Comparing The 4 Major Types Of Construction Contracts

18
Oct

Contracts are good because they offer transactional security to the parties involved.  Understanding a contract is paramount to signing it.  Ensuring the protection and outcome of the arrangement for both parties is what a fair contract does.  These are some of the most common construction contractual arrangements.

 

Engineering, Procurement & Construction Management (EPCM)

 

Under this arrangement, the client hires a professional company to manage the whole construction project from start to finish. Competent firms offer the full package from planning, design, procurement, scheduling, construction, implementation, to the project handover stage. This includes the coordination and management of all subcontractors and the handling of all legal and regulatory issues. Some professional Anderson milling companies are capable of this kind of arrangement because they have adequate resources and industry connections.

 

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Construction Management (CM)

 

At the most basic level, construction management contractual obligations are fairly similar to EPCM. This is because in some cases the CM contractor is also tasked with overseeing the entire project from conception to completion. There are two types of CM contracts, namely Construction Management At-Risk (CMR) and Construction Management Agency (CMA). In the CMR deal, the project owner retains an architect to coordinate with the contractor and the latter bears no liability regarding the project completion date or budget. Contrastingly, a CMA manages the whole project alone, much like in EPCM, and even accepts project completion liability by committing to a guaranteed maximum price (GMP) and construction deadline.

 

Design-Bid-Build (D-B-B)

 

This is the most traditional construction contractual arrangement. In D-B-B, the client first hires an architect to design the project. After he is satisfied with the design, he advertises for a building and construction firm to create the designed project using the Invitation for Bids (IFB) procedure. This means that the contractor is not liable for project failures because all his work is based on the already prepared construction design.

 

Design-Build (D-B)

 

This is another building and construction contract that is similar to EPCM and CMR. The project owner hires one company to design and construct the project. But before contracting the owner prepares or outlines all the major functional and performance requirements of the project. He uses these project demands to Request for Qualifications (RFQ)/Request for Proposals (RFP). The qualifying firm designs the project as per the RFQ/RFP specifications and then proceeds to build it to completion. Like in the CMR contract, the construction company usually bears liability for the project cost and completion date because it is involved in the formal design process.