP-I /Civil, KLU


SPECIAL CONTRACTS
• Turn key contract
 All works may participating.
 The owner is that he need not co-ordinate the work of different
contractors.
 The owner takes over the entire work from the main contract.
• Package contract
 Two or more related jobs.
 Combined of work may done by single contract.
• Negotiated contract
 Detailed project specifications are arrived by the discussions between
the owner and main contractor.
• Continuing contract
 Work is awarded to the contractor on the basis of agreed terms and
conditions.
• Running contract
Prepared by K.Mukilan AP-I /Civil, KLU

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