MMK226783 Construction Contracts & Dispute Management: A Report

This report provides an overview of construction contracts and dispute resolution management, focusing on cost-plus contracts and guaranteed maximum price contracts. It discusses the characteristics, advantages, and disadvantages of each contract type, including considerations for direct costs, overheads, and profit margins. The report also emphasizes the importance of adhering to health and safety laws during construction practices and highlights the need for clear communication channels and proper accounting practices. It further explores the general conditions associated with guaranteed maximum price contracts, such as payment terms and service delivery, and offers recommendations for enhancing project practices to mitigate disputes and ensure successful project outcomes. Desklib offers a variety of resources, including past papers and solved assignments, to aid students in their studies.

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CONSTRUCTION CONTRACTS & DISPUTE RESOLUTION MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Cost plus contract........................................................................................................................1
Guarantee maximum price contract.............................................................................................4
Recommendation.........................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Construction contract can be describe as the mutual as well as legal binding agreement which is
between two parities. It is essential to consider right policies and conditions which are related to
the recorded in the document forms while conducting construction contract. In this type of
practices there are parties that are included more than one property owner which is one or more
contractors. This is significant document which is effectively in order to define the set of scope
as well as terms and conditions with the motive of performing all activities related to constriction
work project in proper and accurate manner (Zhang, Fu and Lu, 2021.). It is crucial for project
manager to effectively and efficiently conduct management practices with the motive of
accomplishing desired goals. There are different types of disputes which could occur while
performing and conducting practices so all of these disputes needs to be resolved in appropriate
manner so that all practices could be performed in smoothly manner. In this report information
about construction contract has been determined along with the dispute resolution management
process that is helpful for enhancing construction practices. cost plus contract and guarantee
maximum price contract has been included in this report. Apart from this different
recommendation for enhancing and improving project practices has been determined in this
report.
MAIN BODY
Cost plus contract
This type of contract can be describe as the contract which is majorly related to the cost that
includes completing the contract of the construction project. It has been determined that contract
includes several activities in which cost is one of the essential aspects that will lead to have
major impact on overall performance as well as potential to attain desired goals. The term cost is
majorly related to the different kinds of costs that is included in the contract project such as
direct cost, indirect cost, overheads as well as cost which is included while conducting certain
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activities of the construction (Adel, Modir and Ravanshadnia, 2021). It has been determined that
this cost is also included in the profits in the certain parts of the project which helps in generating
incomes over as well as above the total cost that is presented in the contract. This is agreed by
the contracting parties and help in smoothly and effectively conducting practices of the
construction. Cost plus contracts will concur for one party to consent to repay to the contracted
party to cover the costs just as have indicated benefit relative to finish worth of the agreement.
As per the Law of restitution it has been determined that award of remedies which have one
common function – to deprive the defendant of a gain, rather than to compensate the claimant for
loss suffered Cost-plus contracts are one of the best to be utilized in construction project when
the budget is limited just as there is high likelihood that real cost come out to be not exactly
expected. In this agreement, the contractor should furnish verification that is related with the
costs like immediate or roundabout costs
It has been determined that contracts are utilized mostly in construction where the
purchaser party should expect some arrangement of dangers while additionally giving the level
of adaptability introduced to the contractor (Haidar, 2021). There are different kinds of
agreements that are by and large utilized with the motivation behind the party for drawing
alongside this having a monetary limitations. For the situation where the party will draw up the
agreements and expected the very so much that the worker for hire will make extraordinary and
pass the undertaking concurring on to the certifications made while in like manner consenting to
pay extra because the worker for hire will create extra gains upon its finishing. It has been
analysed that cost plus contracts are developed or used when overall scope of the construction
project as well as work is not done in properly manner in order to estimated in the advance
duration of the time. The cost plus benefit kinds of contracts are permitted to be built having
fixed costs contracts, where both the parties included will consent to a particular costs paying
little mind to what the genuine costs are brought about by the contractor. Such contracts for
construction reason for existing are otherwise called cost-reimbursement contracts. As per the
health and safety law, it is crucial that all practices of contractions is performed correctly and
accurately without providing any harm to other. In this the contract will assist or allow the
contractor to collect some amount which is mention above the level of reimbursed amounts
which is significant for helping in order to make profits from the cost plus profits contracts. In
some of the cases the contracts will have limited amount of reimbursement through which
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expenses will not be covered in proper manner (Maiti and Choi, 2021). This occurs when the
there are some contactors that will make errors while conducting project practices or even can be
negligent as the part of the constructions. It has been determined that there are different kinds of
cost plus profits contracts that are included in various components which are mention below in
detail –
Direct cost – This can be describe as the cost which is subjective as per the specific needs of the
contractors as well as contracts. This consist of labour cost, material costs, consultancy charges
as well as hiring charges that is as per the requirements of professional work.
