SALONGA, KENJI NICOLAI M.

SPECS 321/SEC7

Formative Assessment # 8 – CONTRACT MANAGEMENT

 How do you define Contract Management?

Contract management is a discipline that supports commercial control via the

preparation, negotiation, implementation and oversight of legally enforceable overall
performance commitments and chance positions, each outbound (to the market) and
inbound (from the market). It converts commercial policies and practices and technical
abilities into specific terms and conditions which are provided to or required from its
suppliers, clients or commercial enterprise partners, ensuring compliance or gaining
approvals for non-compliance.

Through energetic monitoring of overall performance needs and outcomes, contract

control informs commercial control with reference to real and required commitment
capabilities, collectively with their financial and hazard impact.

 Why management is necessary in construction project contract?

Management helps to minimize the cost by optimum utilization of available resources. It

reduces irrational approaches, duplication of works and inter departmental conflicts
innovation and creativity among the construction managers.

Construction management practices continually lead to “maximum production at least

cost”. A good construction management, results in completion of a construction project with
in the stipulated budget.
SALONGA, KENJI NICOLAI M.
SPECS 321/SEC7

 What are the different types of Construction Contract? Differentiate

1. Cost Plus Contracts

o the contractor is paid based on actual purchases, labor costs and other expenses
generated from the construction project.
o the contract includes all direct and indirect costs, plus a specific fee.
o This must detail a pre-negotiated amount that covers the contractor's overhead and
profit, also all costs must be described and classified as direct or indirect costs.

2. Lump Sum or Fixed Price Contracts

o Lump Sum contracts are ideal for projects with a detailed and well-defined scope and
schedule.
o The project design must also be completed to use this type of contract, since there is
limited flexibility for modifications during the construction stage.
o in this contract the risk is transferred to the contractor.
o contractors include some percentage costs associated with carrying the risk, which are
included in the fixed price.

3. Unit Pricing Contracts

o Unit pricing provides flexibility for differences between the planned and actual work.
o For this reason, this contract type is commonly used when the quantity of work cannot
be established accurately.
o An example of this would be a unit prices can be used for excavation projects that
involve soil and rocks, such as highway construction contracts.

4. Time and Materials Contracts

o All costs must be included and classified as direct, indirect, overhead and mark-up.
o Project owners can establish a price cap or specific project duration for contractors, in
order to minimize their own risk.
SALONGA, KENJI NICOLAI M.
SPECS 321/SEC7

References:

https://www.iaccm.com/about/contract-management/

https://www.ny-engineers.com/blog/types-of-construction-contracts