Construction Project Management Portal

Types of Construction Contracts

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What is a Construction Contract? A construction contract is a document text for building an asset or a combination of assets which  related or interdependent in terms of design, technology, function or purpose  basic useing. There are 7 basic types of construction contract : Lump Sum Contract, Unit Price Contract,  Cost Plus Fixed Percentage Contract, Cost Plus Fixed Fee Contract, Cost Plus Variable Percentage Contract,  Target Estimate Contract, Guaranteed Maximum Cost Contract. What are they different ?

Lump Sum Contract

In a lump sum contract, the owner has essentially assigned all the risk to the contractor, who in turn can be expected to ask for a higher markup in order to take care of unforeseen contingencies. Beside the fixed lump sum price, other commitments are often made by the contractor in the form of submittals such as a specific schedule, the management reporting system or a quality control program. If the actual cost of the project is underestimated, the underestimated cost will reduce the contractor’s profit by that amount. An overestimate has an opposite effect, but may reduce the chance of being a low bidder for the project.

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May 29, 2012 Posted by | Cost Management | | Leave a comment