In the past, during construction, contracts and agreements were mostly done verbally, relying on trust. However, when problems arose, it was difficult to mediate. Nowadays, written contracts are created to prevent risks, and there are various types of construction contracts available depending on the client's preferences. Each type comes with its own advantages and disadvantages, as follows:
1. Lump Sum Contract
This is the most commonly used contract type. It involves agreeing on a fixed price that includes all materials, labor, management costs, profits, taxes, and other expenses. The client must understand the total expenditure required. In some cases, this type of contract may cover only certain costs while excluding certain materials.
Advantages - The client will know the exact value of the work, receive the complete project as specified, and it is easy to verify the work done.
Disadvantages - It is difficult to make changes or modifications, and the contractor must bear the risks of fluctuating material and labor costs.
*This type of contract is suitable for projects that have a fully completed construction plan with a clear list of materials for labor and operational costs.
2. Unit Price Contract
This involves agreeing on a price per unit for every item to be constructed, starting the contract during the preliminary design phase without waiting for the complete designs to find contractors.
Advantages - Work can start without knowing the exact quantities, and payments can be made to the contractor close to actual work performed.
Disadvantages - The project value will only be known after signing the contract, which may lead to budget discrepancies if calculated incorrectly.
*This type of contract is not very popular because the client does not know the total cost to be paid once the work is completed. It is suitable for projects where clients want to start construction quickly.
3. Design-build Contract
In this case, the client combines design and construction with a single contractor. They only specify what kind of construction they want and then agree on a price. The contractor will carry out the design, construction plans, and procurement of materials and labor.
Advantages - The construction time will be quick and timely, with clear accountability as one contractor manages the entire project.
Disadvantages - The contract value is high since the contractor must account for additional risks associated with material costs and quantities.
*This type of contract is suitable for clients who wish to combine both design and construction under a single contractor in a one-time hiring format.
4. Turnkey Contract
This type of contract means that the contractor will find financing, technologies, design, and complete construction. The client pays for the construction after the work is completed without needing to invest upfront. This is suitable for large projects that require high technology and funding.
Advantages - The client can benefit from the work without upfront investment.
Disadvantages - The construction value is high, with risks related to exchange rates and interest rates.
5. Cost-plus Contract
In this contract type, the contractor must perform the tasks specified in the contract, and the client must pay the contractor based on actual expenses plus an agreed-upon additional fee, such as operational costs or profit, to be equally shared. The client must clearly state the conditions of what is included and excluded to prevent potential risks.
Advantages - Contracts can be signed immediately without needing detailed designs, reducing risks for contractors amid fluctuating material costs.
Disadvantages - Construction values may vary, requiring the client to strictly control costs.
*This type of contract is suitable for highly complex construction projects and can be used when the client does not want to wait for the design process to be completed, but must clearly specify the scope of allowable expenses.
In total, these are 5 types of construction contracts that clients and contractors should be aware of before starting any agreements or construction projects. At-once is a website that compiles a list of companies providing services in various areas including construction contracting companies. You can visit our website to directly contact the companies you are interested in without going through us, making your service usage more convenient without any fees.
แนะนำบริษัทที่ให้บริการรับเหมาก่อสร้าง
ที่มา: www.mangoconsultant.com
