There is a lot of thought that goes into planning a construction project. Before you start looking at builders, you may spend a considerable amount of time deciding what you want to include in the project.
When it is time to start heading toward the negotiation table, it is essential to think about what type of construction contract will be the best fit for your project.
These are some of the most common types of construction contracts and when they are most useful.
Contracts with flexibility
If you have not decided all the details of your project or how much of it you need a contractor for, a cost-plus contract may be a good option. During the negotiation, parties in a cost-plus contract set up a specific amount for overhead, materials and profit, but allow flexibility on the project itself. It also allows some flexibility if the timeline or costs of the project change.
Contracts when resources are known
For projects that are repetitive with resources (e.g., hourly rates, rate per unit work volume) that are easy to define, but the quantity of such resources is unknown, unit price contracts are a desirable choice. This type of arrangement allows for a flexible number of fixed and well-defined units. A unit price contract is not suitable when the project requires flexibility.
Protect your cost
In a lump sum or fixed price construction contract, there is more risk for the contractor since there is a little allowance for problems or changes in prices. While there can be incentives for contractors that finish early or under budget, there can also be penalties for projects that run behind schedule. A fixed price contract is a good option for a project that has clearly defined parameters and a small likelihood for change.
SederLaw's Litigation team routinely represents contractors, subcontractors, suppliers, design professionals, developers and property owners. We are often involved in contract drafting and negotiation, development of construction and building projects, project administration, disputes, claims, mediation, arbitration and litigation involving construction law and related issues. Broad in scope and experience, our construction law attorneys possess an extensive knowledge of federal, state and local law, addressing everything from mechanic's lien requirements and bonding issues to breach of contract, and construction defect claims.
Partner, James Vevone
339 Main Street, Suite 300
Worcester, MA 01608
Mr. Vevone serves as counsel to a number of real estate clients, including regional and national developers and investors, in connection with shopping center and mixed-use development projects. He assists developers in structuring and documenting purchase transactions with investor subscription; financing; and, tax deferred exchange.