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Topic : Construction Project Management
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Asked by : M NITIN SHENOY, PMP, IPMA-D, CEng MICE, Manager
Industry : Construction
Functional Area : Project Management
Activity: Question posted: 03 17 2009 05:59:56 +0000, 1 answers, 1801 views, last activity 09 20 2010 03:03:08 +0000

There are various types of Construction Contracts available in Literature lke -  Lumpsum, Turnkey, Item Rate, Cost Reimburseable, Design Build, PPP, BOT, BOOT ...etc.

In Practice which type of Construction Contracts you have come accross and their Merits and Demerits..?

If Possible kindly emphasis on the conditions or situations at which a Particular type of Contract could be choosen, or say an evaluation mechanism to choose a Type of Contract for any given conditions/ requirements...!!!

  Answered by     Mohammad Bakhsh, Consultant(Civil), Rail Vikas Nigam Limited  | 09 20 2010 03:03:08 +0000
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Mr Nitin,the selection of the contract type depends on the volume,nature of works,geography of the area,topography political stability of the area.Now a days EPC contract is gaining ground.This type of contract has advantage over others,that the stake holders have to be rest assured of take over of the complete and finished work complete in all respect. The contracting agency has to all the spade work right from reconnaissance  survey to planning,specification fixing agencies.The stake holders or their representative monitor the progress as per conceptual plans.The disadvantage of such type of contract is that stake holders has no control over the design,execution and improvement during the course of  construction.

Monitoring by owner and EPCC

The following points will be helpful to the owner for monitoring the project:

  • Define guarantees well
  • Define scope and quality very carefully
  • Define milestones meticulously
  • Have the LD/penalty clauses well-defined

The handling of an EPC contract is a complicated and complex phenomenon for the EPCC management. Some important points to know are:

  • Have payment terms very specific
  • Have similar terms and conditions regarding quality, guarantee etc., as demanded by owner's with various vendors
  • Do not keep terms open-ended
  • Coordinate vigilantly to reduce chances of errors at site
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