TYPES OF WORKS

CONTRACTS
• Lump sum contracts
• Measure and Value contracts
Bill of Quantities contracts
Schedule of rates contracts
• Cost Reimbursable contracts
cost-plus percentage contracts
cost-plus fixed fee
• Target cost contracts
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 TYPES OF CONSTRUCTION
CONTRACTS Ctd
• Package deal contracts
Design-build contracts
Turnkey contracts
Financed package deal contracts
• Performance based contracts
• Community contracting
• Petty contracts
• Length man system
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 LUMP SUM CONTRACTS
• These are contracts for a fixed amount for the
works as specified and tendered for.
• They are normally based on drawings and
specifications, but may also be based on BOQ
• The lump sum (fixed amount) is paid on
completion of the entire works or it may be
agreed that payment will be made on a proportion
basis on the completion of each of a number of
different stages of the work.
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 Lump sum contracts ctd
• A disadvantage of this type of contract is the lack of
mechanism for pricing small changes in design or
variations hence any changes means the client has to
negotiate a new lump sum amount. It is thus used where
the design is complete and for small jobs.
• Current trend is for lump sum contracts to be
accompanied with priced bill of quantities but its
purpose is for valuing variations: as a rule for lump
sum contracts the works shall not be measured for
the purpose of payment. Most building maintenance
works are fixed price contracts with priced BoQ 4
 Lump sum contracts ctd
• Advantages of lump sum contracts are that
a lot of detailed accounting and measuring
of executed works are avoided and they
give the employer assurance of a fixed total
price and at the same time the contractor is
given a clear straightforward job to do.

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 Measure and Value Contracts
(Admeasurement contracts)
There are two types of measure and value contracts.Bill of
Quantities contracts and schedule of rates contracts.
Bill of Quantities contracts:
• The quantities in the bill of quantities type of contract
are very accurate since they represent the exact
quantities as measured from the drawings or as
measured at site during surveys in preparation for the
respective tender. As regards road maintenance works
the BOQ and hence the site survey is prepared just
before invitation for tenders. If this is not so done the
situation on the ground could have changed enormously 6
in between.
 Bill of quantities contracts ctd
• At tendering stage the contractor is given the bill of
quantities as part of the tendering documents. The
contractor enters his unit rate for each individual item in
the BOQ. The contractor’s unit rate for a particular item
in the BOQ is supposed to be sufficient to cover the cost
of materials, plant, labour, overheads, risk and profit for
each unit of that particular item of work carried out. For
each BOQ item the item’s total quantity of work to be
done is multiplied by the contractor’s rate to get the
tender price for that item. The total sum of the tender
prices of all the individual items in the BOQ constitute
the Contractor’s tender amount for the entire job .
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 Bill of quantities contracts ctd.
• When the work is in progress, the actual amount
of work done by the contractor by the end of any
time period is obtained by measuring the quantity
of work done for each item in the BOQ up to the
end of that time period. The value of the work
done is the total sum of the multiplication of rate
and measured quantity of work done for each
item.This is the amount due to the contractor less
previous payments made to the contractor.
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 Bill of quantities contracts ctd.
• The bill of quantities type of contract is
the most commonly used.
• Its advantages are
1. It results in payment to the contractor according to
the amount of work he does.
2. It provides a means of pricing variation orders
involving work of similar nature to that in the bill
of quantities.

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 Bill of Quantities contracts ctd
• Its disadvantage is the individual unit rates contain
not only the true cost of carrying out the work
item but has also a component of risk as perceived
by the contractor. Hence in high risk jobs, such as
labour based contracts,where labour productivity
rates are very uncertain, the client would not be
getting the most economic or optimal value for
money.
• The BOQ type of contract is included under class
of fixed price contracts, because the unit rates
tendered by the contractor remain fixed
throughout the construction period. 10
 Bill of quantities contracts ctd
• To enable the contractor at tendering stage
to understand the quality required and to
perceive what is involved in a unit of work
for each of the BOQ items there must be
specifications and for some jobs, drawings,
for each item of work or the work item is
described in details in the BOQ.

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 Schedule of Rates Contracts
• In this type of contract, a series of items of
operations are described and against each item the
contractor enters his unit rate for executing each
item described in the schedule.
• Just as in the case of bill of quantities contracts,
for the contractor to be able to be able to
understand what exactly the employer needs , he
should also be provided with a set of
specifications and drawings.
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 Schedule of rates contracts ctd
• In a schedule of rates contract there is no
guarantee that all or any portion of the items will
be carried out. Therefore for each item the
contractor should ensure that each item carries its
own risks, overheads and profit element.
• This type of contract is used where construction
works have to start before complete drawings are
ready or where it is not realistic to prepare such
drawings; or where the full extent of the work to
be done cannot be foreseen.
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 Cost Reimbursable Contracts
There are two types. Cost-plus percentage
contracts and cost-plus fixed fee contracts.
• Cost-plus percentage contracts type of
contract
– In this type of contract the contractor is paid all
his direct costs i.e cost of materials, plant and
labour, and transport charges, and is paid a
percentage over and above this to reimburse
him his overhead expenses and profit.
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 Cost-plus percentage contracts
ctd
• Obviously there is no incentive in this type
of contract for the contractor to be efficient
or to complete early, because the bigger the
cost to complete the job the bigger his profit
would be.
• It is used in emergency.

