Cost-added contracts in construction
Cost-added contracts in construction
The structural engineering contract (contracting contracts) is of a different nature, especially from the rest of the contracts, as it mainly depends on technical considerations. On the other hand, most of the construction projects are carried out by specialists and are called construction contractors. In this article, we will explain in detail and talk about Cost-added contracts in construction.
In fact, the project owner makes an agreement with the contractor so that the project will be executed according to the specific specifications and drawings, which is called the construction contract. So that the owner pays the financial dues to the contractor under the terms of the contract in exchange for the latter carrying out the project works and delivering it to the owner in the form that was agreed upon.
It should be noted that the prevailing method in the field of contracting is for the owner to announce in the available circles about the project to choose the appropriate contractor to implement the project based on several factors, the most important of which is the contractor’s experience, the cost required for the contract, and the previous work performed by the contractor is successful and worthy of entering into another contract.
The definition of the engineering contract (contracting contracts) and its contents:
A contract is a written agreement document between the two contracting parties to implement a specific engineering project, which is the employer (the contracting authority) and is usually symbolized in engineering contracts (contracting contracts) at the first party, and the executing company (contractor) and symbolized in engineering contracts (contracting contracts) in the second party, and on Therefore, the contract clarifies the rights and obligations of each party towards the other.
Cost-Plus Contracts: Negotiated Contracts
In this case, the bid is awarded after calling a specific number and a few highly qualified contractors from the point of view of the owner in terms of previous experience and the presence of mechanisms, equipment and workers and the safety of the financial base for them, then negotiations are made with them to choose one and this type of contract is not used in public sector work except in Small-scale and special devices such as the work of the military sectors. Accordingly, this type of contract is frequently used in private sector contracts, and the owner pays the actual business costs to the contractor in addition to his services, equipment and profits, while benefiting from his technical expertise and the cost of the works is estimated by a clear and accurate way to calculate the quantities
This type of contract is divided into the following categories:
1- The cost contract plus a percentage of the cost: Cost Plus -a-Percentage -of- cost:
In these types of contracts, the employer pays the contractor the true costs of the work, plus an amount for his fees and profits, and this amount is calculated as a percentage of the total true cost of the work.
2- The cost contract plus a lump sum against the compensation – Cost – Plus -a- Fixed – Fee:
In this formula, the owner pays the actual costs of construction, plus a lump sum added for the services, fees and profits of the contractor, and this formula requires the presence of precise specifications that clearly define the volume of the works because the contractor will demand an increase in the amount of the volume of works if they are changed substantially, and this type of contract is frequently used in contracts Military and private sector projects
3- The cost contract plus a lump sum and a percentage of savings profits. Cost – Plus -a- Fixed – Fee & a- Percentage of Profit:
The contract shall be given to the contractor in addition to the amount for his services and fees as a percentage of the profits in the event of savings in the total cost that was estimated when signing the contract and by this means the contractor has an incentive, a strong economy in the cost during implementation.
4- The cost contract plus a lump sum and an incentive to save time: Cost – Plus -an- Incentive Fee:
This formula is used in contracts in which the time worker is of great importance, and by awarding the contract to the contractor in addition to the full cost and the lump sum amount for another lump sum fee for each day that the owner can use the origin before the expected date to complete the project upon signing the contract, and the contract can provide Also a fine for delay if the contractor delays in completing the work on the date specified for its completion.
5- The cost contract plus Fee variable a- Plus- Cost:
The owner pays the entire construction cost to the contractor, with amounts added by a mathematical relationship, based on the cost of the project and the duration of its implementation, and that mathematical relationship is formulated in a way that increases the contractor’s fees whenever he saves the costs of the project, and the sooner it is implemented so that it is completed before the deadline.
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6- The cost contract plus a lump sum with a maximum cost guarantee: Guaranteed Maximum Price Contract
It is taken on cost contracts – the contractor’s fees are added – that it does not give the owner any means by which he can determine the total cost of the project, and to overcome that came the “cost contract formula with a lump sum added with the contractor’s guarantee of the upper limit of the total project cost”, so that it does not exceed the amount Specific ٕ If the total cost exceeds the upper limit, the contractor will bear the entire increase. If the total cost does not reach the upper limit, either the entire difference will be the business owner’s share, or the contractor will have a share of that savings. The contract and its terms specify the formula agreed upon in this case.
