Christian Kenneth M.

Pantonial
Group 1 Reporter
Topic: Fundamentals on obligations and contracts, contract documents, types of construction
contract
Assigned topic: Types of construction contract

What is a contract?
A contract is a mutual agreement between two or more parties that something shall be
done. It is also the General Conditions, the Supplementary Conditions, the Specifications,
the Drawings, the Bill of quantities, the Tender, the Letter of Acceptance, the Contract
Agreement.
Why use contract in Construction?
• Describe scope of work
• Establish time frame
• Establish cost and payment provision
• Set fourth obligations and relationship
• Minimize disputes
• Improve economic return of investment
Types of Construction Contract:
1. Lump Sum Contract – The contractor bids a single fixed price for overall activities in
the project scope. All risks are assigned to the contractor, there isn’t any risk carried by
the owner.
2. Unit Price Contract - The total price of the project in unit price contract is based on the
price of each item’s unit. The contractor is paid as per the rates of items specified in the
bill of quantity.
3. Cost Reimbursable/Cost Plus Contract - All cost for the work according to the
specification is reimbursed by the owner to the contractor. Construction can start earlier
without clearly defined project scope since all costs will be reimbursed and profit is
guaranteed.
4. Time and Materials Contracts - This usually involves the owner and contractor
agreeing upon pay rates and any expenses that might possibly come up over the course of
a project. This type of contract is most commonly used when the project scope is small or
unclear. The owner assumes more of the risk.
5. Design and Build Contract - The owner awards the entire project to a single company. -
It is typically awarded to a contractor, though architects or engineers may be awarded one
in some specialized cases. Once the contract is signed, the contractor is responsible for all
design and construction work required to complete the project - this system allows the
owner to deal with a single source throughout the duration of the job, rather than
coordinating between various parties. The owner is still given the right to approve or
reject design options, but is no longer responsible for coordinating or managing the
design team. - Once the owner approves the design, the same contractor then oversees the
construction process, hiring subcontractors as needed