Types of Construction Contracts and the Contracting Process in Project Management

Project Management 1
Project Management
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Date

Project Management 2
Question 1
Types of Construction Contracts
Fixed price contracts
This is a type of contact which includes penalties for the missed deadlines and benefits for early
termination. The contract is usually used when the risk needs to be transferred to the builder, and
at the same time, the client wants to avoid change orders for the unspecified work (Surahyo,
2017, p. 347).
Cost plus contract.
This type of contract involves the payment of the actual purchases, costs or other expenses that
are generated directly from the construction activities.
Time and material contracts
This kind of construction construct is preferred in situations where the scope of the project is not
clear. In this contract, the client and the contractor must establish agreed rates, which includes
additional expenses which could arise in the process of construction.
Unit pricing contract
In this contracting the unit prices usually help during the order process as the client requests for
specific quantities and the pricing of each unit to for the pre-determined amount of the unutilized
items.
Differences between the construction contracts.

Project Management 3
Cost plus contract is usually used in the situations where the scope of the project is a subject to
confirmation while time and material contract is used in the situations where the scope of the
project is not clear (Collier, 2015, p. 430).
The fixed price contract explains the benefits and the limitations associated with the completion
of the project in regards to the deadline while others do not.
Examples of construction contracts
Contract example
Time and material the contractor is paid by the actual cost
of direct labor, usually at specified hourly
rates
Unit pricing contract Horizontal construction, such as roads
Fixed price a web designer can offer a fixed-price
contract for the design of a website
Cost plus the contractor paid for all of its allowed
expenses
QUESTION 2
The process of construction contracting
The process of contracting involves the following steps
Planning
Initiation