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