It is possible to devise a form of contract with appropriate terms and conditions to suit many different circumstances. Some basic considerations leading to the best choice are:
• Clear definition of each party's contractual responsibilities. Shared responsibilities are unsatisfactory, although they are unavoidable in some circumstances.
The lump sum form of contract provides the best financial risk for the owner, gives the contractor the maximum incentive for early completion, and produces the greatest benefit of competitive bidding. Conversely, reimbursable contracts provide no such incentives. It is dangerous, however, to attempt to use a lump sum contract if the essential conditions are not satisfied-notably, a clear and complete definition of the scope of work.
The owner must have the contractual right to exercise control adequate to ensure the success of the project, but the temptation to assume excessive control should be resisted.
Control and responsibility go together-the greater the owner's control, the less responsibility is carried by the contractor.
One last point: the form of contract must be decided early in the project development and the choice must be made known to the engineers before they write the specifications. Obviously, the specification will be much more precise and comprehensive if it is to be used for a lump sum contract than would be required for a reimbursable contract.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.