A fixed-price contract is a large contract agreement that can be used when the requested work is well defined and the construction drawings are completed. The lump sum agreement reduces ownership risk and the contractor has better control over profit expectations. It is also a preferred choice when stable soil conditions, comprehensive pre-draft studies and assessments have been completed and the contractor has analysed these documents. The agreed contract of sum may, if agreed, contain certain unit prices for items containing indefinite quantities and deductibles, in order to cover unexpected conditions. The time limit for the award of this type of contract is also longer; It will, however, minimize modification contracts during construction. Contract contracts are a great tool for small orders and fairly simple projects. However, lump sum contracts could ultimately give rise to significant disputes and claims arising from contractual documents. The most common argument factors are as follows: the amount of overheads calculated under a flat-rate contract varies from one contracting authority to another, but is based on their risk assessment study and expertise in labour law. However, estimating very high overhead costs may lead the contractor to present higher construction costs to the project owner.
The contractor`s expertise determines the actual result of its estimated profits. A poorly executed and delayed contract will increase construction costs and, finally, reduce the contractor`s profits. For some projects, it may be necessary to establish a payment request using quantities and unit prices. Many contractors will develop an unbalanced offer by increasing the unit price of items to be finalized at the beginning of the project, such as mobilization, insurance and terms and conditions, and reducing the unit prices of the items needed later. Although lump sum contracts are the standard and preferred option for all contractors, they may also have certain restrictions: a lump sum contract has the following advantages: a fixed contract is normally used in the construction sector to reduce the costs of planning and managing contracts. It is said to be a package, because the contractor must submit a total and total price instead of offering individual items. A fixed-price contract is the most recognized type of agreement for simple and small projects and projects, with a clearly defined scope or construction projects, for which the risk of different location conditions is minimal. A lump sum contract or contractual amount requires the supplier to undertake to provide certain services at a fixed or fixed price. In a fixed-price contract, the owner has essentially put the entire risk on the contractor, which in turn can be expected to require a higher mark-up to deal with unforeseen contingencies.
A supplier under contract under a lump sum agreement is responsible for the proper performance of the contract and makes available its own means and methods to carry out the work. This type of contract is usually developed by estimating the cost of labor, the cost of materials, and adding a certain amount to cover the contractor`s overhead and profit margin. If the owner prepares or receives a proposal for a modification contract from the contractor, the price offer may be contested. The owner could indicate that the requested modification was already covered by the provisions of the contract. It is important to prepare specific contractual clauses that define how modification contracts are managed and to what extent the contractor can claim delaying damages. . . .