Contract and Payment

structures
The nature of the contract
depend on
- scope of the work
-Responsibility of the contractor
- The risk involved
- Required time for the
completion of the work.

Things to considered during the

Selection of contractors
Whether responsibility for the design,
procurement , construction,
commissioning is allocated to one
contractor or not
Whether the main contractor will both
mange the project and undertake
construction or will be responsible
management only while the
construction is undertaken by other
contractor
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Procurement routes

1. Traditional system
- Characteristics of traditional
system
a. The client has
engineer/architect who is is
responsible for the design
b. Contractors are responsible
for construction
c. Client is responsible for the
management of the contract
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2. Turnkey contract

-The client is responsible for the

preparation of their work
specification/statement of requirement
-The client does not retain an engineer
during the construction
-The clients role is limited to
inspection , payment and ensuring the
successful completion of the work.

3. The design and build

The contract is responsible for

both construction design and
construction
The client should have an
engineer who protect the interest
of the client

4. Construction management and managing contract

The contractor is responsible only

for the management of the
contract whereas the construction
of the work will be undertaken by
other contractors appointed by the
client
Construction Management
Contract is for use on construction
projects where the employer
appoints separate contractor to
carry out the works, and a
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5. Guaranteed maximum
price
Is a cost-type contract (also known as an
open-book contract) where the contractor
is compensated for actual costs incurred
plus a fixed fee subject to a ceiling price.
GMP Combines construction
management with the design and build
The contractor is responsible for the
management of the design such as
programming, coordinating the work of
designers
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. Guaranteed maximum price

continued
The contractor is responsible for cost
overruns, unless the GMP has been
increased via formal change order
(only as a result of additional scope
from the client, not price overruns,
errors, or omissions).
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The contract pricing

There are three main ways in
which contract is calculated
Lump sum
Remeasurement/bill of quantity
and
Cost reimbursement(cost plus)

Lump sum
Advantages of lump sum
It provides the maximum
incentives to the contractor to
complete the work on time
It reduces to minimum the amount
of administration involved after
contract agreement

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