Contract Types:
Lump Sum

• Contractor agrees to perform stipulated job of work in exchange for a fixed sum of money 
• Extra Costs are taken out of the contractors pocket 
• Be sure and have contingency funds 
• Owner's Prefer

Unit Price 

• Based on estimated quantities of defined items of work and costs per unit amount of each of these work items.

Cost Plus 

• Is usually not the first choice of owners 
• Contracts negotiated by Owner and GC 
• Total Cost not known until completion 
• Scope Contract 
• When drawings and specs are not complete 
• Target Estimate -Contractor's estimate based on preliminary drawings 
• Contract will be amplified w/ more defined drawings and specs 

Letter of Intent 

• Letter Contract 
• Letter is prepared for the signatures of both parties and state their intent to enter into a construction contract at a later date 
• When signed, the letter is binding on both parties and furnishes the contractor with sufficient authority to proceed with construction in the interim before the contract is formally executed. 
• Includes settlement costs in the event the contract is never executed.
• Limits contractor to certain procurement and construction activities. 

Progress Payments 

• Contractor must make application for progress payment 
• Submit application for  payment at least 10 days before established date of progress payment

Warranty Period 

• Obligates contractor correct defects brought to attention by owner during a specified time period after completion 
• Claim must be made w/in a reasonable time 
• one year is a common warranty period 
• up to 5 years 

Contract Time 

• Reasonable time for completion if completion date is not specified 

Indemnification 

• 3 Main Categories: 
• Broad Form Indemnification 
• Indemnifies owner and/or A-E against all losses 

Payment Bonds

• Guarantees Payment for 
• Labor 
• Materials 
• Supplied in the performance of construction 
• Private Owner is Protected 

The Surety 

• Directed Surety 
• Cosureties

Risk Management 

• Comprehensive approach to handling exposure to loss 
• Is concerned w/any Peril that may cause financial impairment to a business

Identify Floodplains and Floodways

Value Engineering vs. Cost Reduction

Critical Path Method

In Construction a project is subjected to a wide range of services including banks, government agencies, engineers, architects, lawyers, insurance companies, contractors, material manufactures and suppliers, and building tradesman.

Unique complexities of each job include, subsoil conditions, surface topography, weather, transportation, material supply, utilities and services, local subcontractors, labor conditions, available technologies.

Project Stages
1. Planning and Definition
2. Design (Architect/Engineer)
3. Procurement and Construction