HOA1&2 - Module 3 - PREHISTORCI ARCHITECTURE OF KERALA.pptx
Types and forms of contracts
1.
2. Every construction project has its
own set of circumstances that can
involve timing, legal obligations,
ownership configuration, cost
limitations, financing objectives,
owner in-house resources, and
more.
3.
4. A contract is a voluntary
arrangement between
two or more parties that
is enforceable at law as a
binding legal agreement.
5. • The construction of
engineering works by direct
employment of an
organization independent of
any contractor eliminates
certain difficulties often no
less serious.
Direct Employment
6. • The responsibility for the
construction and for the cost of
the work is placed on an
organization which the owner or
governmental body must create
for this purpose, and the results
will depend largely on the
efficiency of the organization.
7. • The oldest and most
common method of
letting work under
contract is by receiving
bids with fixed prices.
These may be either Lump
Sums or Unit Prices.
Fixed Price
8. • Contracting on a basis of
either a Lump Sum or of Unit
Prices is subject to the
objection that the interests
of the contractor and of the
owner become at once
antagonistic.
9. • The contractor agrees to build a
project with a specific scope for
a fixed price. A lump-sum
contract is suitable if the scope
and schedule of the project are
sufficiently defined to allow the
contractor to fully estimate
project costs.
Lump Sum
10. • This kind of contract is based
on estimated quantities of
items included in the project
and their unit prices. The final
price of the project is
dependent on the quantities
needed to carry out the work.
Unit Price
11. • In general, this contract is only
suitable for projects in which the
scope is reasonably well
established, and the different
types of items (but not their
numbers) can be accurately
identified in the contract
documents.
12. • For certain types of construction
involving new technology or
extremely pressing needs, the
owner is sometimes forced to
assume all risks of cost overruns.
The contractor will receive the
actual direct job cost plus a fixed
percentage, and have little incentive
to reduce job cost..
Cost Plus Fixed Percentage Contract
13. • Furthermore, if there are pressing
needs to complete the project,
overtime payments to workers are
common and will further increase the
job cost. Unless there are compelling
reasons, such as the urgency in the
construction of military installations,
the owner should not use this type of
contract
14. • For this type of contract, the
contractor agrees to a penalty if the
actual cost exceeds the estimated
job cost, or a reward if the actual
cost is below the estimated job cost.
In return for taking the risk on its
own estimate, the contractor is
allowed a variable percentage of the
direct job-cost for its fee.
Cost PlusVariable Percentage
Contract
15. • Furthermore, the project duration is
usually specified and the contractor
must abide by the deadline for
completion. This type of contract
allocates considerable risk for cost
overruns to the owner, but also
provides incentives to contractors to
reduce costs as much as possible.
16. • This is another form of contract
which specifies a penalty or reward
to a contractor, depending on
whether the actual cost is greater
than or less than the contractor’s
estimated direct job cost.
Target Estimate Contract
17. • Usually, the percentages of savings
or overrun to be shared by the
owner and the contractor are
predetermined and the project
duration is specified in the contract.
Bonuses or penalties may be
stipulated for different project
completion dates.
18. • When the project scope is well
defined, an owner may choose to ask
the contractor to take all the risks,
both in terms of actual project cost
and project time. Any work change
orders from the owner must be
extremely minor if at all, since
performance specifications are
provided to the owner at the outset
of construction.
Guaranteed Maximum Cost Contract
19. • The owner and the contractor
agree to a project cost
guaranteed by the contractor as
maximum. There may be or may
not be additional provisions to
share any savings if any in the
contract.
