Back-to-Back and Lump Sum Construction Contracts

Mohammad T. Alsayyed, PhD, PE, Geotechnical Engineer

International Center for Geotechnical & Engineering Studies, Bethlehem, Palestine

ABSTRACT
In big construction projects, the project is implemented by hiring a main contractor to carry out
the project in full and to be responsible towards the owner for the execution of the overall
project. Back-to-back contracts are thought of as risk-free but they are not. Historically, it has
been difficult for organizations to manage this type of contracting, especially when it involves
multi-layer agreements. The main contractor transfers the execution of all the different
components to one or more subcontractors and/or suppliers. The main contractor in this case
tries to be with the minimum or no responsibility or obligations.
This paper addresses the areas that may be of particular concern in back-to-back contracts such
as: extension of time and additional payments, changes or variation procedures, claim
procedures, completion requirements and deadlines, limitations or liability, suspension and
termination, dispute resolution and cooperation and coordination between the parties.
The paper will address as well the Lump Sum type of construction contracts. This is another
type of contracts that is commonly used. The difference between lump sum and measurement
contracts, advantages and disadvantages, firm price contract, fixed price contract, variations in
contract items and dispute will be presented.