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    Tuesday, December 10, 2019

    Types of Construction Contracts


    The price calculation of different contracting methods in Civil engineering The




    conditions of different engineering projects and the content of the contract are different, and often require different types of contracts and calculation methods. Therefore, in practice, the type of contract and the valuation method have become an important basis for dividing the contracting method.



    1. Contract price for


    fixed-price contract The fixed-price contract is the contracting of works at the agreed total price. Its characteristics are based on drawings and engineering specifications, clarify the contract content and calculate the package price, and the package is dead. During the execution of the contract, unless the construction unit requires a change in the original contracting content, the contracting unit shall generally not require a change in the contract price. This method is relatively simple for the construction unit, so it is welcomed by the general construction unit. For the contractor, if the design drawings and instructions are quite detailed, the construction cost can be estimated more accurately, and the consideration should be taken into consideration when signing the contract, without causing too much risk. It is also a relatively simple way of contracting. If the drawings and instructions are not detailed enough, there are many unknowns, or if the material unexpectedly rises in price and the unexpected weather and other unexpected circumstances, the contractor must bear the risk of contingency; for this reason, unforeseen costs are often increased, which is not conducive to reducing the cost. In the end, it is not good for the contractor. This kind of contracting method is usually only applicable to small-scale and less technically complex projects.

    2. The contract price of


    a volume-based contract is based on a bill of quantities and a unit price list. Usually, the construction unit entrusts the design unit or a professional estimator (cost engineer or surveyor) to propose a quantity list, which lists the sub-item quantities, such as excavation of several cubic meters, filling of compacted cubic meters, and concrete of cubic meters. The wall is plastered with a number of square meters, etc., and the contractor fills in the unit price and calculates the total cost. Because the amount of work is calculated uniformly, the contractor can get the total cost only by reviewing and filling in the appropriate unit price, and the risk is less; the contract issuing unit only needs to check whether the unit price is reasonable, which is convenient for both parties. At present, this kind of contracting method is used internationally. In China, the reform direction of the calculation method of engineering cost has begun.

    3.Contract price


    When construction is needed without detailed construction drawings or some conditions of the project are not completely clear despite the construction drawings, it is not possible to calculate the quantity of the project more accurately, but also to avoid causing the construction unit and contractor to rely on luck. If either party bears too much risk, it is more appropriate to adopt a unit price contract. In practice, this type of contracting can be subdivided into three types:
    (1) According to the unit price of the sub-item
    , the construction unit will list the sub-item project name and unit of measurement, such as earth excavation per cubic meter, concrete per cubic meter, For each ton of steel structure, etc., the contractor usually fills in the unit price one by one; or the construction unit can first propose the unit price, and then be approved by the contractor or put forward a revised opinion as a formal quotation. And settle the project price at this unit price based on the actual number of projects completed. This kind of contracting method is mainly applicable to emergency projects that have no construction drawings and the construction volume is unknown.

    (2) Contracting according to the final product unit price


    refers to contracting according to the unit price of each final product, such as every square meter of residence and every square meter of road. The quotation method is the same as the contract price per unit project. This kind of contracting method is generally applicable to residential buildings with standard designs, primary and secondary school buildings, and general plant buildings. However, considering that the cost of basic projects varies greatly due to different conditions, when we contract certain housing construction projects at a unit price per square meter, we generally only refer to the part above the elevation of ± 0, and the basic project is contracted by volume or divided into parts. Project unit price contract. The unit price can be packaged at one time according to the budget quota or the price adjustment coefficient, or it can be agreed to allow the adjustment with changes in wages and material price indexes. Specific adjustment methods are clearly stipulated in the contract.

    (3) Bidding and final bidding based on total price, and settlement of project price based on unit price


    This kind of contracting method is suitable for projects that have reached a certain depth and can be used to estimate the approximate value of the number of sub-projects. However, due to some circumstances that are not completely clear, major changes may occur in actual work. For example, tunnel excavation in railway or hydropower construction may cause large changes in the number of earth and stone due to abnormal geological conditions. In order to enable both parties to the 




    contract to avoid the risks arising therefrom, the contracting unit may propose a total quotation based on the estimated project quantity and a certain unit price. Unit price contract. Subsequently, the two parties settle the project price based on the actual number of projects completed and the contract unit price.

    4.Cost plus fee contract price contracts


    basic characteristics of this contracting approach is based on the actual cost of the project (including labor costs, materials, mechanical royalties construction, other direct costs, and construction management costs, and by independent fee, but does not include The total management fee and tax payable of the contracting enterprise), plus the agreed total management fee and profit, determine the total project cost. This kind of contracting method is mainly applicable to situations where the content of the project is not very clear before the start of construction, such as emergency engineering while designing or construction that needs to be repaired after being damaged by disasters such as earthquakes and war. In practice, there are four different specific methods:

    the calculation method of cost plus fixed percentage remuneration can be described by the following formula.

