Types of Construction Contracts
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Types of Construction Contracts #
Types of Construction Contracts
Construction contracts are legal agreements between parties involved in a constr… #
There are several types of construction contracts, each with its own set of terms and conditions. Understanding the different types of construction contracts is essential for all parties involved in the construction industry to ensure a smooth and successful project delivery. In this glossary, we will explore the various types of construction contracts commonly used in the industry.
1 #
Lump Sum Contract
A lump sum contract, also known as a fixed #
price contract, is a type of construction contract where the contractor agrees to perform the work for a fixed price. The total cost of the project is determined before the work begins, and the contractor is responsible for completing the project within that budget. This type of contract is suitable for projects with well-defined scopes of work and where the risks are minimal. The contractor bears the risk of cost overruns and delays under a lump sum contract.
2. Cost #
Plus Contract
A cost #
plus contract is a type of construction contract where the contractor is reimbursed for all costs incurred during the construction process, along with a predetermined fee or percentage of the total cost. This type of contract is commonly used when the scope of work is not well defined or when the project involves a high level of uncertainty. The owner bears the risk of cost overruns under a cost-plus contract.
3 #
Time and Materials Contract
A time and materials contract is a type of construction contract where the contr… #
This type of contract is often used for projects with uncertain scopes of work or when the project duration is difficult to estimate. Time and materials contracts provide flexibility to both parties, but they can lead to disputes over the actual costs incurred during the project.
4 #
Unit Price Contract
A unit price contract is a type of construction contract where the contractor is… #
The unit prices for each item of work are predetermined, and the contractor is paid based on the actual quantities installed. This type of contract is commonly used for projects with repetitive tasks or where the scope of work can be easily quantified. Unit price contracts provide transparency in pricing but can lead to disputes over the quantities installed.
5. Design #
Bid-Build Contract
A design #
bid-build contract is a traditional method of project delivery where the owner first hires an architect or engineer to design the project, then solicits bids from contractors to construct the project based on the completed design. This type of contract provides a clear separation of design and construction responsibilities but can lead to disputes between the design team and the contractor if there are discrepancies in the design documents.
6. Design #
Build Contract
A design #
build contract is a type of construction contract where a single entity, known as the design-builder, is responsible for both the design and construction of the project. This integrated approach allows for faster project delivery, streamlined communication, and better coordination between the design and construction teams. Design-build contracts are becoming increasingly popular due to their efficiency and cost-effectiveness.
7 #
Construction Management Contract
A construction management contract is a type of construction contract where the… #
The construction manager acts as an advisor to the owner, providing input on design, cost estimation, scheduling, and construction management. This type of contract is commonly used for complex projects or when the owner lacks the expertise to manage the construction process.
8. Public #
Private Partnership (PPP) Contract
A public #
private partnership contract is a type of construction contract where a private entity partners with a government agency to finance, design, build, operate, and maintain a public infrastructure project. PPP contracts are used to leverage private sector expertise and resources to deliver public projects more efficiently and cost-effectively. This type of contract involves a long-term partnership between the public and private sectors.
9 #
Guaranteed Maximum Price (GMP) Contract
A guaranteed maximum price contract is a type of construction contract where the… #
The contractor bears the risk of cost overruns up to the guaranteed maximum price, providing the owner with cost certainty. GMP contracts are commonly used for projects with a high level of complexity or uncertainty.
10 #
Alliance Contract
An alliance contract is a type of construction contract where the owner, contrac… #
All parties share the risks and rewards of the project, with a focus on achieving common project goals. Alliance contracts promote transparency, trust, and innovation among project participants, leading to better project outcomes and reduced disputes.
Conclusion #
Conclusion
Understanding the different types of construction contracts is crucial for all p… #
By choosing the right type of contract for a construction project, owners, contractors, and other stakeholders can mitigate uncertainties, maximize efficiencies, and achieve project objectives. The glossary terms provided in this guide offer a comprehensive overview of the various types of construction contracts commonly used in the industry, helping professionals navigate the complexities of construction contract law with confidence and clarity.