Jumana Amro-1202208

Prof. Suhail Sultan

Advantages & disadvantages of contracts

Fixed price contracts:

Advantages:

 Certainty of cost
 Budgeting and ability to pay
 Market changes

Disadvantages:

 Certainty comes at a higher cost

 Market changes

Time and material contracts:

Advantages :

 Provide you with the flexibility needed in your agreement as you're only paying a
set amount for the materials and time taken to complete the project
 Make negotiating terms and conditions easy
 Allow you to cap the maximum amount of hours for the project

Disadvantage:

 Without a not-to-exceed clause and maximum caps on costs, you may find
yourself facing issues with negotiations or contractors taking advantage of these
missing items.
 You have to deal with the extensive process of actively tracking the materials
being used for the project as well as the billable hours
 There's no established budget

Cost plus fee contracts:

Advantages:

 Eliminate some risk for the contractor

 Allows the focus to shift from overall cost to quality of work done
 Covers the entire expenses related to project
 It can be used to put a limit or cap on the amount of money that the contractor
can spend on a project.
 Contractor gets flexibility
  Budget friendly contract
 Helpful in outsourcing research and development activities

Disadvantages:

 Leads to longer project time line

 It leads to disputes when trying to recover the construction related expenses
 Requires additional resource to reproduce and justify all related costs.
 Accounting of all indirect costs creates difficulties for contractor
 Total cost is uncertain