When drawing up a construction contract, the layout of the work must be precise. A detailed and conclusive construction contract minimizes confusion and clarifies all the tasks and responsibilities of the parties involved. A construction contract should take into account the following key points: – However, there are some details about these types of contracts that you need to know. First, you need to keep track of all your expenses and be prepared to present them. This may require additional resources and labor costs on your part. You may also be limited on how much you can spend. Some cost-plus contracts contain clauses with „not to be exceeded“ cost amounts. Post-survey contracts are not always suitable for projects with many materials and tasks. Other disadvantages include: – Time and material contracts are usually preferred if the scope of the project is unclear or has not been defined. The owner and contractor must set an agreed hourly or daily rate, including any additional costs that may arise in the construction process. Creating a construction contract with each new project can be very tedious, and that`s why it`s important to have a standardized template with standard project parameters. The templates can then be modified to meet the specific requirements of the project.

ConsensusDocs, Autodesk, and the American Institute of Architects have standardized contract documents that are available in many variants to meet project requirements. A good contract is beneficial for all parties involved, and such standardized models make you worry that other parties to the construction will comply with the same regulations as you. Knowing which contract to use and when is essential to a successful outcome in terms of delivery, customer satisfaction and profit. We`ve simplified things by bringing together the eight most common types of construction contracts and detailing the pros and cons of each. Here is an overview of the advantages and disadvantages of time and material contracts: The contractual method ensures that construction plans are detailed and complete. It avoids costly mistakes and ensures that the project meets the owner`s goals accordingly. Construction contracts also ensure that the entire project team works in the same direction to achieve the same goal. Traditionally, homeowners receive finished designs before accepting construction bids.

This leads to two separate contracts and a longer process. But the design-build contract does things differently. As the name suggests, a design-build contract deals with both design and construction costs. With this type of contract, the construction process actually begins before the final design is completed. This process saves the owner time and money by combining the design and delivery of the construction project into a single contract. It also streamlines communication and creates repeatable processes. Cost-plus contracts, also known as reimbursement contracts, involve the owner paying the contractor the costs incurred during the project plus a fixed amount of money for profit, which can be determined by a percentage of the total project price. This contract is used when the risk needs to be transferred to the builder and the owner wants to avoid change orders for unspecified work. However, a contractor must also disclose certain percentages of costs associated with bearing this risk. These costs are hidden in the fixed price. With a lump sum contract, it`s harder to get credit for unfinished work, so keep that in mind when analyzing your options.

Costs plus contracts are generally used when the scope of work, materials, work and equipment is not clearly defined or difficult to estimate from the outset. Projects that use this type of contract are more likely to be completed as planned, as builders are not completely limited by cost. However, this type of contract is more complex to manage and requires close monitoring. This contract is based on the units used and not on a single price. Payment is calculated at a specific rate for each item, e.B cubic meters for a specific amount of time. „The contractor gives an owner a price for a particular task or scope of work, although the parties may not know the actual number of units of work to be manufactured at the time the contract is entered into.“ [14] Therefore, the owner does not have an exact final price until the project is completed. [19] This type of contract is usually used when the amount of work cannot be determined, for example.B. in civil engineering projects involving the excavation of soil and rock […].