If you are about to engage on a construction project or business yet your experience is very limited, then you must first learn to understand some basic stuff in the construction industry. Basically, there are three main parties in a civil project, namely the contractor, the engineer, and of course, the one who finances the venture. The final party is more commonly known as the owner. The point of the whole endeavor is to make sure that what the owner wants the owner gets, after all he or she is the one who finances the entire project. The engineer who is the chief confidante of the owner ensures that the plan is well-executed. He guides the investor on all the details concerning the project such as methods of construction, safety requirements, completion time, and construction cost.
The contractor, as the name implies, contracts with other individuals or organizations for the realization of a given project. It goes without saying that an excellent proposal can be realized by an efficient team of engineers, contractors, architects, material dealers, manufacturers, entities that distribute equipments, and state agencies. Based on the nature or type of work being constructed, there are many types of contracts that can be used in the construction industry. However, in situations where projects are to be carried out via the utilization of civil equipment, the following contract types are the most commonly used.
Three Popular Types of Contracts Used in a Civil Construction Project
- Fixed Percentage Plus Cost Contract Type
This type of contract requires a contractor to carry out the job per specifications, drawings, and particular plans. These schemes form the segment of a specific contract bond. Payments are made based on particular on-site expenditures or costs acquired by the contractor.
- Unit-Value Contract Type
A unit-value or price contract requires the contractor to execute the different aspects and items of a project based on the project schedule. The schedule is based on the tendered rates agreed upon by the owner and the contractor. Payments received by the contractor are given at particular intervals. These intervals are based on the actual work schedule. The payments also depend on the value of the work that is carried on. Among other common types of contract, the unit-price contract is the most popular. This is due to the possibility of preparing approximate items of work quantities based on the comprehensive measurement of related structures of a project.
- Lump Amount Contract Type
Lump amount or sum contract type, the entire particulars of a given project is suitably designed. The project is also efficiently evaluated even before the contractor tenders his specific rate. It goes without saying that lump sum is the best type of construction contract so far since a fixed amount of cash is paid to the contractor.
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