Lump sum

Advantages of lump sum

It provides the maximum
incentives to the contractor to
complete the work on time
It reduces to minimum the amount
of administration involved after
contract agreement

Conditions related to lump sum method

The ground condition on the site

Material quantity and specification
number of labors and labor hours
Descriptions and quantities of boughtout
items
Types of constructional plant which will
be
required and for what periods
Time required by the designers
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Conditions related to lump sum

method continued
The site organization and facilities and
which will be required and for how long.
Factors which will affect the site
productivity
Geographical and climatic factors as
they affect site work
Access to site
Local availability of material and labor
NB: The contractor should give similar
information to the subcontractors
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Bill of quantity
It involve in estimation of quantity,
cost of the materials, labor, supervision
and plant which will be required to
execute the work.
It is commonly used in building and
engineering contracts

Cost reimbursement
In Cost reimbursement contract (cost
plus contract), the contractor is
reimbursed the actual cost they incur.
It can be used where the scope of the
work to be carried out can not be
properly defined at the beginning and
the risk associated with the works are
high (repair/rehabilitation). This is a high
form of contracting for the client as the
final cost is not known when the
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Terms of payment
Advantage of terms of payment
The employer avoids having to restrict the
tender list to large firms possessing the
resources to finance the contract.
It ensures that the renderers do not have to
inflate their tender prices by financing charges.
It gives encouragement to and allow the
employer to take advantage of firms possessing
technical initiatives who would otherwise be
held back from expanding by lack of liquid cash.
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Advantage of terms of payment continued

The employer minimizes the risk of

being saddled with a contractor who
has insufficient cash with which to
carry out the contract and of having
therefore to either support the
contractor financially or terminate
the contract.

Delay in payment
After issue of completion certificate by the
architect or engineer, there is no excuse
for delay
Late payment is breach of contract
Many contract charge interest on client of
being delay of payment
If payment is delayed after notice from the
contractor for more than a specified period,
the contract has right to suspend the work
or terminate the contract
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Advance payment
It is recommended to avoid advance
payment

Retention money
With contracts for building and civil
engineering works, it is usual for the
purchaser to retain a proportion of the
contract price until the work has been
completed.
This percentage varies but is usually between
10 per cent and 20 per cent.

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