Types of Contract

KJC326 

TYPES OF CONTRACT 2.1

INTRODUCTION

The client will usually take advice as to what type of contract should be adopted for each project, although Bill of Quantities contract is probably the most frequently used in Civil Engineering Engineering Construction contracts can be categorised under two major heading!

2.2

"i#

Type of payment systems

"ii#

Type of organisations

TYPE OF PAYMENT SYSTEMS

Contracts under types of payment systems are either priced based or cost based "i#

$riced based %n pric priced ed base based d paym paymen entt syst system ems, s, pric prices es bein being g subm submit itte ted d by the the contractor in his bid %t is also known as &'i(ed $rice Contract), which include! "a#

*ump sum "*+# contract

"b# "b#

eas easur urem emen entt - .eme .emeas asur urem emen entt - &ea &easu sure re / 0alue) lue) con contr trac act, t, which comprises of BQ contract, and +chedule of .ate contract

"ii#

Cost based %n cost based systems, the contracts are &Cost .eimbursement Contract)1 which which mean mean the actual actual cost cost incur incurred red by the contra contracto ctorr is reimb reimburs ursed ed together with a fee to overcome overheads overheads and profit This will include the cost of material, labour, supervision, equipment, plant and other items havi having ng resi residu dual al valu value e 2e is also also paid paid a fee fee for for his his serv servic ices es in the the management of the work and as profit 2owever, it is essential that the services e(pected from the e(ecutor and the method of evaluating the cost cost must must be clea clearl rly y defi define ned d in the the cont contra ract ct Cost Cost .eim .eimbu burs rsem emen entt Contract comprises of! "a# "a#

Cost $lus $erc $erce entag tage 3f 3f Cos Costt Co Contra ntract ct

"b#

Cost $lus 'i(ed 'ee Contract

"c# "c#

Cost $lus 'luc 'luctu tua atin ting 'e 'ee Con Contr trac actt

"d#

Target Co Cost Co Contract 4-5

KJC326 

2.2.1

LS Contract

%n *+ contract, the contract price is a fi(ed sum quoted by the contractor for the entire works as specified in the contract documents The nature and e(tent of the work are normally indicated on drawings and the nature of the materials and workmanship described in specification 6o individual rates are quoted for each item of work 7etailed or appro(imate quantities may not be issued with the form of tender %n most cases there is no provision to vary the contract price even if the actual work e(ecuted differs in quantities from those on which the tender was based 2owever there may be provision if the specified work is varied erit! "i#

+uitable where later changes are not e(pected, and when a simple and quick form of payment is preferred

"ii#

$ayments are made in stages, as identified in agreement form 'or  e(ample 589 of the contract sum shall be paid upon the completion of  foundation stage

"iii#

6o physical measurements shall be carried out1 general visuali:ation is satisfactory

7emerit! "i#

%f there are any changes in the plans and-or drawings, the value of the change should be negotiated with the contractor This may cause delay and sometimes disputes

"ii#

The owner pays a fi(ed sum for the works, regardless of their actual cost This constitutes an undesirable practice from the contractor)s point of  view

"iii#

There is no provision of payment for materials at site

4-4

KJC326 

2.2.2

B Contract

BQ contract is the most usual type of fi(ed price contract ; bill of quantities is prepared, giving as accurate as possible, the quantities of each item of work to be e(ecuted The contractor only need to quotes a unit rate or price for each item of work The &Contract $rice) is the sum total of prices of each item of work mentioned in the BQ $ayments are generally made on the basis of the actual measured quantity of work e(ecuted for each item in the BQ and the rate quoted