The construction project owner and a general contractor sign on a legal document containing project details is called a construction project contract. The owners want someone to outsource the job. Hence, the contractor executes the whole construction process. By signing the construction contracts, both parties agree to the terms and conditions regarding the project completion and payment matters. A construction project is essential before starting a project. Therefore, construction estimating services can be vital in understanding the construction project estimates before signing the contract.
These contracts contain information about communication channels, materials, labor, costs, and timelines. Construction contracts are necessary to streamline the decision-making process. In short, a construction contract is like a roadmap for a construction project.
This is How Construction Helds!
Each construction project needs legal documentation before its execution. A contractor executes the project after signing a legal contract with the owner. By signing this document, the contractor and the owner agreed on the same terms and conditions.
Every construction project is different, depending on various conditions and locations. Therefore, there are multiple types of construction contracts, such as lump-sum contracts, cost-plus contracts, time-material contractors, and unit pricing contracts.
What is a Construction Project Constitute?
As we know, a construction project differs for all kinds of construction. There are always huge differences depending on the size, location of the project, budget of the project, and scope of the project. But still, there are some necessary components or ingredients of a construction project. These are:
- Total Value of Project
- Rentainage of Project
- Scope of Construction Project
Total Contract Sum
All construction projects must have a collective sum of the whole project, the total amount a project owner pays to the general contractor. A general contractor will complete the project within this contract sum.
Rentainage of Project
Retainage is another term associated with project costs. It involves the percentage of the project amount that a project owner will keep with him until the general contractor completes the projects according to the owner’s demands.
Scope of the Project
Every construction project is different in terms of scope. A project’s scope is mentioned in the project contract, which clarifies any ambiguities regarding the project timelines and project scope.
Important Project Details
There are a lot of other important project details that should be included in the project’s contracts. These are:
- Construction Drawings
- Warranty
- Terms and Conditions
- Regulatory Compliance
- Work Specifications
- Project Timelines
- Details about management changes
- Payment Details
- COntractor’s and owner’s responsibilities
Types of Construction Contracts
Each construction project is different in terms of size and scope, and there is a different contract for different kinds of construction projects.
Lump-Sum Contracts
This type of contract includes all the project costs that a contractor and an owner agree upon, as well as all the materials and equipment that the project requires.
Time-Material Contracts
These contracts are used in scenarios where there is no idea of project scope and completion. In this contract, the contractor gets his fee on an hourly basis and according to the material used. In this type of project, the contractor needs construction takeoff services to analyze the rates and quantities of the materials used per hour better.
Cost-plus Contracts
This is a pre-estimation cost that a project owner gives to a general contractor before the project starts. This cost is shown in cases when the project scope is undetermined.
Conclusion
Construction contracts simply eliminate the project complications between the contractor and the owner. These documents are necessary to save time and effectively manage all project areas. Similarly, the project cost is another significant factor. Construction cost estimating services can play an essential role in the influential role in the cost management of the project.
