TYPES OF CONSTRUCTION CONTRACTS

CONTRACTS
It is an agreement between two parties agreeing for quality of work for the amount of money. The purpose of
a contract is to establish the agreement that parties have made and to fix the duty and rights in accordance with
the agreement.

TYPES OF CONTRACTS
• Between client and architect
• Between client and contractor
• Between architect and contractor
• Design built project
• Architect is the builder
• Architect does project management contractor's work and design
TYPES OF CONTRACTS

1. Item Rate
2. Percentage Rate
3. Lump Sump
4. Labor Rate
5. Material Supply
6. Price Work Agreement
7. Cost plus Percentage Rate
8. Cost plus Fixed Fee
9. Cost plus Sliding/Fluctuating Fee Scale
10. Target Contract
11. Negotiated Contract
12. Turnkey Job
13. Conditional Contract
14. Rate Contract
1. LUMP SUMP CONTRACT
It is usually used in projects with well defined scope of work and has minimum risk.
• Includes cost of labour, material and other implements
• Smaller project
• Low chances of deviation
• Well defined scope
• Security
• Minimum risk involvement
• Pay in one go
• Project budget approved from client
• Must be completed • in the given time
• As in drawings and specifications • Special conditions
PROBLEMS
• Material price hike
• On site changes
• Get money only after completion
• If contractor leaves mid way, no pay for completed work
• Cash liquidity is required

3 TYPES OF LUMPSUM CONTRACTS

• Area based contract
• Per sq foot area
• Fixed sum contract
• Turnkey contract
• Design build
• Architect is builder/contractor
2. ITEM RATE CONTRACT
Rates are part of the contract and the quantities which carry the prefix approximate do not form part of
the contract.
• Different items to different contractors
• Division of contracts
• Classify building in to diff materials
• Rate for diff materials and amount
• Owner deserves the right to increase/decrease/omit quantities of any items
PROBLEMS
• Quantity of items below plinth may vary to any extent due to local conditions for which the contractor
will not be entitled to the revised rates
• For super structure items, the contractor is bound to execute works in excess up to 25% of the tendered
quantities without claiming revised rates
• The contractor will not be entitled to revised rates even if 25% more of tendered work. Even if the value
of such excess quantities is less than Rs 5000.
• Owner doesn’t know total cost of project till the end
3. COST PLUS PERCENTAGE
• Contractor gets percentage of the total budget
• Mainly used for huge projects
• In construction, a method of payment to a contractor in which an additional amount of money, expressed as
a percentage, is paid by the client that is designated to cover the contractor's overhead costs. When paid as a
predetermined profit, the client will usually require a strict accounting of expenses.

PROBLEMS
• Owner is at a risk because cost may go up; this will increase the contractor’s share
• Multiple owners -specifications keep changing on site
• Guarantees the contractor a fair return while allowing changes in the construction process