    C = Ca (1 + P) (33-1) where C is the total cost; Ca is the actual engineering cost; P is a fixed percentage.
    It can be seen from the formula that the total construction cost C will increase with the project cost Ca. Obviously, the contractor cannot be encouraged to be concerned about shortening the construction period and reducing costs, which is not good for the construction unit. This type of contracting is rarely used today.
    (2) Cost-plus fixed remuneration The
    cost of the project is actually reported, but the remuneration is a fixed amount agreed in advance. The formula is:
    C = Ca + F (33-2)
    In the formula, F stands for remuneration, which is usually determined by a certain percentage of the estimated project cost, and the amount is fixed. Although this kind of contracting method cannot encourage the contractor to be concerned about reducing costs; but starting from getting paid as soon as possible, the contractor will be concerned about shortening the construction period, which is it's desirable. In order to encourage the contractors to work better, there are also bonuses in addition to the fixed remuneration according to the quality of the project, the duration of the project and the cost reduction. In this case, the upper limit of the percentage of the bonus can be greater than the fixed remuneration to fully play the positive role of the reward.
    (3)
    The contract method of cost plus floating remuneration requires the project cost and the expected level of remuneration to be agreed in advance. If the actual cost is exactly equal to the expected level, the construction cost is the cost plus a fixed remuneration; if the actual cost is lower than the expected level, increase the remuneration; if the actual cost is higher than the expected level, decrease the remuneration. Three cases are available equation expressed as follows:
    If Ca = C0, then C = of Ca + F. (33-3)
    of Ca <C0, C = of Ca + F. + [Delta] F (33-4)
    of Ca> C0, C = of Ca + F.-[Delta] F (33-5)
    of formula Medium C0—expected cost;
    △ F—the increase or decrease of the remuneration, which can be a percentage or a fixed absolute number.
    With this contracting method, it is generally stipulated that when the actual cost is overrun and the remuneration is reduced, the original fixed remuneration amount is the maximum reduction. That is, in the worst case, the contractor will not receive any remuneration, but will not be liable for compensation for overspending.
    In theory, this method of contracting does not have much risk for both the contractor and the contractor, but it can also motivate the contractor to reduce costs and shorten the construction period. Rich experience and sufficient information.

    (4) Target cost plus award penalty


    In the case that the preliminary design and the engineering specification are urgently required to start construction, a rough estimate can be prepared based on the rough estimate of the project volume and an appropriate unit price list as the target cost; as the detailed design is gradually specified, the project volume and target cost can be added. Adjustment, and additionally stipulate a percentage as the remuneration; at the final settlement, if the actual cost is higher than the target cost and exceeds a previously agreed limit (such as 5%), the remuneration is reduced, and if the actual cost is lower than the target cost (there is also a margin limit) Increased remuneration. It is expressed as follows:
    C = Ca + P1C0 + P2 (C0-Ca) (33-6) In the
    formula, C0 is the target cost; P1 is the percentage of basic remuneration; P2 is the percentage of reward and penalty. In addition, there are also bonuses and penalties for the processing period.
    This kind of contracting method can prompt the contractor to pay attention to reducing costs and shortening the construction period, and the target cost is determined by adjusting the design progress, so the construction unit and the contractor will not take many risks, which is desirable. Office. Of course, it is also required that both the contractor and the representatives of the construction unit have rich experience and sufficient information.
    5.
    The contract method of calculating the compensation contract based on the total investment or the amount of contracted work is mainly applicable to feasibility studies, survey and design, and procurement of materials and equipment. That is, the design fee is calculated based on a certain percentage of the estimated investment amount, the survey fee is calculated based on a certain percentage of the completed survey workload, and the procurement contract business fee is calculated based on a certain percentage of the price of the materials and equipment. These must be clearly specified in the contract.

    Contract method:


    (1) Contract work and materials. 


    All the labor and materials used in the construction of the project. This is the more common construction contracting method adopted internationally.

    (2) Part of the labor contract.  


    That is, the contractor is only responsible for providing all the labor and part of the materials for the construction, and the rest is supplied by the construction unit or the general contractor. Before China's reform and opening up, the construction unit that had been practicing for many years contracted all labor and local materials. The construction unit is responsible for the supply of unified and departmental management materials and some special materials, which belongs to this contracting method. After the reform, it has gradually transitioned to the method of contracting labor and materials.

    (3) Contract work without materials.


     That is, the contractor only provides labor services and does not assume the obligation to supply any materials. This kind of contracting method exists in construction projects at home and abroad.

    3.Special contracting


    The content of special contracting is a special project in a certain construction stage. Due to its strong professionalism, it is mostly contracted by relevant professional contracting units, so it is called professional contracting. For example, auxiliary research items in feasibility studies, engineering geological surveys in the survey and design phase, water supply and water source surveys, basic or structural engineering design, process design, power supply system, air conditioning system and disaster prevention system design, equipment selection during construction preparation Purchasing and production technician training, as well as basic construction, metal structure production and installation, ventilation equipment and elevator installation during the construction phase.
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    Item Reviewed: Types of Construction Contracts Rating: 5 Reviewed By: Riaz Mushtaq
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