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Types of contract:
a) Lumpsum Contract
b) Item rate contract
c) Lumpsum and schedule contract
d) Cost plus fixed fee contract
e) Cost plus percentage of cost contract
f) Special contracts
d) Cost plus Fixed Fee Contract: Contracts when the scopre and nature of the work
is roughly obtained. It includes:
A lumpsum approximate cost
Nature of work
Estimated time of construction
Manpower
Equipment requirements.
Fee for contractor doesn’t change with any fluctuation of actual cost.
Suitability: A project with no idea about the difficulties to be encountered. Contractors to
complete the job skillfully and expeditiously.
Pros: As in the fee for contractor is fixed and there is no upper bound as such as the cost of
construction, the contractor performs for the interest of the owner resulting good quality of
work.
Contractor would be ready to take up the job before preparation of detailed
specification.
Any required arrangements in design/drawing can be done during construction
without any disputes.
As the contractor fee is fixed and no cost limit, work can be done speedily.
Cons: Cannot be adopted for any public/government construction because some strict norms
are difficult to follow in this context. The owner may face financial difficulty as the actual
total cost is unknown.
e) Cost plus percentage of cost contract: A percentage of construction cost
reported by the contractor is assured as the fees for the contractor.
Suitability: When cost is not an important factor, but quality matters.
Pros: Contractor invests more on quality improvement to spend more money.
Cons: Attracts corruption. Same as (d)
f) Special Contract:
i. Turnkey Contract: All kind of works (Civil, electrical, Mechanical etc.,) are controlled by
single contractor, who can hire some sub-contractor for execution of any special work.
Pros: A fully operational product/structure to handed over to the owner in the end of the
project.
Cons: Singly handed project leads to scope of poor quality.
ii. Package Contract: When two or more contracts are combined in a single one.
iii. Negative Contract: When cost or mode of execution are finalized between two parties
(owner and contractor). Most f the consultancies project come under this.
iv. Continuing Contract: Any new or additional contract with the same form and condition of
the existing one.
Pros: It can save time and money as no re-tendering required.
v. Running Contract: Contract to supply material
This is very much necessity based.
Runs for long time.
Payments based on supplied material.