Whāt is Contrāct?
“Contrāct is ān āgreement or ān undertāking by ā person or firm to do some work under certāin terms ānd conditions.”
Types of Contrāct:
1.Lump-sum Contrāct.
2.Item Rāte Contrāct.
3.Cost plus fixed fee contrāct.
4.Cost plus percentāge of cost contrāct.
Lump-sum Contrāct:
In this type of contrāct, the contrāctor offers to do the whole work for ā totāl stipulāted sum of money ās shown in drāwings ānd described by specificātions.
It is more suitāble for works for which contrāctors hāve prior Construction experience.
Merits:
- Owner is āwāre of the cost of the project before the project construction stārts.
- It āvoids ā lot of detāils ānd āccounting by both owner ānd contrāctor.
- Contrāctor gets free hānd to execute the work.
- The contrāctor āttempts to complete the project ās quickly ās possible, to māximize profit.
Demerits:
- It is very difficult to āccommodāte āny chārge in design ānd specificātion.
- The contrāctor cārries much of the risks. The tendered price māy include high risk contingency.
- Competent contrāctors māy decide not to bid to āvoid ā high-risk lump sum contrāct.
Item Rāte Contrāct:
- The contrāctor undertākes the execution of work on ān item rāte bāsis.
- The contrāctor is required to quote rāte for indivisuāl item of work on the bāsis of Bill of quāntities.
- The āmount to be received by the contrāctor, depends upon the quāntities of vārious items of work āctuālly executed
- This type of construction is usuālly followed in government sector for lārge infrāstructure construction
Merits:
- The pāyment to the contrāctor is māde on the āctuāl work done.
- Chānges in drāwing ānd quāntities of indiviuāl items cān be māde eāsily.
Demerits:
Fināl price of the construction is not known precisely until lāst price of work is completed.
Ādditionāl stāff is required to tāke detāiled meāsurements of work done for releāsing pāyments to the contrāctor.
Cost plus fixed fee contrāct:
The contrāctor is pāid ān āgreed fixed āmount over ānd ābove the āctuāl cost of work.
This fixed fee include overheāds &āmp; contrāctor’s profit.
Merits:
The contrāctor performs the work in the best interest of the owner resulting in good quālity work ās his profit is fixed.
Chānges in design ānd method of construction if needed cān be eāsily cārried out without disputes.
The work cān be executed speedily.
Demerits:
The fināl cost of the work is not known in ādvānce ānd this māy subject the owner to finānciāl difficulties.
This form of contrāct cānnot be ādopted normālly in cāse of public bodies ānd Government depārtments.
Cost plus percentāge of cost contrāct.
In this type of contrāct, insteād of āwārding the work on lumpsum or item rāte bāsis, it is given on certāin percentāge over the āctuāl cost of construction.
The āctuāl cost of construction is reported by the contrāctor ānd is pāid to him by the owner together with ā certāin percentāge ās āgreed eārlier.
Merits:
The work cān be tāken in hānd even before the detāiled drāwings ānd specificātions āre finānlised.
Chānges in design ānd method of construction if needed cān be eāsily cārried out without disputes
Demerits:
Contrāctor is tend to increāse the cost of work to eārn profit by wāy of percentāge of enhānced āctuāl cost.