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 Cost-plus fixed fee contracts.
• In this type of contract the contractor is paid his
actual costs, but the fee, which is intended to
cover his overheads and profit, is fixed. The fee
may be tendered in competition with others or
may be negotiated between the employer and the
contractor.
• It is used when the scope of work is ill defined and
difficult to predict.

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 Target Cost Contracts
• These are much like the cost-plus fixed fee contracts, but
the employer introduces additional incentives by offering
the contractor a bonus payment if he completes the work
within previously set cost target. The contractor’s costs
are monitored as in cost reimbursable contracts. If at
completion actual cost is below the target the saving is
shared between the contractor and the employer in a
specified way (70/30). If actual cost exceed set target
there is a penalty for the contractor in that he may have to
carry a set percentage of the excess (30/70), or, if it is
over a certain amount the contractor is paid only a
nominal fee, and if it exceeds a set amount the contract is
terminated. 17
 Package Deal Contracts
In package deal contracts the contractor handles both
design and construction. There are three types:
• Design-Build contracts
– The contractor assembles a team of designers who
design the facility (building or road) as specified by the
employer and the contractor carries out the actual
construction work.
– [In Tanzania, Examples of design-build contracts
include the demolition of the bombed USA building in
Dar es Salaam and the construction of a new office on
the same plot; the construction of stretches of road in
the central and southern corridor].
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 Turnkey Contracts
• These are primarily for the supply and erection of
specialist equipment or machinery or plant.The
contractor is then required to hand over the
completed plant operating at the specified level of
production and efficiency.
• Training of the operatives is often a part of the
turnkey contract.
• Examples of turnkey contracts in the roads sector
include: supply and erection of asphalt premix
plant; stone crushing plant.
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 Financed package deal contracts
• There are situations where the employer
needs the turnkey facilities but he has no
ready cash and wants therefore the
contractor to raise the capital required. [In
Tanzania the construction of the Morogoro
– Dodoma Road by Ecsisa, a Brazilian
contractor, was under financed package
deal arrangement].
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 Performance based contracts
• In this type of contract the employer defines a
desired condition of the road structure which the
contractor will need to maintain. The requirements
of the employer are described in terms of results
required (out puts).
• It is stated in the contract how results will be
inspected and measured.
• The statement of requirements in the contract will
also contain measurable inspection and acceptance
criteria with positive and negative incentives
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 Community contracting
• This type involves contracting out minor works to
a group of project beneficiaries such as a rural
village or an urban neighborhood. The group
participates at all stages of the project from
inception, planning to implementation.
• No formal contracting firms are used. Instead
skilled individuals within the project area do any
skilled work required and these will later do the
maintenance of the facility.
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 Petty Contracts
• Petty contracting allows contracts to be let to small
informal contractors, which are not registered and which
are not recognized as commercial firms.
• Contracts are let out through direct selection(without
competition), applying standardized unit rates and
simplified contract documents and procedures.
• Petty contracting is suitable to works dispersed over a
large geographical area, or such works as de-silting of
drainage channels within an urban area.

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 Lengthman contracting
• In this type of contracts individuals living in
the vicinity of a road are contracted to do
routine maintenance of the road.
• The contracts are normally based on
standard task rates, and a fixed wage rate
where necessary.

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FORCE ACCOUNT (Direct Labour)
Procuring Entity carries construction works
using its own personnel and equipment.
Method used where:
• Required works are small and scattered or
in remote locations for which qualified
contractors are unlikely to bid at reasonable
rates.
• There is emergency needing prompt
attention

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 Public-Private Partnerships (PPP)
Common arrangements are:
• Build Operate Transfer (BOT)
• Build Own Operate Transfer (BOOT)
• Lease Develop Operate (LDO)
BOT
• Contractor will design, build, and operate the project (a
bridge or sports stadium) say for 25 years, the
concession period. During this period the operator
(private sector investor) will collect revenue from those
who use the facility. The revenue collected during the
concession period has to be sufficient for the operator to
repay his financiers, meet management fees and profit. 26
BOOT
• A consortium of contractors, banks,
consultants and other private investors team
up to to build a public infrastructure
facility, or electricity generating facility,
own it, and operate it for a certain period of
time, the “Concession Period” long enough
to recover their capital plus profit. At the
end of the concession period the ownership
of the facility will be transferred to public
hands (government).
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LDO
• The private sector partner leases a facility (a sports
stadium or railways) develops the facility and
operates the facility for the concession period
charging fees adequate for him to recover his
investment costs and make a profit. At the end of
the concession period he hands back the facility to
the government
PPP are effective ways of attracting private finance
into large public projects, and where the public
entity may not have adequate capital. In BOT,
BOOT, and LDO arrangements the primary
developer (government) might participate as share
owner in the PPP arrangement.
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