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Construction process Types of contracts

Construction process Types of contracts. Halmstad University Construction management. Piotr Mazur Paulina Wawryca Paweł Bilski. Types of contracts.

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Construction process Types of contracts

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  1. Construction processTypes of contracts Halmstad University Construction management Piotr Mazur Paulina Wawryca Paweł Bilski

  2. Types of contracts Contract – is an agreement between two or more persons (individuals, businesses, organizations or government agencies) to do, or to refrain from doing, a particular thing in exchange for something of value.

  3. Types of contracts • Fixed-price contracts • Lump-sum contract • Unit price contract • Cost plus contracts • Percentage of costs • Fixed fee • Fixed fee with maximum cost • Incentive fee • Design and build contracts (all-in contract or turnkey contract) • Construction management contracts • Cost-plus fee • Guaranted maximum price

  4. Fixed-price contracts Lump-sum contracts Unit-price contracts Lump-sum contract – in this type of contract, engineer or contractor agrees to do the described and specified project according to the drawings and specifications for a fixed price Unit-price contract – specify the amount to be paid for each unit of the work, but not the total amount. It is used when quantity of the work cannot be accurately estimated in advance.

  5. Cost-plus contracts Percentage of costs Fixed fee Fixed fee – max.cost Incentive fee A contract where the purchaser agrees to pay the cost of all materials and labour, contractor and profit. We can divide them into: • Percentage of costs – contractor is paid a fee that is a percentage of the cost • Fixed fee – contractor is paid a fixed sum which is independent of the final cost • Fixed fee with guaranteed max. cost - the contractor guarantees the max. Total cost for the project • Incentive fee – contractor is paid a fee which is dependent of the final cost

  6. OWNER Design/build firm Design dep Constr. dep Sub-contractor Design and build contract (all-in contract or turnkey contract) – in this type of contract, the owner select one contractor that both design and builds the project.

  7. OWNER Deisgn firm Construction manager Construction firm(s) Contract relation Management relation CONSTRUCTION MANAGEMENT CONTRACT In this type of contract a Construction Manager (CM) is selected to work on the project through design and construction. The CM provides advice during design, manages cost and schedule, can engage contracts for work with subcontractors and is responsible for completing the building project.

  8. Construction management contracts: • Cost-plusfee – theownerpay to the CM theactualcost of the construction (based on competitivebids for each trade subcontract • GuaranteedMaximumPrice (GMP) – theowner and thecontractoragree to a projectcostguaranteed by thecontractor as maximum. Thecostcannot be exceeded, and contractorisresponsible for anyadditionalcost

  9. CONSTRUCTION PROCESS

  10. The Construction Process consists of six stages: • Concept • Contracts and Bid Documents • Bidding • Construction • Construction payments • Completion

  11. 1. CONCEPT • Planning and Architectural Programming • Schematic Plans

  12. 2. CONTRACTS AND BID DOCUMENTS • Contract/Working Drawings/Plans • Architectural Plans • Structural Plans • Mechanical Plans • Technical Specifications • Contract Form • Contract Specifications • Bidding requirements

  13. 3. BIDDING The following is the sequence of events to prepare a contract bid: • The contractor obtains a copy of the plans and specifications from the owner in order to prepare a formal estimate of the construction cost or bid (experienced construction personnel prepare the bids). • The contractor reviews the contract plans and specifications to determine how to build the project and to consider all the limitations or conditions the owner requires for the project.

  14. 3. BIDDING • The contractor solicits bids from subcontractors, estimates their direct material and labour costs, and evaluates the ultimate profit potential of the contract. The amount of the bid covers the estimated costs and a profit for the construction project. • The owner evaluates all of the submitted bids and then awards the contract. • The contract document and specs contain the project start and completion dates, the progress billing procedures, the insurance requirements, and other pertinent information.

  15. 4. CONSTRUCTION • Building permits • Subcontractors • Scheduling of subcontractors • Shop drawings • Project submissions • Change orders

  16. 5. CONSTRUCTION PAYMENT

  17. 6. COMPLETION

  18. References and furtherreading - A. Walker, 2002, Project Management in Construction • B. Hjort, 2010, Construction Methods and Management Compendium • http://www.irs.gov/businesses/article/0,,id=134673,00.html#7 • http://www.cod.edu/facilities_plan/DESIGN1.pdf • http://www.pp.okstate.edu/arch/Chopshop/New%20Folder/A11.pdf • http://www.ehow.com/facts_4966327_types-contracts-construction.html

  19. QUESTIONS: • What is the definition of a „contract”? • What are the different types of contracts? • Describe fixed-price contracts. • What is the sequence of events to prepare a contract bid? • What are the six stages of construction process? • Who schedules the subcontractors?

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