Contract Families

Contract families

Contract Families
Contract Families

Agreements

Agreements
Contract Families

Collateral warranties

Collateral warranties
Contract Families

Guides

Guides
Contract Families

Procurement

Procurement

Traditional/Conventional

The traditional or conventional procurement method has been a standard practice in the construction industry for 150 years, following the emergence of general contracting firms and independent client consultants. There are two main features of the traditional method:

  1. The design process is separate from the construction (although JCT contracts provide for design of specific parts of the works to be carried out by the contractor)
  2. Full documentation (i.e. drawings, work schedules, bills of quantities) must be supplied by the client before the contractor can be invited to tender for carrying out the work.

Other features of the traditional/conventional procurement method:

  • A contractor is usually selected and appointed by competitive tender, but sometimes by negotiation.
  • The terms of many traditional contracts require the client to appoint a professional consultant (i.e. architect, quantity surveyor, contract administrator) to act as an independent contract administrator.
  • Full documents are needed for the tendering process – including that from specialist sub-contractors. Time is needed to adequately prepare this.
  • The client has control over the design through their appointed consultants (i.e. architect). Generally there is no design responsibility on the contractor.
  • Design and construction are separate sequential processes – this can increase the overall time of the project.
  • There is reasonable certainty on the cost of the project because the contract figure is usually known at the outset. The contract does have provision for cost to be adjusted later, if required.
  • Speculative risks are balanced between the parties. A lump sum contract is more in favour of the client whereas a measurement contract is less so. A traditional lump sum approach in terms of design, quality and cost is relatively low risk procurement option for a client, however the time required for the project overall is likely to be longer than other procurement methods.

Types of traditional/conventional contract

Lump Sum Contracts

With lump sum contracts, the contract sum is determined before construction work is started. Contracts ‘with quantities’ are priced on the basis of drawings and firm bills of quantities. ‘Without quantities’ means a contract priced on the basis of drawings and usually another document, such as a specification or work schedules.

Measurement Contracts

The contract sum for measurement contracts is not finalised until completion of the project, where it is assessed on remeasurement to a previously agreed basis. This type of contract can arise where the works to be carried out by the contractor cannot for good reason be accurately measured before tender. Normally the design will be reasonably complete and an accurate indication of quality will be available to the tenderer. The contract of this type with least risk to the client is probably that based on drawings and approximate quantities. Measurement contracts can also be based on drawings and a schedule of rates or prices. A varient of this is the measured term contract under which individual works can be initiated by instructions as part of a programme of work, and priced according to rates related to the catergories of work likely to form part of the programme.

Cost reimbursement Contracts

Sometimes referred to as ‘cost-plus’ or ‘prime cost’ contracts, these work on the basis that the sum is calculated from the actual costs of labour, plant and materials to which an amount is added to cover overheads and profit. The overhead and profit amount can be a fixed-sum, percentage, or some other reimbursement payment. This type of contract is only generally used where the circumstances of the project preclude other alternatives or where a partnering ethos is in place, as it can be quite high risk for the client.

Traditional/conventional JCT contracts

Lump Sum Contracts

Measurement Contracts

Cost reimbursement Contracts