What is a Contract? | Types Of Contract In Civil Engineering Construction
What Is Contract In Constraction Management?
In the construction industry, a contract is a legal agreement between two parties in the written formate signed by both parties and there are mainly 10 types of contracts in civil engineering.
In the contract, a promise is made to do something by one party in return for money or a promise or grant of some interest by other parties.
According to the contract law, the contract must be enforceable by law which offers personal rights and imposes the personal obligation.
The parties in the contract make the rules and laws for themselves only.
In the case of public bodies, an official duly authorized contract is fixed on the public body.
Let’s Dive into the different types of contracts in the construction industry-
Types Of Contract In Civil Engineering Construction Management
Here are different Types Of Contract In Civil Engineering Construction Management for the execution of civil engineering works-
- Item Rate Contract | Schedule Contract
- Percentage Rate Contract
- Lump-Sum Contract
- Labour Contract
- Cost Plus Percentage Rate Contract
- Materials supply Contract
- Cost Plus Fixed Free Contract
- Cost Plus Sliding Or Fluctuating Fee-Scale Contract
- Target Contract
- Negotiated Contract
Item Rate Contract | Schedule Contract
In the Item rate contract, the total price of the project is based on the price of each item’s unit. The contractor is paid as per the rates of items specified in the bill of quantity.
In simple words, the Item Rate Contract is a type of contract in which the rates are estimated item-wise.
Due to detailed analysis of cost the item rate contract is more scientific and the change in the drawing of the building can be made easily.
In civil engineering, the item rate contract or schedule contract is also known as the Unit Price Contract.
More Read- Advantages And Disadvantages, Suitability Of Item Rate Contract
Percentage Rate Contract
In the Percentage Rate Contract, the department prepares a plan of the bill of quantities with rate, amount, and total amount.
The contractor carries out the work as per the rate prepared by the department or some percentage above or below the rate prepared by the department.
The percentage above or below or at par is applicable to the overall cost of the work also.
More Read- Percentage Rate Contract- Advantages, Disadvantages & When To Use
Lump-Sum Contract
In the Lump-Sum type contract, the contractor is present a single fixed amount for the execution of work in all respect in the given time according to the drawing, design, and specifications supplied to the contractor.
In the lump-sum contract, no need for detailed measurements of the items of work is needed but the whole construction work must be checked with the drawings and specifications.
More Read- Advantages And Disadvantages Of Lump-Sum Contract & When To Use
Labour Contract
In the labour contract, the owner or department purchase the different type of required materials himself and the owner or department invites the contractors only for labour work.
The owner only sees the materials requirements and their delivery at the site on the time and the contractor has all the responsibility of the construction work.
More Read- Labour Contract-Advantages, Disadvantages, And When To Use?
Cost Plus Percentage Rate Contract
In the cost plus percentage rate contract, a contractor takes the work of construction on the actual cost of construction work and an agreed percentage of profit for his services.
The contractor is paid the actual cost of the whole work with a certain amount of profits maybe around 10% as agreed by the owner at the end of work.
In this type of contract, the contractor brings the materials and labours on his own money and he makes a proper note of expenses of money on materials and labours.
More Read- Advantages And Disadvantages Of Cost Plus Percentage Rate Contract
Material Supply Contract
In the material supply contract, a contractor makes an agreement with specific terms & conditions for the supply of materials related to the work.
The rate made by the contractor for supplying the materials is including the transportation charge, local taxes, delivery charges, etc.
At the time of the delivery of material, the materials should be examined, counted, and measured.
Cost Plus Fixed Fee Contract
In the cost plus fixed fee contract, the contractor gets paid by the owner or department an agreed fixed amount above the actual cost of work.
In the cost plus fixed fee contract, the contractor tries to complete the construction work as early as possible and the owner gets the advantage of early completion.
The fixed fee includes overhead and profit to the contractor.
Cost Plus Sliding Contract | Fluctuating Fee-Scale Contract
In the const plus sliding contract or fluctuating fee-scale contract, the contractor gets paid the actual cost of the construction project with some amount of fee.
The fee amount which is given to the contractor with the actual cost is inversely variable according to the increase or decrease of the estimated cost agreed first by both parties.
If the actual cost of the project is higher than the first agreed estimated cost then the fee amount is lower.
And if the actual cost of the project is lower than the first agreed estimated cost then the fee amount is higher.
The cost-plus sliding contract is also known as fluctuating fee-scale contract.
The cost-plus sliding contract is one of the best systems of contract in the construction industry.
Target Contract
In the target contract, the contractor uses his skill and expertise in order to keep the cost of construction as low as possible and earn a bonus with a fixed percentage fee.
In the target contract, the contractor is paid on the basis of cost plus a percentage.
The contractor wants to keep the cost of construction high in order to gain more amount on the fixed percentage of the cost of construction.
Negotiated Contract
In the construction industry, when the contract is given only on the basis of negotiation without calling the tender is called the negotiated contract.
The negotiation allows more flexibility for the owner to select a contractor.
More Read- General Conditions Of Contract In Civil Engineering Construction
More Read- Essential Requirements Of Valid Contract In Civil Engineering
So these are analyses of the 10 Types Of Contract In Civil Engineering construction. I hope you liked it.
Frequently Asked Questions (FAQ)
In civil engineering, a contract is an agreement between two parties to do some work under some conditions and terms. Work like construction work, maintenance, repairs, supply of materials, supply of labour, materials transport, etc.
Here are the different types of engineering contracts-
1. Item Rate Contract Or Schedule Contract or Unite Price Contract.
2. Percentage Rate Contract
3. Lum-Sum Contract
4. Labour Contract
5. Cost Plus Percentage Rate Contract
6. Materials Supply Contract
7. Cost Plus Fixed Fee Contract
8. Cost Plus Sliding Or Fluctuating Fee-Scale Contract
9. Target Contract
10. Negotiated Contract
The Item Rate Contract is also termed as the Unit Price Contract or Schedule Contract.
In construction project management the cost-plus percentage rate contract is a type of contract in which a contractor takes the work of construction on the actual cost of construction work and an agreed percentage of profit for his services.
In construction project management, the labour contract is a type of contract in which the owner or department purchase the different type of required materials himself and the owner or department invites the contractors only for labour work.
The lump-sum contract in the construction project management is a type of contract in which the contractor presents a single fixed amount according to the drawing, design, and specifications supplied to the contractor.
The percentage rate contract in the construction project management is a type of contract in which the contractor carries out the work as per the rate prepared by the department or some percentage above or below the rate.
A scheduled contract in construction project management is a type of contract in which the total price of the project is based on the price of each item’s unit.