Contract Management
National Institute of Technology Warangal
Construction Contract
◉ It is a legally binding agreement between two or more parties involved in a
construction projects. It outlines the terms and conditions for the execution of the
project, including scope of work, cost, timeline, quality requirements, risk
allocation, and responsibilities of each party.
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Conditions Required for Valid Contract
◉ There must be mutual agreement between the two parties.
◉ There must be an offer made by one party, and other party must accept it.
◉ There must be mutual exchange of value (Money, Services, Materials).
◉ The contract must be for a legal purpose.
◉ Clear terms: Scope of work, Payment terms, Deadlines, Responsibilities of both
parties
◉ Practically achievable.
◉ Both parties must enter the contract willingly without pressure.
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Contract Document
◉ Agreement form
◉ General Conditions
◉ Special Conditions
◉ Scope of work
◉ Bill of Quantities
◉ Specifications
◉ Drawings
◉ Work schedule
◉ Payment terms and schedule
◉ Penalties, Claims, Dispute Resolution
◉ Termination Clause
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Agreement Form
◉ Project Details
◉ Roles and Responsibilities
◉ Agreed Contract Value
◉ Dispute Resolution Mechanism
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General Conditions
◉ Project administration rules
◉ Responsibilities of contractor and client
◉ Safety, environmental, and quality standards
◉ Payment conditions
General Conditions
◉ Environmental impact considerations
◉ Special material procurement rules
◉ Site-specific safety measures
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Scope of work
◉ Tasks assigned to the contractor
◉ Materials and construction techniques
◉ Project schedule and deadlines for each phase
Bill of Quantities (BOQ)
◉ Cost estimate of Materials
◉ Labor requirements and costs
◉ Equipment and transportation costs
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Scope of work
◉ Tasks assigned to the contractor
◉ Materials and construction techniques
◉ Project schedule and deadlines for each phase
Bill of Quantities (BOQ)
◉ Cost estimate of Materials
◉ Labor requirements and costs
◉ Equipment and transportation costs
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Specifications
◉ Material quality
◉ Workmanship standards
◉ Testing methods to ensure compliance
Drawings
◉ Architectural layouts
◉ Structural drawings
◉ MEP Layouts
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Work Schedule
◉ Start and end date of major tasks
◉ Critical path- tracking for delays
Payment Terms
◉ Milestones-based payments
◉ Lump-sum or cost-plus pricing
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Penalties, Claims, & Dispute Resolution
◉ Penalties for delays
◉ Dispute resolution clauses help avoid lengthy court cases
Termination Clause
◉ Grounds for contract cancellation
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Types of Construction Contracts
1. Lump-sum (Fixed Price) Contract
◉ Contractor agrees to complete the project for a fixed price.
◉ Suitable for project with well-defined scopes.
◉ Risk: Contractor bears cost overruns.
2. Cost-plus Contract
◉ Owner reimburses the contractor for actual cost plus a fixed fee or percentage.
◉ Suitable for projects with uncertain scopes.
◉ Risk: Costs may escalate without strict control.
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Types of Construction Contracts
3. Unit Price Contract
◉ Payment is based on a pre-agreed rate per unit of work, eg. Per cubic meter
of concrete
◉ Suitable for projects with repetitive tasks
4. Design-Built Contract
◉ A single entity handles both design and construction.
◉ Reduces disputes and speeds up project completion.
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Types of Construction Contracts
5. Turnkey Contract
◉ Contractor completes the project and hands it over to the owner, ready to use
◉ Common in large infrastructure and industrial projects.
6. Joint Venture Contract
◉ Two or more parties collaborate on a project, sharing risks and profits.
7. Design, Built, Operate
◉ Single entity is responsible for designing the project, building the infrastructure,
and operating & maintaining the facility for a specified period.
◉ Typically used for the roads, bridges, water treatment plants, and metro
systems.
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