Types Of Contract Agreement In Construction

In essence, each construction contract is an agreement. You and the recruitment party should discuss the parameters of the project to reach a common conclusion on the best type of contract. In the end, a good contract benefits both parties in the same way. It is a negotiated contract that pays real and direct costs and involves negotiating additional overhead and profit costs, as a rule, between the parties. The owner has more control over the project; However, the risks are transferred to the owner. [11] EPC contracts are a contract that includes engineering, procurement and construction. In the case of cost-plus contracts, most of the risk is put on the owner. This is because the contractor is paid for all costs incurred during the project, and all unforeseen costs come from the owner`s pocket. This is why cost-plus contracts are most suitable for projects that require great creative flexibility. Three of the most well-known standard agreements are the FIDIC “red,” “yellow” fidic and “green” FIDIC, named after the color on the cover of the document under which the document is published. Depending on the type of cost plus the contract, the owner can pay in the end more than expected and therefore generally takes more risks than the owner. A “reference date” is a reference date from which changes in conditions can be assessed. In a work market, the inclusion of a base date is generally used as a mechanism for the distribution of risk between the owner and the contractor for changes that could occur between the contractor`s pricing of the offer and the signing of the contract.

This can be a very long time and the changes that occur can have a significant impact on the cost of the work. [22] Sometimes incentives are incorporated into these contracts to reward the contractor when the contract is entered into prematurely. These agreements may also include penalties, sometimes referred to as “liquidated damages” for an order that is slow to be concluded. Owners generally use these types of contracts to avoid change orders for additional or otherwise indeterminate work. In the case of very small projects for which the time limit is short, this cannot be considered necessary. For large projects, the basic date can be used to allow changes in the amount of the contract or sometimes time extensions, or even to determine the rules applicable to the contract (for example. B, the publication of arbitration rules). – Decepts decepts.

Suppose two contractors offer for an order, and each uses the same price units, and one of them is cheaper than the other. Instinctively, the customer chooses the cheapest of the two. But the cheapest of these two seem to be slower or have a lower quality of work, etc. As a general rule, commercial contracts are not that different from housing contracts. However, you may need to obtain additional authorizations and other documents, depending on the relevant zonarization laws and other building laws. Be sure to follow these laws when setting up a commercial contract, as this can cause you serious problems if you do not. A subcontract is primarily a contract between a contractor or a prime contractor and a subcontractor. It describes the limitations of specialized work to be done for the construction project. [6] Unit cost contracts offer greater flexibility in the event of a deviation from field quantities and are therefore still used for heavy construction and motorway contracts.

[19] Associated General Contractors of America (AGC) notes that this type of contract is not widely used for the entire project and is primarily used for contracts with subcontractors whose identification of different quantities is important and is often used for repair and maintenance work.