Unlike flat-rate contracts, unit-price contracts are fairly well treated with the amendments. In the event of a major problem, the contractor can treat it as an additional unit and provide a price. This allows the owner to make changes as he or she sees fit and work with the contractor to create a better project. This potential problem was highlighted in a case of Mascareignes v Chang Cheng 2016 (Privy Council meeting in London). In this case, it involved the use of JCT design and construction contracts for an office building in Mauritius. The contracting entity of this project significantly changed the scope of the work and, when the final tally was established, the contractors assessed most of the components of the custom contract and their value after deducting the initial prices, while the timelines and other mobilization costs remained unchanged. In his appeal, the MSC client argued that this approach was not compatible with a lump sum contract. The application of costs not recognized as part of the mobilization package can pose problems related to the need for advances for lump sum contracts. This is very important because contractors can be highly exposed from a commercial point of view if certain measures are not included in the contractual documents in which they participate. Contractors like lump sum contracts because they offer some autonomy and freedom to complete the job.
Owners like contract contracts because the owners know exactly what the project will cost in the end. You don`t have to worry about excessive working hours or equipment supplements. The price is what it is. Mechanisms for changing the amount of the contract for a lump sum contract: A lump sum contract offers the following benefits: There are many examples of lump sum contracts, download below free lump sum contract models. The amount of overheads calculated under a lump sum contract varies from contractor to contractor, but is based on their risk assessment study and work expertise. However, estimating a very high public cost may lead the contractor to present the developer with higher construction costs. The contractor`s know-how will determine how its estimated profit will actually be. Poorly executed and long-delayed work will increase construction costs and ultimately reduce the contractor`s profits.
If an owner has an overview of what he wants, but the roadmap to get there is not very clear, unit-price contracts can work very well. Unit price contracts are essentially a series of lump sum contracts throughout the project. The project is divided into phases and a contractor will provide a fixed price to complete each phase. Compared to other types of contracts, the lump sum agreement assigns a high risk to the contractor, since the method of preparing the contract is more expensive for the contractor. Therefore, a clear system must be put in place to regulate the different network conditions during the construction of the course by adding the necessary provisions: the main advantage of a flat-rate agreement with a client is that it can achieve cost security when entering the post-contract phase of a project. This can be a pretty important factor for developers if they choose the type of supply route they will choose if faced with a development. Knowing in advance the total cost of a project makes it easier for developers to get financing and can make project financing management less cumbersome.