Construction DB | Construction Site Handbook | Types of Contracts

Construction Site Handbook

Share your expertise and experience with the Construction DB community. You are free to add or edit any of the articles in the Construction Knowledge Collaboration Project.

[English | 简体] Types of Contracts

All-in Contract
This type of contract is sometimes known as “ package contract ” or “ turnkey contract ” or “ design and build contract ” and can be on lump sum basis or re-measurement basis .

The client or its engineer will set out the requirements in board or particular terms and invite the tenderers ( usually pre-qualified ) to submit a comprehensive proposal for the design and construction of the project .

Lump Sum Contract
This type of contract is binding with a fixed lump sum price of which the contractor has to undertake all the works as shown on the tender drawings , bills of quantities , specifications and the terms and conditions of the contract .

The quantities of works are for information only and the contractor is responsible for the assessment of all costs that it will incur throughout the contract period . The lump sum price will seldom be adjusted unless the specified tendered work is altered by formal instructions .

Re-measurement Contract
This type of contract consist detailed bills of quantities ( BQ ) that computed from the tender drawings by the client or its engineer , however the BQ quantity is approximate only and is not final . The tenderers will quote against each BQ item and enter a unit rate or unit price to build up the total contract price on basis of those BQ quantities .

During the construction period , the actual quantity of works executed under each BQ item will be jointly measured and valued at the quoted rate for interim payment purpose .

At completion of contract , the exact quantity of works finally executed under each BQ item will be again jointly re-measured ( ie. the final measurement ) and valued at the quoted rate to evaluate the final account .

In case of instructed variation or additional works that are without basis of BQ rate(s) , the contractor can build up new rates for those works for valuation .

In general , this type of contract is much fair to both the client and the contractor because the total workdone is being paid on re-measurement basis and surely can eliminate a lot of disputes resulting from the grey areas of contractor’s responsibilities .

Build , Operate and Transfer ( BOT ) Contract
This type of contract is sometimes known as “ Build , Own , Operate and Transfer ( BOOT ) contract ” . The client will layout a series of required end products with specification , terms and conditions ; and the contractor has to finance , design , construct , maintain , manage and operate the finished work for an agreed period say 10 years , 20 years or so .

During this agreed period , the contractor has the temporary ownership of these finished works and can charge the end users for recovery of its investment together with the expected profit . However when the agreed period expires , the finished work will have to be transferred back to the client in specified conditions .

Maintenance Contract
This type of contract is usually for the maintenance or renovation work of a large sized project and the construction period usually ranges between 2 to 3 years or as otherwise agreed .

Usually a “ schedule of rates ” contains a comprehensive list of work items is already prepared to cover the employer’s proposed works but without specified quantities . The tenderers will be invited to quote their competitive rates against the work items in the schedule ; or sometimes to quote an addition / deduction percentages against the pre-determined rates entered by the employer or its engineer .

The employer will issue Works Orders to the contractor during the stated period for execution of any work items as required in anywhere within the project site . Payment for workdone will be based on the agreed schedule of rates . In case the executed work items are not covered under the agreed schedule of rates , a new rate or “ star rate ” will be built up and jointly agreed for payment purpose .

Term Contract
This type of contract is a short term contract and usually applies to some project which has an urgency to commence construction work . It includes a list of major work items with provisional quantities and invites the contractor to quote .

Following the award of the contract , the contractor will immediately commence preparatory work and detailed scope of works will be instructed from time to time until the whole design is completed . The works payment will be on the basis of the list of major work items , and will negotiate a relevant new rate for the missing work items .

Types of Contracts Sub-Pages