1.

Lump-Sum Contract:
This agreement requires the Contractor to bid a fixed sum based on the project as described in
the contract / bidding documents. The quantities of material required can be calculated to submit
a single lump sum price of work.
‘Fixed price’ contracts came into use, often for a lump sum, in which Contractor has to take all
risks of variations, unexpected ground conditions, currency variation, errors and omission etc.
Such fixed price contracts can be satisfactory for both Client and Contractor for relatively simple,
easily defined works. Naturally a contractor’s price for undertaking a contract for a fixed sum is
higher than for a bill-of-quantities contract for the same work.

2. Unit Price or Item Rate Contract:

Those agreements where a contractor will perform specific work for predetermined set of unit
prices of different items of work.
Contractors submit a unit price for each item. Unit prices are multiplied by estimated quantities of
work and totaled.
The low bidder is the bidder with the lowest price of all items. Items those unit prices varies from
estimated by more than 15% are sometimes subjected to renegotiation of the unit price. The goal
of unit price contract is fairness to both parties.
Its economical mode of contracting, where profit of contractor is marginalized and payments are
made on work done / performed.

3. Target Estimate Contract:

This is another form of Contract which specifies penalty or reward to a contractor depending on
whether the actual construction cost of project is greater or less than the contractor’s estimated
direct job. Usually the percentage of saving or cost over run is shared by owner and the
contractor. Bonuses and penalties may be stipulated for different project completion dates.

4. A+B and A+B+C Contracts:

They are relatively new invention and were developed by State Highway and Transportation
Department. The purpose is to provide contractor to complete project quickly and efficiently.
A=Cost, B= Time, C=Warranty

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