TYPES OF

CONTRACT
SHAHIN M B
S8
CIVIL ENGINEERING
TYPES
• Lump-sum Contract
• Cost Plus Fixed Fee Contract
• Cost Plus Bid Bid Fee Contract
• Guaranteed Maximum Contract
• Negotiated Contract
• Unit-price Contract
• Design Build
• Turn Key Contracts
Lump-sum Contract
• Traditional method of Contract.
• The contractor offers to do the whole work for a total
stipulated sum of money as shown in drawings and
described by specification.
• It is more suitable for works which contractor have
prior construction experience.
• This is considered when tender process will tend to be
slower and preparing a tender may be more expensive
for the contractor.
Lump-sum Contract(Contd.)
Advantages
• Owner is aware of the cost of the project before the
project construction starts.
• Project scope and limits are defined prior to the start
of construction.
• Contractual relation between all parties, owner and
Engineer are clearly defined.
• Best price for work obtained through competitive
process with cost of work established and agreed
upon.
Lump-sum Contract(Contd.)
Disadvantages
• The lack of time flexibility in this method may result in
delayed project implementation.
• Highly skilled Architect or Engineer is needed.
• Difficult to implement revisions or change in the work
on the later stage of the work.
Cost Plus fixed fee Contract
•All Cost for the work according to the specification is
reimbursed by the owner to the contractor.
•Contractor is paid a fixed sum which represents the profit
•The variation on the lump-sum fee is percentage fee
wherein fees is established by percentage of total cost
incurred by the contractor.
•Usually it is fixed as a sum.
Cost Plus Bid fee Contract
•Owner invites proposal from qualified contractor
in terms of past experience, performance , etc.
•All Cost for the work according to the
specification is reimbursed by the owner to the
contractor.
•The bid fee is calculated on the basis of project
scope.
Guaranteed Maximum Contract
•The contractor agrees to perform work within a
price ceiling. This is the maximum guaranteed
price.
•If the ceiling is exceeded, without change in scope
then the excess cost is borne by the contractor.
•If the work is accomplished under the ceiling then
the owner pays no more than the actual cost and
the profit is shared between the contractor and
the owner.
•This method gives greater flexibility for the owner
Negotiated Contract
The preselected contractors are invited upon on
the basis of
• Capability of the past experience in the specific
area
• Availability of the personnel to accomplish the
work in the specified time frame
• Bid (Estimate) Price
• Proposed method for compensation including
amount of fee.
Negotiated Contract (Contd.)
•The owner is then negotiating with the contract
including method of payment for the work, Bid,
etc.
•On the basis of circumstances it can be
competitive or non-competitive.
Unit Price Contract
•Based on the estimated quantities of the items
involved in the work.
•The cost per unit item is given by the contractor
and the estimated quantities of items are given by
the owner.
•The total cost of work can only be calculated only
after the completion of the work because
measurement is made on the basis of work
actually done.
Unit Price Contract (Contd.)
•The contractor is obliged to perform the work
actually required in the field at his quoted price
only.
•If the estimated quantity is exceeds, then there
should be increase in unit price , therefore it is
difficult to forecast the project cost.
Design Build
•It is a method to deliver a project in which the design and
construction services are contracted by a single entity
known as the design–builder or design–build contractor
•design–build relies on a single point of responsibility
contract and is used to minimize risks for the project
owner and to reduce the delivery schedule by
overlapping the design phase and construction phase of a
project.
•Contractor will be responsible for all of the work on the
project, regardless of the nature of the fault
Turn-key contracts
•A type of project that is constructed so that it could be
sold to any buyer as a completed product.
•This is contrasted with build to order, where the
constructor builds an item to the buyer's exact
specifications, or when an incomplete product is sold
with the assumption that the buyer would complete it.