13/05/2026
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TYPES OF CONSTRUCTION CONTRACTS IN CONSTRUCTION AND CIVIL ENGINEERING WORKS.
Construction contracts in building and civil engineering are categorized based on risk allocation, pricing structures, and project delivery methods.
Key types include;
> Lump Sum -fixed price for defined scope
>Unit Price -rates per unit of work
> Cost-Plus -actual costs plus fee
> Design-Build -single entity for design and construction
This allows clients/owners to match risks with contractors.
TYPES OF CONSTRUCTION CONTRACTS
1. Lump Sum [Fixed Price] Contracts
The contractor agrees to a total price for the entire scope of work.
Best for projects with clear, defined scopes; high risk for the contractor, low for the owner.
2. Unit Price Contracts
Used when the scope is known, but the total quantity is uncertain e.g. earthworks.
The contractor bids a price per unit e.g., per cubic meter of soil.
3. Cost-Plus [Cost Reimbursable] Contracts
The owner pays for actual project costs [labor, materials] plus an additional fee for overhead and profit.
High risk for the owner, low for the contractor; used when the scope is not well-defined.
4. Guaranteed Maximum Price [GMP] Contract
A cost-plus contract with a ceiling; the contractor absorbs costs exceeding the maximum price, providing budget certainty.
5. Time and Materials [T&M] Contracts
The owner pays based on the time spent like; hourly rates and materials used.
Often used for repairs, renovations, or unexpected work where the scope is unknown.
6. Target Cost Contract
A contract where a "target" cost is estimated.
If final costs are under, both parties share the savings; if over, they share the risk, encouraging efficiency.
7. Percentage Rate Contract
A type where a contractor quotes a percentage above or below a standard cost estimate provided by the owner ; common in public works.
*DELIVERY-BASED CONTRACT TYPES:
8. Design-Build [D&B] Contract
A single entity is responsible for both designing and constructing the project, streamlining communication and speeding up delivery.
9. Construction Management [CM] Contract
The owner hires a manager to oversee construction, with subcontractors contracted directly to the owner [CM Agency] or the manager [CM at Risk].
10. EPC [Engineering, Procurement, and Construction] Contract
Often called "Turnkey," the contractor handles everything, allowing the owner to take over a finished, operational project.
COMMON STANDARDS USED
1. FIDIC Contracts- Widely used in international civil engineering projects.
2. NEC [New Engineering Contract]-Focuses on flexibility and collaboration.
3. JBCC- Used in building projects for standardized administration.
4. GCC [General Conditions of Contract] -Common in civil engineering and construction, especially in specific regions.
NB: Choosing the right contract depends on balancing risk tolerance, scope certainty, and the desired speed of completion.
