Lump sum contract: Difference between revisions
Add content |
Add content |
||
| Line 23: | Line 23: | ||
* |
* |
||
* There is a higher risk for the contractor.<ref name=":0" /><ref name=":1" /><ref name=":2">{{Cite web|url=https://www.constructiontuts.com/lump-sum-contract-advantages-and-disadvantages/|title=Lump Sum Contract Advantages and Disadvantages in Construction|date=2017-02-05|website=Construction Tuts|language=en-US|access-date=2019-07-04}}</ref> |
|||
* Proper [[change order]] documentation is required which could be time-consuming.<ref name=":0" /><ref name=":1" /><ref name=":2" /> |
|||
* Higher fixed price due to unforeseen conditions.<ref name=":0" /><ref name=":1" /><ref name=":2" /> |
|||
* The contractor selection usually takes longer.<ref name=":0" /><ref name=":1" /><ref name=":2" /> |
|||
* The design has to be completed before the start of activities.<ref name=":2" /><ref name=":0" /><ref name=":1" /> |
|||
* Change orders could be rejected by the owner.<ref name=":0" /><ref name=":1" /><ref name=":2" /> |
|||
* It increases the adversarial relationship among the stakeholders of the project.<ref name=":0" /><ref name=":1" /><ref name=":2" /> |
|||
* The contractor has a freedom to choose its own methods.<ref name=":0" /><ref name=":1" /><ref name=":2" /> |
|||
<br /> |
<br /> |
||
Revision as of 10:23, 4 July 2019
This sandbox is in the article namespace. Either move this page into your userspace, or remove the {{User sandbox}} template. Hello my name is Hsadeh. I live in the USA.[1] I like it here.[1] I like apples.[2]
- ^ a b Rogers, Tony (2018). Hooman is great.
- ^ Harry Potter und der Stein der Weisen (Harry Potter 1). ISBN 978-3551557414.
Lump sum construction contract is contract, which is sometimes referred to as stipulated-sum, a single price is quoted for the entire project based on plans and specifications and covers the entire project and the owner knows exactly how much the work will cost in advance. [1] This type of contract requires a full and complete set of plans and specifications and includes all the indirect costs plus the profit and the contractor will receive progress payments each month minus retention. The flexibility of this contract is very minimal and changes in design or deviation from the original plans would require a change order paid by the owner. [2] In this contract the payment is made according to the percentage of work completed. [3]
According to Associated General Contractors of America, “In a lump sum contract, the owner has essentially assigned all the risk to the contractor, who in turn can be expected to ask for a higher markup in order to take care of unforeseen contingencies. A Contractor under a lump sum agreement will be responsible for the proper job execution and will provide its own means and methods to complete the work.”
Advantages
- The owner's risk is reduced due to the price of the contract being fixed and variations are not as much like other contracts. [4][5]
- There are less Change orders and they are reduced. [4][5]
- The bidding and contractor selection is less complicated.[4][5]
- Obtaining construction loans are easier with this type of contract.[5][4]
- The profit margins and percentages are greater for engineers and contractors.[4][5]
- Payments and installments are made on regular basis which provides the contractor with a reliable cash flow.[4][5]
- Management of the contract is a lot easier for the owner.[4][5]
- It create an improved communication and relationship between the design team, contractor, and the owner.[4][5]
Disadvantages
- There is a higher risk for the contractor.[4][5][6]
- Proper change order documentation is required which could be time-consuming.[4][5][6]
- Higher fixed price due to unforeseen conditions.[4][5][6]
- The contractor selection usually takes longer.[4][5][6]
- The design has to be completed before the start of activities.[6][4][5]
- Change orders could be rejected by the owner.[4][5][6]
- It increases the adversarial relationship among the stakeholders of the project.[4][5][6]
- The contractor has a freedom to choose its own methods.[4][5][6]
- ^ The project resource manual : CSI manual of practice. Construction Specifications Institute. New York: McGraw-Hill. 2005. ISBN 0071370048. OCLC 56191871.
{{cite book}}: CS1 maint: others (link) - ^ Halpin, Daniel W. (2006). Construction management (3rd ed ed.). Hoboken, NJ: Wiley. ISBN 0471661732. OCLC 61425134.
{{cite book}}:|edition=has extra text (help) - ^ "The Pros and Cons of Pricing Options in Construction Contracts". Bell Davis Pitt. 2017-06-20. Retrieved 2019-07-04.
- ^ a b c d e f g h i j k l m n o p "Lump Sum Construction Contract - Advantages and Disadvantages". The Constructor. 2016-12-09. Retrieved 2019-07-04.
- ^ a b c d e f g h i j k l m n o p "Lump sum contract - pros and cons - Designing Buildings Wiki". www.designingbuildings.co.uk. Retrieved 2019-07-04.
- ^ a b c d e f g h "Lump Sum Contract Advantages and Disadvantages in Construction". Construction Tuts. 2017-02-05. Retrieved 2019-07-04.