Contract Types Flashcards
What is a lump sum contract?
Where the contract sum is determined before construction work is started. The contractor undertakes a defined amount of work in return for an agreed sum.
When is a lump sum contract appropriate?
For works designed by the Employer, where detailed contract provisions are necessary and the Employer is to provide the Contractor with drawings and specifications to define the quantity and quality of the work.
What is a measurement contract?
Where the contract sum is not finalised until completion but is assessed on remeasurement to a previously agreed basis.
When is a measurement contract appropriate?
Can be used in situations where the design (or type of works) can be described in reasonable detail, but the amount cannot. For example, excavation works.
Often because for a good reason the work cannot be measured accurately before tenders invited.
What are the different contract types?
Lump sum Measurement Cost Reimbursement (cost plus) Design and Build Contractors design portion Turnkey Management contracting Construction management Partnering
What is a cost reimbursement contract?
Where the sum is arrived at on the basis of prime (actual) costs of labour, plant and materials, to which there is added an amount to cover overheads and profit.
Sometimes referred to as ‘cost-plus’ or ‘prime-cost’.
When is a cost plus contract appropriate?
Often used where the nature and scope of the work to be carried out cannot be property defined at the outset and the risks associated with the works are high, for example urgent repair works or rebuild following fire.
What is a Design and Build contract?
Where the project documents will be written with the contractor’s design obligation relating to the whole works in mind.
Differs from ‘works and material’ contract in that they expressly provide for contractor’s design obligations.
When is a design and build contract appropriate?
Speed – overlapping design and construction period can fast track the projects and reduce the overall programme.
Where price certainty is required.
When is a design and build contract NOT appropriate?
Quality – Where the specification is not tightly controlled by the client and cost efficiencies are sought by the contractor.
Inflexibility – cost and time implications of changes made further into the contract period are at the discretion of the contractor.
What is a Turnkey contract?
A form of contract under design and build procurement where the client settles on a complete package, usually to some standard specification from a commercial firm.
Delivers a project in a fully operational state that is ready to use
When is Turnkey contract appropriate?
Where the employer wants to be hands off and do not wish to by heavily involved in the contract.
What is management contracting?
Where the management contractor undertakes to manage the carrying out of the works through trade contractors who are contractually accountable to him.
The management contractor programmes, packages and obtains tenders for the works, which are each let on a competitive basis on lump-sum, firm-price contracts with the management contractor.
When is management contracting appropriate?
The Management Contracting approach is generally reserved for major projects with high levels of complexity.
Value – reduces risk premium for main contracts and ensures best price for each separately tendered works package.
Speed - This is a quick method of procuring a competitively tendered main contractor; it can also enable a quick start on site.
Flexibility - design activity can extend into the construction period.
Buildability - Early contractor input on the programme, buildability and content of works contract packages.
When is management contracting NOT appropriate?
Highly involved - This method requires a higher level of client involvement in rolling decision-making throughout the construction period, i.e. a very hands-on option for a client.
Cost uncertainty - The final cost is not known until the contract is complete (prime cost)
Programme risk - There is a programme risk, as the scope of work develops well into the construction phase and the final scope is not known until close to completion.
