1. Introduction
Using alternative payment condition in procurement contract should be related to the client’s context such as knowledge, abilities, willingness for taking risks, and preparation for the drawings and bill of quantity at the tender stage. Therefore, in this paper, the selection of contract terms matching with client context will be shown with a scenario.
2. Lump sum fixed price scenario
If the client does not have construction knowledge or abilities and does not willing to take any risks, then the choice should be the lump sum fixed price term which could fulfil the general condition of less risk and effort. At the same time, there is the necessity of client preparation such as fully developed design and bill of quantity. In this way, the client still needs to control by
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The contractor will again want to claim for delays (Simister & Turner, 2001)”.
6. Cost plus fixed amount fee scenario
The client has enough knowledge or experience about construction sequence, and willing to take some risks then he or she could choose this term. Therefore, the contractor is paid a fixed-fee for final cost based on final measurement. In this setting, there could be a low productivity and quality deliverables because fixed fee is often discourageable in progressive work.
7. Cost plus percentage fee scenario
This is the highest risk exposure for the client, and the least developed design is required for the commencement of work. Therefore, all the uncertainties such as costs and fees will be put off by the design and work are done. In this way, the client pays all the expenses of the contractor, plus the percentage of profit margin that agreed with final cost basis previously. This is the most flexible contract term for both client and contractor, and can expedite the project commencement. However, there still be the discouragement of productivity rate if there is not incentive
...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.
... offers that had been made by the developer to the purchaser. Whereas, the second element is acceptance also clearly stated in these agreement, where the purchaser accept the offers and whatever fees, maintenance and infrastructure fees and so on .The third element will be capacity, from these agreement clearly seen that the purchaser has all the capacity to be involved into a contract of agreement. Finally the last element that I have discussed in these assignment is free consent which is the contracts that had been made is free consent and not caused by coercion, undue influence, fraud, misrepresentation and mistake. Finally we can summarise that an agreement is always consists of eight elements of contract based the sections of contract law and it for me it is a good chance for me to apply principles of law relating to the elements of contract that I have chosen.
Asmar et al. (2013) found that IPD has been gaining recognition due to the various benefits it offers to the architecture/engineering/construction (AEC) industry and that much research has not been done to gauge the performance of IPD projects in contrast with other project delivery systems such as design-bid-build, design-build and construction management at risk systems. The metrics that are used to analyze the performance of IPD according to Mollaoglu-Korkmaz, Swarup and Riley (2011) are cost, quality, schedule performance, and owners perception of post-occupancy performance)
These estimates aim to determine the total costs and come into the wider field of cost planning. The use of this type of estimating would be brought about where a stringent requirement for cost control has been requested by the client. These estimates attempt to utilise ideas supported by Dysert (2006) that where uncertainty is present, a range of figures to represent the works rather than committing to a single point figure, would leave the client more informed about the scale of the project.
...e steps that are required to be addressed while coming to deal with vendors. The Proposed idea, looks satisfactory in meeting the outcomes. One thing that should be ensured is that they should incorporate the clauses pertaining to risk in the plan.
Price and trust are one of key that taking part in the construction procurement. The parties that usually involved in determining a price for whole or certain jobs in the construction project is clients, subcontractors, and the main contractor. Neither price nor trust can be underestimated as procurement mechanism. Usually the subcontractor is the one of the important organizational parts to drive a project towards its completion. Selecting appropriate subcontractors and managing the relationships are important to the project performance. In reality, the main contractors will give the priority to the others that have a lower price from the bids. Not h...
In the construction industry, the owner of property or the client such as from ministry, department and agencies will retain all or a combination of these professional, both to provide advice before they enters into construction contract and thereafter to supervise and administer the contract. The scope of work or advice usually relates to the project initiation, preliminary study, design of works, the practicability, the preparation of tender drawing, cost estimates, the type of standard form contracts are necessary. Thereafter, the professional group who involved in the project will be required to secure tenders and to prepare all the necessary documentation for the purpose o...
In construction industry there are numbers of standard construction form, models, templates are available, and choosing a particular contract is depending on type of procurement strategy that been selected by the clients and other parties. Generally the all contractors are containing the appliances for determine and conveying the situation while the contractor in a position to entitled for additional payments more than the real value of the project work.
If the contractor is appointed at the outset of the project (so that they can contribute to the development of the design from the beginning), they may be appointed through a two-stage process. In the first stage, the contractor is selected on the basis of a fee, preliminaries, overheads and profit. They then work with the design team (who may be employed either by the contractor or by the client at
..., 2013). As these contractors are risk-averse, they will drop out in the first phase leaving only the most efficient contractors to compete against each other. Furthermore the inclusion of a premium, offers less incentive for collusion as contractors are more inclined to deviate from a cartel to receive a higher payoff. Although theoretically feasible in a controlled environment, in real life there are laws and regulations that protect firms against collusive practices. In the case where the client may suspect collusion is a real possibility, AMSA offers the most effective collusion deterrence. However administratively it may be difficult to implement phase 1, where the price sequentially drops as the tender process takes several months with contractors rarely interacting with each other compared to an auction where the bidders are together and bid in one sitting.
These damages that could occur due to these hazards are accidents to workers, accidents to the general public, loss of skills and experience, damage to property, loss of time and production, loss of money on contracts, loss of reputation and future business. These factors can be divided and categorized into financial risks, environmental risks, management risks, transport risks and technical risks. The biggest risk for a contractor is around a tender stage when cost and a timescale commitments are given. Edges can be lost if the bill of amounts is not precise. Subcontractors may not remain by their quotes and work might be costlier than evaluated if the decision of development technique turns out not to be
The Security of Payment legislation came under the slogan of ridding the construction industry of the unAustralian practice of not paying contractors for the work they had done. The main objective of this legislation was to ensure the contractors; mainly the ones down at chain of hierarchy of contracts receive security for their payments. Targeting mainly the smaller sub-contractors and suppliers, the East Coast legislations attempt to provide for a fair and balanced payment standard for construction contracts.
Time-phased project work is the basis for project cost control. Work package duration is used to develop the project network. Further, the time-phased budgets for work packages are timetabled to establish fiscal measures for each phase throughout the project. The time-phased budgets are to emulate the real cash needs of the budget, which will be used for project cost control. This information is useful to estimate cash outflows. The project manager's attention is on when the costs are to occur, when the budgeted cost is earned, and when the actual cost materializes. This information is made up to measure project schedule and cost variances (Gray & Larson, 2005). The following are typical types of costs found in a project:
With the contractor plan every step of the construction as well as the timeline/deadline for completion.
There are several advantages of this traditional route in the construction industry. First, the designs are completed before tender and tender can provide good time and cost control. Also, the tenderer can receive complete information and design and they can be bidding on the same basis, so the competitive is fair. Moreover, this is design-led and the client can change the design ability, so the level of functionality and quality will be increased in the overall design. And then, it is relatively easy of variations to arrange and manage if the design will be changed because client’s needs and technology. Also, traditional paths are a tried and tested route, so it is well established and the market is very familiar with. Furthermore, it is good price certainty at the award of the contract because of full set information.