Profits – This is refer to the fixed percentage of the amount which is calculated along with the
consideration of overall cost occurred during the completion of the project.
Overheads cost- This is refer as the cost allocable which is related to the contract that is
according to the office rent, travelling expenses as well as supplies that is required in the office
for smoothly conducting its practices.
Contract can vary as per the profits as well as fess which are required for the components of the
contractor. It has been determined that cost plus fixed percentage fess can be describe as where
the contractor will receive some amount of income which is significant for helping the rate on
the expense of agreement which is pre settled. It has been investigated that expense in addition to
the decent free agreement comprise of the sum which is paid to the project worker as well as is
fixed and autonomous from the expense of agreement (Jenkins, 2021). Cost plus profits will
prompt accomplish many benefits, for example, the contractor is paid according to the fixed
percentage of the expenses so it won't overwhelm the cost and subsequently, would to lead to
trouble the contractors. Accordingly, it will help in disposing of the danger that is transferred to
the contractee. The nature of the item won't be compromise as there is no degree for having
budget imperatives for the contractors. This will prompt have a superior quality for the project. It
has been determined that cost plus profits contract will lead to several cons which will lead to
have negative impact over contract. There is an extent of rising disputes that can happen between
the contractor and the contractee alongside reimbursement of the cost. During the time spent
keeping away from the conflict during the hour of settlement of the agreement cost, more costs
will be caused in bookkeeping as well as creation covers month to month premise. With this
agreement, the project may take longer time that it is normal just as it have the extent of
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vulnerability for the contractee when the last cost of the project isn't constantly set to still up in
the air. One more disadvantage from the cost plus benefit contract in construction project is that
the contractors are not qualified for any sort of motivations regardless of whether the project is
not finished inside the ideal time span (Arif and Saeed, 2021). Cost plus profits contracts can be
utilized in fruitful manner in certain circumstances were the frameworks are set up before the
execution of the agreement. It is critical to have an appropriate framework that will check the
costs that happens during the hour of construction of the agreement. According to the law of
health and safety all employees and labour should be provided safety measures while conducting
practices at construction sites. It has been determined that there is proper kind of communication
channel that is significant for presenting message and ideas between the contractors as well as
contractee. Contractor should have some adequate assets to execute the contracts as the cost of
the agreement shouldn't be paid promptly to the contractor. Sufficient measure of financing
arrangements should be there with the contractor. Additionally, the functioning group should
make certain with regards to legitimate bookkeeping, examining and different records that re to
be kept up with in the agreement and viable.
Guarantee maximum price contract
Local Government Authority can be future contact to the guarantee greatest price contract for its
new task practices. It has been analysed that this contract is regarding the ensuring the grantee
value against the contract is conducting (Pellerin. and Joblot, 2021). This is a contact type which
permit the client to address a specific cost against the agreement is set up. Regardless to the cost
of the agreement or the all out cost that is brought about in beside to the agreement is convey the
cutoff is set to convey the whole task. Guarantee maximum price contract can be describe as the
type of the contract which is limit is set according to the contract is acquire. This is a kind of
agreement which permit the partner to set a cap that would permit the partner to dispatch the
whole agreement at a specific cost. clients just need to pay the breaking point set in cap of the
agreement. Project that resembles school and such sort of project this is an appropriate
agreement which can designate the accompanying highlights.
