CONTRACT FORMATION

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Contract Type
AGREED FIXED PRICE OR LUMP SUM CONTRACT Used for construction, events etc

Remarks
Used where works are clearly defined at the time the contractors are solicited and price escalation risks are minimal. The contractor undertakes to supply the Materials, Works and/or Services specified for a fixed or lump sum price. Used where elements can be defined by unit rates and the total value calculated based upon the estimated quantity. Used for re-measured and repetitive work orders. Where there is a risk in determining the accuracy of the works. The contractor is paid cost plus agreed fee for works.

UNIT RATE CONTRACTS Used for construction contracts

REIMBURSABLE CONTRACTS Used for consultancy, pollution control, repair works etc

MODIFIED FIXED CONTRACTS Used for cleaning works, etc

A combination of the above types of contract forms