We advise/asssist our clients at all stages of the construction contracts.
Construction contracts comprises of:
a. Mutual Agreement
1. Lump Sum Contract
In this type the contractor bids a single fixed price for overall activities in the project scope. The contractor is responsible for estimating project costs from drawings then
adds overhead and his profit to determine the price of the project.
All risks are assigned to the contractor, there isn’t any risk carried by the owner. The contractor has incentive in this contract as he is rewarded for early finish and there is
penalty for late finish. This contract is ideal when the project scope is well defined at the design stage because there is limited flexibility for modifying the design during
A subcontractor is not a party to a contract between the owner and a contractor in a primary contract. There is no privity between him and the owner. He has privity with
Like a subcontractor, a supplier has no privity between him and the owner. He has privity with the primary contractor.
2. Cost-Plus-Fee Contract – This is also called Reimbursable contract or Time and Material contract. The owner pays the contractor all the costs of the work plus a
fee to cover the contractor’s operating overhead cost and profit.
Costs of work are classified as direct costs or reimbursable costs and indirect costs or non-reimbursable costs.
Direct costs include the following:
(1) Labor cost,
(2) Material cost,
(3) Tools, plant and equipment cost and
(4) Job overhead cost.
Indirect costs include:
(1) Operating overhead costs and
3. Guaranteed Maximum Cost-Plus-Fee Contract – This is a modification of the Cost-Plus-Fee contract. Under this contract, with the provision of a certain
critical amount of design information and with a lump sum fee, bidders estimate a maximum cost for work.
material is brought and sold.–It is used for engineering construction work done in remote locations. The common unit of measurement is the unit by which the primary
5. Design-Build Contract – In the traditional design first-and-then-build method, many problems arise especially allocating the responsibility between the designer
and the contractor. If a defect is noticed in the construction it could be due to a design deficiency or a construction fault. The designer will try to put the blame on the
contractor and the contractor will do the same on the designer.
Documents that are applicable for Construction Contracts:
There are two kinds of documents – bidding documents and contract documents.
Bidding documents are as follows:
1. Notice to contractors/Invitation to bidders, Solicitation of bids.
2. Instructions to bidders.
3. Bid form
5. General conditions.
6. Supplementary conditions.
9. Bid bond.
10. Performance bond
11. Payment bond
Contract documents are as follows:
1. Bid form
3. General conditions.
4. Supplementary conditions.
7. Performance bond
8. Payment bond
- Labor-Management Relations – The Sherman Antitrust law
- Equal Employment Opportunity Laws – Civil Rights Act of 1964.
- Americans with Disability Act
- Wage and Labor laws such as:
- The Davis-Bacon Act
- Copeland Anti-Kick Act and
- Fair Labor Standards Act
- Worker’s Compensation – The laws of all states require employers to be responsible for the payment of compensation benefits to employees who suffer job-related illness
- Construction Safety Act - Occupational Safety and Health Act
Construction contracts as subject to Claims and Disputes when:
- Delay in work
- Schedule changes
- Differing site conditions
- Constructive changes
- Severe weather conditions
- Failure to agree on change-order pricing
- Miscellaneous problems such as breach of contract, owner’s failure to make payments, work beyond contract scope, etc.
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