General conditions
The significant condition under this sort of agreement includes setting the costs that will
be need to the client to pay alongside the agreement is set up. This is a fundamental condition or
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general term of the agreement is made (Hamledar and Fischer, 2021). This is the overall
situation include in the agreement that would guarantee to the undertaking for drawing in to the
agreement that would contain the great and quality agreement choice against the agreement is
conveyed. The agreement can permit the customer and the specialist organization to pay the
whole worth in various portions. This is a different condition that might connect to the agreement
type which will permit the contractor as well as contractee to set the time length in which the
portion will be paid alongside the agreement is set up. Installment in the agreement is normally
affected with the size of installment. Terms of conveying administrations might change based on
accommodation of the party include in the agreement. The installment is sure in this where the
customer get to know at the underlying period of the agreement or at rthe season of starting or
development of the agreement the cost of the agreement. This just require the customer to pay
the set worth of cap against the agreement is set up by the parties include in the agreement. The
Local Government Authority might go into this agreement which would need the association to
recognize the all out cost of the agreement even at the hour of going into the arrangement. The
all out worth of agreement is sure in this agreement which is a center benefit connected with the
agreement.
Special condition
These are the circumstance that complete the whole agreement explicit and would uphold
the association to relieve the necessity of the agreement. Special condition are by and large not
connected with the agreement however become a piece of the agreement because of the need and
prerequisite of agreement. Special situation might append with the agreement that is completely
founded on the contractor and contractee. The circumstance might be identified with the
certification cycle, installment terms, percentage of finishing for the agreement and such other.
Nominee may likewise present in the agreement that will additionally cause the agreement all the
more clear for the parties to include with the agreement (Zin and et.al., 2021). This is an
exceptionally fundamental condition associated with the agreement wherein contractor and
contractee may include the way that cut off times should likewise be associated with the
agreement terms. This include the quarterly or month to month cutoff time in regard to
percentage of fulfilment in the agreement.
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Scope of work
This is refer as the interaction that is truly feasible and down to earth in nature as it
uncover the whole design. Local Government Authority is attempting to build against the
agreement choice and this training would permit the organization to distinguish the whole
construction that will be set up toward the finish of agreement get finished
Drawings
Drawing can be describe as the pictorial presentation of the contract which includes the
process that is very feasible as well as practical in nature in order to disclose the complete
structure. It has been determined that Local Government Authority is significant in order to
trying to construct against the contract option as well as practice which would allow the
organisation to identify the while structure
Specifications
The specification section consist of the grantee price contract that includes the contactor as well
as contractee that will includes the specific condition associated with contract (Perera,
Sirimewan and Senadeera, 2021). This circumstance is other that the overall circumstance or the
special situation associated with the agreement. Specification is started to regard the individual
interest of the parties include in agreement. Specification assumes a vital part in such a period
any party associated with the agreement neglect to meet a specific condition to the agreement.
This is by and large identified with the instalment.
Bill of quantities
The bill of quantities is also associated with the type of contract types and this consist of
collecting all the bills of all different cost that is incurred over the contract. This very important
factors as well as different aspects which is associated with the contract that helps contractor to
identify the total profits which is earned in the completion of the contract.
Construction Schedule
The construction schedule is significant in order to disclosed the completion of contract partly
along with this completely. This can be describe as the time duration that is helpful for disclosing
different percentage of the contract that will assist in completing the required set of work.
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Schedule of Values
Schedule of values is a term of agreement that uncover that at which piece of the
agreement residency customer would be responsible to make which percentage of all out worth
of agreement (Ayhan, Dikmen and Talat Birgonul, 2021). This is going to support the
installment stream in agreement based on the percentage of fruition of the entire agreement.
Schedule of work is typically impact with the construction schedule of the agreement. Based on
the percentage of consummation led by contractor the instalment need to be made by customer.
Advantage of contract
 The major benefit of contract is that it helps in accelerating the schedule as well as
effectively conducting different practices of the contract.
 This is helpful for providing support in order to save the incentive which is included in
the contract.
 This is consider to be beneficial in order clear the contract which is as per the all aspects
of the contract.
 This is consider to be significant in order to keep secure contact options for both the
parties that is included in the contract.
Risk factors of contract
 There are different risk factors of the contract which will lead to have negative impact
over the contract. This includes inaccurate and inappropriate cost which is reporting the
contract.
 This type of contract option lead to increases the risk of contract as customer will pay
after the completions of work.
 The construction contract is consider to be usually sustaining long tenure that includes
the increased price of the material, working labours along with this other aspects of the
contract which is significant for further reducing the loss of contractor.
