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    5 Types of Contract

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    agung dwi nugroho
    There are several common types of construction contracts that are suited to different project needs. A lump sum contract sets a fixed total price for the entire project scope and is best for straightforward projects. A unit price contract divides work into units that can be individually billed, making it suitable for repetitive jobs without a known volume. A time and material contract reimburses the contractor for actual costs plus an agreed pay rate, providing flexibility for undefined scope projects.

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    5 Types of Contract

    Uploaded by

    agung dwi nugroho
    2 views1 page
    There are several common types of construction contracts that are suited to different project needs. A lump sum contract sets a fixed total price for the entire project scope and is best for straightforward projects. A unit price contract divides work into units that can be individually billed, making it suitable for repetitive jobs without a known volume. A time and material contract reimburses the contractor for actual costs plus an agreed pay rate, providing flexibility for undefined scope projects.

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    5 types of contract

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    There are several common types of construction contracts that are suited to different project needs. A lump sum contract sets a fixed total price for the entire project scope and is best for straightforward projects. A unit price contract divides work into units that can be individually billed, making it suitable for repetitive jobs without a known volume. A time and material contract reimburses the contractor for actual costs plus an agreed pay rate, providing flexibility for undefined scope projects.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    2 views1 page

    5 Types of Contract

    Uploaded by

    agung dwi nugroho
    There are several common types of construction contracts that are suited to different project needs. A lump sum contract sets a fixed total price for the entire project scope and is best for straightforward projects. A unit price contract divides work into units that can be individually billed, making it suitable for repetitive jobs without a known volume. A time and material contract reimburses the contractor for actual costs plus an agreed pay rate, providing flexibility for undefined scope projects.

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    © All Rights Reserved
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    of 1

    Type of Construction Contracts

    Contract Type Definition Ideal Use Benefits Risks

    - Estimating mistakes eat


    - Simplified bidding
    Fixed total price is set for Straightforward projects into margin
    Lump sum contract
    the entire project with a clear scope of work
    - Potential for higher profit - Errors are amplified on
    margin large projects

    Divides the work to be - Difficult to predict total


    Repetitive jobs without an - Simplified invoicing
    volume
    completed into separate
    Unit price contract estimate of the amount of - Remeasurement can
    units, which the contractor - Consistent profit margins
    work required delay payment
    bills for individually

    Contractor is reimbursed - More flexible with - Logging costs is time


    for the cost and materials Projects without a well unexpected cost increases consuming
    Time and material contract as well as labor an defined scope of work - No incentive to finish early
    - Easy negotiation
    established pay rate or reduce costs

    - Some costs (e.g


    Owner reimburses
    - More flexible overhead) can be hard to
    contractor for costs
    justify
    (materials, labor, Projects that involve design
    Cost plus contract overhead) incurred during changes throughout - Simpler estimating & - High cash requirements
    the project plus a set profit bidding up front
    margin

    - Quicker bidding and - Contractors absorb cost


    Establishes an upper limit financing overages
    Guaranted maximum price Projects with relatively few
    for construction costs;
    (GMP contract) unknown variables - Incentivizes saving - Can take longer negotiate
    contractors absorb excess

    AGUNG DWI NUGROHO, S.T., M.T.


    Project Construction Management Practitioner

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