REYES, PAUL CYRUS A.

CE 512 – ASSIGNMENT # 2 1/21/20

CE52FC2 MIDTERM ENGR. VIBAS

TYPES OF CONTRACT

The word as ‘Contract’ in human activities is so general under legal contest. In construction, the main
important thing is that work information is enough to carry out the works though Contract also can be
seen every project.

A formal contract incorporating the terms described in the tender may be sent to the successful bidder
for execution.

The following are the various types of contracts, for execution of civil engineering works:

1. Lump Sum or Fixed Price Contract

Under a Lump Sum or Fixed Price Contract, the contractor agrees to perform the work specified and
described in the contract for a fixed price. The price of a fixed contract can only be changed upon the
execution of a change order, under which the owner and the contractor either:

(1) Agree for the contractor to perform additional work that falls outside the scope of the original work
for an agreed upon extra compensation or

(2) Agree to remove certain work from the original scope of work and reduce the price of the contract in
proportion to the work that the contractor no longer has to perform.

2. Measurement Contract

Measurement contracts (sometimes called “re-measurement” or ‘measure and value’ contracts) contains
a Bill of Quantities (BOQ) provided by the employer or its consultants, can be used in situations where the
design (or type of works) can be described in reasonable detail, but the amount cannot. The contractor
will quote against each BOQ item and enter a unit rate or unit price to build up the total contract price on
basis of those BOQ quantities. During the construction period, the actual quantity of works executed
under each BOQ item will be jointly measured and valued at the quoted rate for interim payment purpose.

3. Turnkey Contract

A turnkey contract is a business arrangement in which a project is delivered in a completed state. Rather
than contracting with an owner to develop a project in stages. The developer is hired to finish the entire
project without owner input. The builder or developer is separate from the final owner or operator, and
the project is turned over only once it is fully operational. In effect, the developer is finishing the project
and “turning the key” over to the new owner.

4. Design and Build Contract

Design and Build procurement work on the basis that the main contractor is responsible for undertaking
both the design and construction work on a project, for an agreed lump-sum price.

Design and build projects can vary depending on the extent of the contractor’s design responsibility and
how much initial design is included in the employer’s requirements.

Nevertheless, the level of design responsibility and input from the contractor is much greater on design
and build projects than a traditional contract with a contractor’s designed portion.

5. Cost Plus Contracts

The Cost-Plus Contract is a type of a construction contract under which the owner agrees to pay the
complete cost of the materials and labor needed to needed to build the project along with a fee for the
contractor’s overhead and profit.

This contract type is favored where the scope of work is highly uncertain or indeterminate and the type
of labor, material, and equipment needed to build the project is also uncertain in nature.

6. Unit Price Contracts

Unit Price Contracts are based on anticipated quantities of items which are counted in the project in
addition to their unit prices.

The final price of the project depends upon the quantities required to carry out the work. Generally, these
types of contracts are suitable only for construction and supplier projects which involve accurate
identification of different types of items, but not their numbers, in the contract documents.

These types of contracts are oftentimes used on excavation projects.

7. Time and Material Contracts

Time and Material Contracts are usually preferred if the project scope is not clear, or has not been defined.
The owner and the contractor must establish an agreed hourly or daily rate, including additional expenses
that could arise in the construction process.

The costs must be classified as direct, indirect, mark-up, and overhead. Sometimes the owner might want
to establish a cap or specific project duration to the contractor that must be met, in order to have the
owner’s risk minimized.

8. Item rate contract

For this contract, contractors are required to quote rates for individual items of work on the basis of
schedule of quantities furnished by the client’s department.

9. Percentage rate contract

In this form of contract, the client’s department draws up the schedule of items according to the
description of items sanctioned in the estimate with quantities, rates, units and amounts shown therein.

10. Labor contract

This is a contract where the contractor quotes rates for the item work exclusive of the elements of
materials which are supplied by the client’s Department.

11. Piece-Work agreement

This is that for which only a rate is agreed upon without reference to the total quantity of work to be done
or the quantity of work to be done within a given period.

12.Target Contract

This is the type of contract where the contractor is paid on a cost-plus percentage work performed under
this contract.

In addition, he receives a percentage plus or minus on savings or excess effected against either a prior
agreed estimate of total cost or a target value arrived at by measuring the work on completion and valuing
at prior agreed rates.