Recommendation
In order to successfully operates roles and responsibilities in any industrial sector it is essential
for company to undertake use of effective strategies, methods and appropriate contract in order
to make sure that all the operations are being executed in a well defined and effective manner. In
terms with LGA it is essential for organisation to duly undertake advantage of efficient contract
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in order to accomplish project in a cost-effective manner. With the help of undertaking use of
appropriate contract company can successfully undertake their operations while assuring
profitability. It has been identified that it is essential for organisation to include proper planning
in contract in order to make sure that all the operations are being conducted in a well defined and
effective manner. There are some recommended practices being offered to organisation that will
help them to execute contract efficiently.
• LGA is duly recommended to undertake advantage of appropriate contract as it assist
organisation to include system organisation to formulate the new school that can be done in a
cost-effective way.It is essential for an organisation to make sure that their operation is executed
with minimum cost while maintaining quality, as this will help LGA to ensure overall success in
market while assuring a long-term sustainability. In addition to this company is usually
recommended to undertake advantage of Cost plus contract construction as to fulfil all the
activities and work in appropriate time in a contract. It is essential to make sure that activities is
being accomplish under proper time. In this cost + construction contract will significantly help
organisation how to execute work in time effective manner. Furthermore, it has been underlined
that the cost plus profit contract mainly include certain type of cost which include direct
overhead, indirect overhead which is essential to be considered and to make sure that all the
activities get fulfilled in effective way. However, it has been identified that there are some
certain form of percentage of the profit that has been agreed among the parties.Along with this
LGA offers certain amount to the contractor then this will allow organisation to assure the
accomplishment of work in time effective manner while maintaining quality. Furthermore, it has
been identified that the cost plus profit contract mainly includes the overall costs such as direct
cause which include the charges which is required LGA event to material cost and labour and
hiring charges. In addition to this, it has been underlined that it will also include the overhead
cost which include insurance, travelling expenses as well as office rent. From the above
mentioned analysis it has been identified that with the help of undertaking advantage of this
recommended measure organisation can not only execute their activities in time effective manner
but can also accomplish their overall operational cost and can execute all the activities while
maintaining expenses. In addition to this with the help of undertaking use of cost plus fixed
percentage fees in the contractor organisation will duly received the income on the decided
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percent on the cost of the contract this, will significantly assist organisation to fulfil contract
requirement while maintaining time quality and profitability.
• In addition to this company is also recommended to LGA to undertake use of cost plus
fixed contract, as this will significantly offer number of advantages to organisation. For example
if fixed amount is being paid to contractor the fees will be fixed. In this there will be no
additional form of burden in terms of cost overrun. This will duly reduce the risk transferred to
the contract. Along with this it has been underlined that in this organisation will also undertake
advantage of not accomplishment of project activities on time. In this contract will be held liable
for the compensation for the loss. This will assist the organisation to make sure that their cost
does not goes in a waste. Furthermore, it has been identified that there will be no significant
compromise in the quality of project. In this with the help of setting budget on priority basis with
certain amount of percent given to the contractor will allow organisation to maintain contract
quality. This will significantly assist organisation to ensure maximum success in a well-defined
and effective manner. In addition to this, both the parties of the contract will be aware
about the budget of the project and it will be as an evidence regarding the overall
expense that has been spend on the work. Furthermore, it has been underlined that if
both the agreed parties are aware about the project budget then this will be duly termed as
evidence in terms of overall expenses that has been duly spend upon the work. Along with this, it
has been underlined that the final project cost will be less than if it was decided in the contract.
In terms with present contract it has been identified that overall amount of expenses are duly said
on the average which is needed and in this is the contractor is duly allowed to fulfil project in
limited budget that has been already decided. Thus, if LGA company use this contract
it will save the organization form extra expenses. However, if any mischief is
done by the contractor the in this contract the terms are solving by an adductor. In this
it has been identified that if company undertakes use of this recommended measure, then this
will duly save them from spending additional expenses that can enhance their overall project
course. Along with is it has been identified that in this it has been underlined that in this if
contractor undertake any irresponsible action, then this contract the terms are being solved by a
better. This will be on the educated discretion to import the claim as per the loss and damage.
Furthermore, it has been identified that the other advantage is in the case of any loss in the
decrease of labour and raw material in this the overall amount of damage will be duly transferred
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towards contractor and they are required to their overall expenses.In addition to this organisation
can easily overcome the issue associated to the tender as in this contract will attract more number
of tender, and it will offer them percentage of work in estimated time.
