Procurement (Price) Flashcards
What are the 4 procurement options for price?
- Lump Sum Contracts
- Measurement Contracts - Measure & value
- Cost Reimbursement Contracts - Cost Plus
- GMP - Guaranteed Maximum Price
What are the 4 procurement options for contractor selection method?
- Competitive Tender - Single Stage
- Negotiation
- 2-Stage or Multi-Stage Tender
- On site and Off-Site Overheads + Profit
What are the 4 procurement options for Contractual Organisation Methodology?
- Traditional: Design - Bid - Build
- Project Management
- Design & Build
- Management Contracts
What is a Lump Sum Contract
Contract in which the contractor agrees to carry out a defined scope of work for a pre-agreed sum.
What is the most common form of contract price?
Lump Sum Contract
Who takes the risk in a lump sum contract? What might be included in the contract to mitigate this risk?
The Contractor.
There is risk that the lump sum will not cover the total costs of the work. A contingency sum (typically 10%) may be included for unexpected conditions.
How are Lump Sum Contracts priced?
Without Quantities Known: Contract is priced on drawings and other documents required.
With Quantities Known: Contract is priced on drawings and a firm schedule of quantities.
Items that cannot be accurately quantified are covered by a approximate or provisional sum.
What is a Measurement Contract - Measure and Value Contract?
A contract in which the contract sum is only finalised after the work is completed and remeasured at the end.
When is a Measurement Contract (Measure and Value) used?
Used where the extent of work and materials cannot be accurately measured before starting work.
What is a Cost Reimbursement Contract (Cost Plus or Charge Up)?
Where the contractor is paid its actual costs for the work completed at the end of the project.
When would you use a Cost Reimbursement Contract?
Can be used in small projects, where the contractor wants assurance that they will be paid for the work they complete.
Works may be of an urgent nature (e.g. Repairs). Payment is arranged after completion.
Who takes the risk in a Cost Reimbursement Contract?
The client/principal.
The contract sum is not known at the start and may be greater than expected.
What is a Guaranteed Maximum Price Contract (GMP)?
Contract in which the contractor agrees to complete the project for a maximum price.
This price is only guaranteed if the scope of the project does not change.
Where is a GMP contract commonly used?
Often used for public works.
Public works are usually high budget and require a price limit due to the spending of tax dollars (auditing/accountability).
Who takes the risk in a GMP contract?
The contractor takes the most risk. They need to complete the project within the GMP in order to make a profit.
Because of this there is risk to the final quality of the project design. E.g. A contractor may reduce the quality of finishes (plywood to mdf) in order to lower their costs.
