CONSTRUCTION CONTRACTS AND THEIR DOCUMENTS (CHAP 3) Flashcards
CATEGORIES OF CONTRACT IN
CONSTRUCTION
COMPETITIVE BID
CONTRACTS and NEGOTIATED
CONTRACTS
(COMPETITIVE BID CONTRACTS):
A. UNIT PRICE CONTRACTS
The payment to the contractor can be calculated easily according to the amount of work he did.
The method gives freedom to alter the work of construction
All tenderers price on exactly the same basis and their tenders may be closely with one another,
Plans and specifications do not need to be completed in detail.
Advantages of unit price contracts
(COMPETITIVE BID CONTRACTS):
The bid is based on the price per unit of work on of material.
COMPETITIVE BID CONTRACTS
Total cost = Estimated quantity x Unit price
in the bid.
UNIT PRICE CONTRACTS
(COMPETITIVE BID CONTRACTS):
A. UNIT PRICE CONTRACTS
The employer doesn’t know the exact cost of the work until it is completed.
Disadvantage of unit price contracts
(COMPETITIVE BID CONTRACTS):
Bidding is done on a total amount of the works and services required by the plans and specifications. The specification and drawings need to be completed in every detail before a lump-sum offer is called for
LUMP SUM CONTRACTS
(COMPETITIVE BID CONTRACTS):
B. LUMP SUM CONTRACTS
Avoid a lot of detailed accounting and measuring work
Owner does know the exact cost of the work to him
The work is a straightforward job for the contractor and he will try to complete it as early as possible in order to
increase his’ profit.
Advantages of lump sum contracts
(COMPETITIVE BID CONTRACTS):
B. LUMP SUM CONTRACTS
lteration of design or addition during construction
by employer or engineer causes troubles
Plans and specifications must show complete details which require a lot of lime and money
Contractor has interested to use cheaper labour and materials.
Disadvantage of lump sum contracts
Price of the work is not definitely fixed.
Price = cost + profit
Here profit is a professional fee and is
subjected to negotiation and bidding.
NEGOTIATED CONTRACTS
(COMPETITIVE BID CONTRACTS):
It is forbidden in some countries, because has great disadvantages such as;
Contractor will tend to pull up the cost of
the work in order to get more money from
the same work.
Owner has a great risk.
COST + PERCENTAGE OF COST
(COMPETITIVE BID CONTRACTS):
Advantages
It used for an accurate bidding estimate is difficult to be prepared.
Disadvantages:
Owner has the risk of the construction
Contract has not any incentive for the contractor to minimize the cost.
COST + FIXED FEE CONTRACT:
(COMPETITIVE BID CONTRACTS):
There is increase in the contractor’s profit if the contractor decreases the cost of the construction. Contractor may get 25 to 50% of the saving he makes.
THE COST + FIXED FEE + CONTRACT
WITH A PROFIT-SHARING CLAUSE
(COMPETITIVE BID CONTRACTS):
Contractor’s fee changes proportionally to the actual cost of the work in accordance with a sliding scale of fixed fee. He gets increasing fee with decreasing of
construction costs and vice versa. A minimum fee is guaranteed to him.
CONTRACTS BASED ON COST + SLIDING
SCALES OF FEES:
(COMPETITIVE BID CONTRACTS):
The contractor guaranties that the construction will not exceed a certain maximum. He can not receive the compensation for the exceeding amount. These contracts require exact plans and specifications for the establishment of a reasonable ceiling prices.
COST + GUARANTEED CEILING PRICE
CONTRACT:
DOCUMENTS OF THE CONTRACTS
Describes in words the work to be built, the quality
of materials, workmanship to be used and method of testing etc.
Specification
DOCUMENTS OF THE CONTRACTS
Which pictorially shows the works to be built,
their dimensions and level, etc.
Contract drawing:
