Types of contract

Introduction
Prior to the commencement of a construction project, the
project owner faces two important issues:

decisions regarding the relationships among the

various parties

the basis upon which the contractor will be paid.

Decisions regarding the relationships among the various parties

This reviews the various project delivery systems that form

the basis for the;

project’s contractual relationships

dictate the span and duration of responsibility of each party

Basis upon which the contractor will be paid

This identifies different types of contracts that are used

to measure how the contractor will be paid for
completed construction work.
Project delivery systems
Delivery systems
Traditional design–tender–build
Management Contract
Construction Management Contract
Project Management Contract
Design and Manage Contract
Design and Construct Contract
Design, Manage and Construct Contract
Direct Labour
Build–own–operate–transfer
 Traditional Design-Tender-Build
Feasibility
Team
Contractual link
Feasibility Organisational link
study contract
Design Employer
contract
Main Contractor or
Design Management
Team Contractor

Subcontract Subcontract

Nominated Nominated
Subcontractor Supplier
Subcontractor Supplier

Letters of intent
Sub-subcontractor
 Management Contract
Feasibility
Team Contractual link
Organisational link
Feasibility
study
contract

Employer
Design Construction
contract contract

Design Management
Team Contractor

Construction contractors
 Construction Management Contract
Feasibility Contractual link
Team Organisational link
Feasibility
study
contract

Employer
Design Construction Construction
contract management contract
contract
Design Construction Construction
Team Management Contractors
Project Management Contract
Feasibility
Team Contractual link
Organisational link
Feasibility study contract

Employer
Design
contract Management Construction
contract contract

Design Project
Team Manager Contractor

Subcontract

Subcontractors
 Design and Manage Contract
Contractual link
Feasibility
Organisational link
Team
Feasibility
study
contract

Outline Employer Design and

Design management
contract contract

Outline Design and

Design Team Management
Contractor

Detail Design Construction

Team Contractors
Design and Construct Contract
Feasibilit
Contractual link y Team
Organisational link Feasibility
study
contract

Employer

Design and
construct contract
Contractor
Design Manager
contract Subcontracts

Design
Team
Subcontractors
Design, Manage and Construct Contract
Contractual link Feasibility
Team
Organisational link Feasibility
study contract

Employer

Design, manage and

construct contract
Design
Team

Subcontractors Suppliers
 Direct Labour
Feasibility
Team Contractual link
Organisational link
Feasibility
study contract

Design
Design contract Employer
Team
Construction
contract

Contractors
Type of Contracts
4.1 Fixed –Price Contract (Lump Sum
Contracts)
This is one of the most important
construction contracts. Under which the
contractor agrees to perform the entire
work so specified in the contract at a price
agreed to and fixed at the time the contract
is determined by competitive or negotiated
bidding.
Unit Price Contract
This might be seen as a variant to the
fixed contract. The significant feature is
that the price per unit (although
quantities may vary) is fixed at the time
the contract is entered into and it is to
remain unchanged throughout the work
performance.
COST-PLUS CONTRACT OR “VALUE-ADDED”
CONTRACT

Here the price is determined by actual cost plus

whatever additional payment by means of “fees” to
cover contractor’s profit upon which the parties
should agree.