Types Of Contract Method For Construction Management

1622 WordsAug 17, 20167 Pages
2.3 Contracts There are several types of contract method and these methods generally fall under three categories: Fix price (FP) or lump sum (LS), guaranteed maximum price (GMP) and reimbursable contracts. These methods can be applied to any contracting for construction management. Lump sum contact, also called fixed price is when an owner engages an entity to perform a fixed scope of work for an agreed lump sum payment (Cmaa, 2012). Guaranteed Maximum Price (GMP) is a contractual arrangement between an owner and an entity to perform a fixed scope of work for a price that is guaranteed to not exceed the stated maximum price. GMP typically includes a base cost along with several allowances and contingencies and may result in final cost lower than stated GMP. These savings may fall to the owner or may be shared among the owner and the engaged entity (Cmaa, 2012). Reimbursable contracts come in a variety of forms and sometimes it is coupled with a not to exceed maximum price. Reimbursable contract is an arrangement between an owner and an entity to perform a fixed or variable scope of work based on agreed calculated method. Reimbursable contract includes unit price, cost plus fixed fee, cost plus incentive fee, time spent and time and materials (Cmaa, 2012). Reimbursable Terms (Cmaa, 2012)(Antoniou, Aretoulis, Konstantinidis, & Kalfakakou, 2013) • Unit price payment is an actual quantity at set unit prices. • Cost plus fixed fees payment is based on actual cost plus a fixed
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