CONCLUSION
From the above report it has been determine that contract can be classified into different parts
which is significant for gaining correct and accurate information about the contract. It has
classified into two major parts that is cost plus contract and guarantee price contract. Both of
these are effective contract that is significant for smoothly and effectively functioning of the
contract project. Cost plus contract type of contract can be describe as the contract which is
majorly related to the cost that includes completing the contract of the construction project. It has
been determined that this cost is also included in the profits in the certain parts of the project
which helps in generating incomes over as well as above the total cost that is presented in the
contract. This is agreed by the contracting parties and help in smoothly and effectively
conducting practices of the construction. It has been analysed that this contract is regarding the
ensuring the grantee value against the contract is conducting. This is a contact type which permit
the customer to address a specific cost against the agreement is set up. It has been identified that
it is essential for organisation to include proper planning in contract in order to make sure that all
the operations are being conducted in a well defined and effective manner. LGA to undertake
use of cost plus fixed contract, as this will significantly offer number of advantages to
organisation. Advantage of appropriate contract as it assist organisation to include system
organisation to formulate the new school that can be done in a cost-effective way.It is essential
for an organisation to make sure that their operation is executed with minimum cost while
maintaining quality
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REFERENCES
Books and Journals
Zhang, L., Fu, Y. and Lu, W., 2021. Contract Enforcement for Claimants’ Satisfaction with
Construction Dispute Resolution: Moderating Role of Shadow of the Future, Fairness
Perception, and Trust. Journal of Construction Engineering and Management, 147(2),
p.04020168.
Adel, T.K., Modir, M. and Ravanshadnia, M., 2021. An analytical review of construction law
research. Engineering, Construction and Architectural Management.
Haidar, A.D., 2021. Types of Construction Contracts. Handbook of Contract Management in
Construction, pp.31-55.
Maiti, S. and Choi, J.H., 2021. Investigation and implementation of conflict management
strategies to minimize conflicts in the construction industry. International journal of construction
management, 21(4), pp.337-352.
Jenkins, J., 2021. International construction arbitration law. Kluwer Law International BV.
Arif, F. and Saeed, F., 2021. Role of construction project documentation for effective arbitration
process. Journal of Legal Affairs and Dispute Resolution in Engineering and
Construction, 13(2), p.04521006.
Pellerin, R. and Joblot, L., 2021. Litigation management process in construction industry.
Hamledari, H. and Fischer, M., 2021. Role of blockchain-enabled smart contracts in automating
construction progress payments. Journal of Legal Affairs and Dispute Resolution in Engineering
and Construction, 13(1), p.04520038.
Zin, S.M. and et.al., 2021. A Proposed Pandemic Clause for Force Majeure Events under
Construction Contracts in Malaysia. Environment-Behaviour Proceedings Journal, 6(16), pp.33-
37.
Khalef, R., and et.al., 2021. Contract risk management: A comparative study of risk allocation in
exculpatory clauses and their legal treatment. Journal of Legal Affairs and Dispute Resolution in
Engineering and Construction, 13(1), p.04520036.
Perera, B.A.K.S., Sirimewan, D.C. and Senadeera, A.D., 2021. Management of variations in the
public-sector building construction projects in Sri Lanka. Journal of Engineering, Design and
Technology.
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Ayhan, M., Dikmen, I. and Talat Birgonul, M., 2021. Predicting the Occurrence of Construction
Disputes Using Machine Learning Techniques. Journal of Construction Engineering and
Management, 147(4), p.04021022.
Perera, B.A.K.S. and Dewagoda, K.G., 2021. Streamlining the management of payment delays:
the case of Sri Lankan Government building construction projects. Journal of Financial
Management of Property and Construction.
Badi, S., and et.al., 2021. Technological, organisational and environmental determinants of smart
contracts adoption: UK construction sector viewpoint. Construction Management and
Economics, 39(1), pp.36-54.
Paton-Cole, V.P. and Aibinu, A.A., 2021. Construction defects and disputes in low-rise
residential buildings. Journal of Legal Affairs and Dispute Resolution in Engineering and
Construction, 13(1), p.05020016.
Thapa, P. and Shrestha, S.K., 2021. Assessment of Impact of COVID-19 Lockdown on Nepal’s
Construction Sector based on Selected Construction Projects.
Perera, B.A.K.S., and et.al., 2021. A study on variation-specific disputes that arise in road
projects in Sri Lanka: a qualitative approach. International Journal of Construction
Management, 21(6), pp.571-581.
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