3 - Contracting forms and pricing mechanisms for major programme and projects Flashcards
What are Model Form contracts?
They are conditions of contract. They have a common template for the execution of project work in particular industries.
They reduce the need for parties to create bespoke terms
Consistent with recognised practice
Name some pros and cons of Model Form Contracts
Pro – reduce time scales, less negotiation
Con – may not be suitable for project with unique features, the needs of parties might be out of the norm
Name 3 types of model form of contract
New Engineering Contract (NEC) – management of engineering and construction projects
International Federation of Consulting Engineers (FIDIC) – construction, plant & design
The Joint contracts Tribunal (JCT) – minor and major projects
What are the 3 tiers in NEC contracts?
Core Clauses – responsibilities, time, testing, payment, risk, insurance
Main Optional Clauses – price with activity schedule, price with BOQ, Target cost with activity schedule, cost reimbursable, management contract
Secondary Option Clauses – price adj for inflation, bonus for early completion, delay damages, limitation to liability
What are the 2 main pricing mechanisms?
Fixed Price, Flexible Price
What factors can influence pricing?
Risk, Value, Power, Relationship, Custom (general practice), External (PESTLE)
What is lump sum pricing (fixed)?
Agreement in advance of a schedule of payments(staged payments), payment made on delivery, specs are definite,
Pros – risk management (price known, supplier bears risk), cash flow management (timing of payment known), supplier motivation, administration
Name 4 types of pricing mechanisms
Fixed lump sum,
Activity schedule pricing (each activity priced) ,
Bill of Quantities (requires detail),
Target Costing Method (max price and no max price),
Cost Plus (reimbursable) – fixed, incentive, award fee,
Time and Materials
