TERMS OF AGREEMENT
Contracts should be drafted to ensure that specific topics are addressed. A construction contract should identify the contractor, the owner, and the designer. The scope of work for which the contract is being drawn should also be defined. The project may be defined in a descriptive fashion, along with specific reference to documents such as the construction drawings and specifications.
The contract may stipulate that the construction project must be completed by a given date or within a given number of days of the notice to proceed. Failure to complete the project with stipulated time may result in liquidated damages charged against the contractor.
The contract will state how payments are to be made to the contractor. General, payments are made on a monthly basis. However, on small projects the payment for the entire project may occur after the project is completed. On other projects the contractor may be given an agreed sum before construction begins, with the understanding that the final payment will be made after project completion.
There are three types of construction contracts are the unit price contract, the cost plus contract, and the lump sum contract. There is no best form of contract. The nature of the project and the specific needs of the owner will determine the form that is most suited for the project.
Finally, the contract must contain the signatures of the contracting parties.
UNITS PRICE CONTRACT
A contract in which payment is based on a contractor’s quoted price per unit of work performed and the owner’s measurement of the total number of such units installed. By using this method the owner is not certain of the actual cost of the project until the project is completed. This kind of contract is not suited for major constructions, this type of payment is usually involve with earthwork suck as excavation.
COST PLUS CONTRACT
A cost plus contracts is one in which the contractor is reimbursed for most of the direct expenditure associated with a particular project plus allowance for overhead and profit. It is common for the allowance for overhead and profit to be based on a percentage of costs. If the allowance for overhead and profit is reasonable, the contractor is almost assured of not losing money.
Many contracts reimburse the contractor for the direct project costs plus a percentage of ...
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If changes are made to the contract, negotiations between the owner and the contractor will establish the payment to be made to the contractor for such work. Thus, unlike cost plus contracts, the cost of each change order must be negotiated between the owner and the contractor.
A lump sum contract gives the contractors some latitude to front load billings. Some of the costs will occur early in the project, and the contractor will want to front load on the billings to cover those expenses. Expense of this sort include insurance premiums that are due at the beginning of the project, permits that must be obtained prior to construction, bond premiums that are paid at the project start, miscellaneous early fees, and mobilisation.
Owners with a limited budget prefer this form of contract because it is the only that yields a fairly accurate indication of the project, the amount stated in the contract will be the amount actually paid by the owner.
With this kind of construction, lump sum contract is the most appropriate contract. When lump sum contracts are used, the owner has some idea of the anticipated costs. Therefore we have decided that we are going with the lump sum contract.
The preference for a Firm Fixed type contract is influenced by various factors other than the huge costs associated with other types of contracts. One of the major factors contributing to this preference is the significant increase in federal obligations in other types of contracts. This increase is coupled with the lack of a clear and complete picture of the use of cost-reimbursement contracts by the federal government. Actually, a considerable increase in federal obligations has been reported for contracts involving the use of combination strategies. Secondly, the government seems to prefer Firm Fixed type contract because of the recent decision to remove the use of combination strategies. This decision was made as part of initiatives to enhance the effectiveness of all new contract awards from the beginning of the 2010 financial year (“Extent of Federal Spending”, 2009). Third, preference for a Firm Fixed type contract was brought by the difficulties in determining rationales for using other types of contracts.
...hing that was not ever the easiest type of contract to navigate but over the years the requirements have continued to get more complicated and require a lot of additional effort on the contract and the contracting officer. A contracting officer does not just accept the data supplied by the supplier as acceptable. A contract officer will have to perform due diligence and verify the information submitted. This means that the contracting officer will have to verify the material costs, the labor costs, the travel costs, and any of the data supplied.
