Sunday 15 September 2013

Types of construction Contracts

Types of construction Contracts

There are basically two types of construction contracts
  1. Fixed Price Contract
  2. Cost Plus contract

Fixed price contract is such a contract where a project has a fixed price ,However ,any agreed variation in project may be charged by the contractor.
Cost Plus contract is such a contract where contractor charged a fees for his services . it means the contract is reimbursed with cost plus fees .

Advantage of Cost Plus Contract

The biggest advantage of cost plus contract is guaranteed profits unless and until some unseen circumstances the contractor knows his profit ration and this is a risk free investment. The risk free investment is a great opportunity.

Disadvantages of Cost Plus Contract

The biggest disadvantage of cost plus contract is the cost control as contact awarding party has to reimbursed the cost therefore contractor give less consideration to cost controls.

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