Construction Contracts Essay

1036 Words5 Pages
Chapter 4 – Construction Contracts 1. Name and briefly describe each of the two basic types of competitively bid construction contracts. Which type would be most likely used for building the piers to support a large suspension bridge. Why? Two basic types of competitively bid construction contracts are lump-sum and the unit-price contract. The lump-sum contract is when the contractor agrees to complete all work for a pre-determined price including profit and the contract. The unit-price contract is when the contractor quotes work on units separately instead of entire project. Price is based on units of work performed, and cost varies depending on the quantities of units. Building the piers to support a large suspension bridge will…show more content…
4. Name two types of negotiated contracts and describe the method of payment and incentive concept. Cost + percent of cost is the method of payment which is related to the cost of the job, the larger the cost of the job the higher the amount of fee that is to be paid by the owner. There is a little incentive to be efficient and economical in the construction but is subjected to abuse. Cost + fixed fee is paid regardless of the variation of the reimbursable cost factor. This method gives contractors an incentive to get the job done as quickly as possible in order to recover his fee over the shortest time frame. 5. What is meant by unbalancing bid? What type of contract is implied? Give an example of how a bid is unbalanced. A bid is unbalanced when some contractors use this method to profit greatly on a project. Contractors do this by changing unit prices of various bid items to the point where the price does not reflect the true cost of those items. The unit-price contract is implied to an unbalancing bid. An example of how a bid could be unbalanced occurs when a contractor uses the method of unstable bidding by overbidding in the beginning of the contract in order to reduce his finances and then will underbid at the end of the project. 6. Why is cost plus a percentage of cost type of contract not used to a great extent? A cost plus, is a fixed-price contract where the contractor paid for all the allowed expenses to certain limit
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