KPPB Law offers expert construction contracting services. Our professionally experienced and highly skilled construction attorneys offer the most informed construction contract drafting, guidance, analysis, defense/representation, and overall expertise. KPPB Law profoundly understands the necessity of an effective, and exhaustively crafted, construction contract. With KPPB Law’s construction contract services, we insure the interests of both the contractor and employer are thoroughly protected.
A construction contract is a legally binding document in which the contractor and employer agree upon, and meticulously detail, all aspects and expectations of the construction project and construction site. The construction contract should encompass the entirety of the project’s scope, stipulating details such as: the material expectations of the jobsite, agreed upon construction schedules and the expected project completion deadline, as well as the amount of expected compensation and the distribution of said compensation. The contract may also include more big-picture concepts, such as any inclusion of pre-construction services and the coordination between any architects and subcontractors with the involved employer and contractor.
It is imperative that a construction contract is thorough and comprehensive. The construction contract establishes the foundational guidelines and expectations that drive the construction site and construction project. When a construction contract is extensively drawn, both the site and project are directed to a safe and effective conclusion, yielding quality results through skilled workmanship, often mitigating delays or financial losses. Furthermore, clear and definitive construction contracts are vital for both the contractor and employer should anything go wrong. If a dispute arises, and actions like arbitration are pursued, the construction contract will be heavily involved in the determination of damages and the responsibility of both involved parties.
The Four Most Common Construction Contracts
The dedicated construction attorneys at KPPB Law work with the four most common types of construction contracts, among others. Due to their specific and detailed nature, the inclusions and goals of each individual construction contract vary greatly. Construction contracts must take into account all the specific characteristics, needs, and expectations of the employer, contractor, construction project, and construction site.
Cost Plus Contracts
Cost plus contracts are drawn when the scope of the construction project has not been thoroughly fleshed out and the employer wishes instead to focus on the establishment of billing limitations. Cost plus contracts defined the compensation of all costs, purchases, and subsequent expenses produced by construction, as well as taking into account all direct and indirect costs. Both involved parties agree upon the amount of compensation dedicated to the contractor. Cost plus contracts are generally pursued when the employer desires extra protections against overcharging or superfluous charges.
Lump Sum Contract
Also called fixed price contracts, lump sum contracts are drawn to minimize the cost of design and contract administration, establishing a literal “lump sum” for all construction activities. This fixed price is agreed upon by both parties, and omits the act of bidding on individual items. Usually, lump sum contracts are pursued by projects with a completely realized scope, or small projects, because there is less risk for costly complications.
Time and Materials Contracts
Time and materials contracts are drawn to define a set hourly rate, or daily rate, of construction endeavours. With a time and materials contract, the costs are established specifically across four classifications: overhead costs, direct costs, indirect costs, and markup costs. Often, the contract also accounts for the expectation of any additional costs that may arise, in order to provide some financial leeway if additional costs are accrued during construction. Generally, time and materials contracts are most effective for small projects, or projects with particularly well-defined scopes, because the success of the contract hinges on the ability to make an accurate estimate of costs, schedules, and completion dates.
Unit Pricing Contracts
Unit pricing contracts are drawn to ensure the employer is being charges fair, uninflated prices for the materials and labor that are being retained. These prices can be set based on the specific desired quantity of materials, or they can be set during the bidding process. The unit price is malleable, and can be raised or lowered as the scope of the project changes. The flexibility of unit pricing contracts generally create a situation that fosters fluid cost agreements between both parties as the construction process unfolds and compensation amounts change.