Flooring contractors have a mix of variable costs and fixed costs in their operations, with the variable costs being the vast majority. Fixed costs include the following: cost of vehicles, cost of equipment, cost of facilities, and cost of insurance. Contractors will pass fixed costs on to the customers by usually adding anywhere from $1 to $2 to the cost of installation per square foot. Everything else is variable, because what they charge depends on the number and types of jobs the contractor performs, and the labor and materials required.
As the first is a 5-year contract at a competitive price, the third one is a very flexible contract in terms of commitment, but without the cost advantage of the first. (Exhibit 3)
This exchange of considerations is what formed the initial contract. A new contract
One way to provide clear description of a project is to prepare project charter. A Guide to the Project Management Body Of Knowledge (2008), “it is the process of developing a document that formally authorizes a project or a phase and initial requirements that satisfy the stake holder needs expectations” (pg.71). Preparing a project charter is the initial step for project manager to start any project. In Project charter we can describe different components of the projects. To start any project, preparing a project charter is the initial steps for project manager. Some of the essential components are described below.
The four elements to a contract are an offer, an acceptance, an intention to create a legal relationship, and a consideration (usually money). The first and second element of a contract is the agreement, which is made up of an offer and an acceptance of a contract. The elements of an offer are (1) serious intent
A contract is an agreement which has its specified terms and conditions between two or more parties in which there is a promise to do something in return for a benefit.
Cost Analysis is an aspect of estimation that applies both formally and informally to the aspect of costing. Cost analysis is a formal discipline used to help appraise, or assess, the case for a project or proposal, and is an informal approach to making decisions of any kind. It is ultimately an economic tool to aid in logical decision making. In the case of construction cost estimates, the next step would be the cost analysis process. The sole purpose is to determine if the completed estimates are reasonable. Usually comparisons are made with similar projects done in the past to see if the number are within the same vicinity of each other. Though the estimates may differ from case to case, if the cost estimate is significantly higher or lower than the normal ra...
A contract is an agreement between two parties in which one party agrees to perform some actions in return of some consideration. These promises are legally binding. The contract can be for exchange of goods, services, property and so on. A contract can be oral as well as written and also it can be part oral and part written but it is useful to have written contract otherwise issues can be created in future. But both the written as well as oral contract is legally enforceable. Also if there is a breach of contract, there are certain remedies for that which are discussed later in the assignment. There are certain elements which need to be present in a contract. These elements are discussed in the detail in the assignment. (Clarke,
Estimates form the basis of tender comparison, so it should be as accurate as possible, if deficient the award settlement becomes arduous (Odusami & Onukwube, 2008). Accurate cost estimate for projects are tremendously essential to both the clients and the contractor. It provides the basis for the contractor to submit the tender and allows the parties to highlight the final cost of the project at an early stage. Essentially it is used for planning the entire project and helps during the execution phase (Akintoye and Fitzgerald, 2000). It has been pointed out that the building cost of the project usually differs from the estimated final cost and this is due to the variations (Oberlender and Trost,
Furthermore, there is good price certainty at the award of the contract because of full set information. However, there are some disadvantages to the process. First, it is very consume time in the pre-contract process due to the strategy is sequential and construction cannot be started before the completion of design. Also, the contractor is not appointed at the design stage, so the contractor and supply chain have no input into the design or planning of the project. Moreover, there are divided responsibility of design and construction, so it is easy to cause disputes in the post-contract processes.
The 2nd involves heavy and civil engineering such as streets and bridges, utility systems, land subdivision and highways. Firms in these two sectors are principally encorporated in contracts that include responsibility for all aspects of individual projects and are commonly known as general contractors.
establishing a collaborative relationship between the OD practitioner and the members of the client system. A major component of entering and contracting is to make a good decision about how to carry out the OD process. The contract allows the parties involved to explicitly set the direction of the project and how the process will take place. The OD contract will generally address three key areas: setting mutual expectation or what each party expects to gain from the OD process; the time and resources that will be devoted to it; and the ground rules for working together and the stating of what are the proper roles of all the parties involved including the practitioner.