Tendering and Contracts Topics Essay Example | Topics and Well Written Essays - 3500 words

Tendering and Contracts Topics - Essay ExampleLump sum campaigns are the simplest image of contracts used in engineering and construction. They are also called stipulated sum, as this is the simplest part of an agreement among the supplier of operate and a customer (Oklahoma State University, n.d., p.1). The customer pays the scathe upon completion of the agreed work, or as agreed. The price offered by the supplier of services is based on estimation of the costs of labour and materials, and a hackneyed amount for overhead and the desired amount of profit (Oklahoma State University, n.d., p.1). Profit and overhead are commonly estimated to the total of about 12-16 percent of the go for cost (Oklahoma State University, n.d., p.1). This share increases with risk (Oklahoma State University, n.d., p.1). In case the terminal costs of labour and materials are higher than the builders estimate, the profit is reduced (Oklahoma State University, n.d., p.1). When final costs are lower, profit increases. However, the price of the project remains the same. Though there are advantages of this contract, problems talent arise as well. In cases where costs turn out to be higher than first estimated, the supplier of services might attempt to substitute cheaper materials for those first specified (Oklahoma State University, n.d., p.1). ... ed plan of activities mustiness be defined ahead of time owners financial risk must be low and fixed at the beginning there must be sufficient time to throw the project properly and bid (Oklahoma State University, n.d., p.1). Unless these requirements are met, this guinea pig of a contract should not be used. This contract is thus usually used with Design-Bid-Build method of project procurement (Oklahoma State University, n.d., p.1). In this method, project planning is outsourced and separated from project execution (AECOM CONSULT, 2006, p.i ). Transportation companies have traditionally used it. Another type of contracts is the measures and value contract. Unlike in the lump sum contract, here the final cost of the project is schematic upon completion. Before the outset, costs are estimated. Upon completion, costs are re measured in order to sanction the actual cost (Royal Institution of Chartered Surveyors, 2012). Instead of receiving one final bill, the owner receives the bill of quantities, which is represent of a schedule of rates for each unit or item (Royal Institution of Chartered Surveyors, 2012). This type of contracts is best suited for projects where the initial anatomy cannot be completed ahead of time. Drawings and a bill of come close quantities is usually produced (Royal Institution of Chartered Surveyors, 2012). They are recommended for the residential projects (Georgie P Landscape Architecture Ltd, n.d., p.1). The advantage of this contract over the lump sum is that the program for design, tendering and construction is shortened (Royal Institution of Chartered Surveyors, 2012). Howev er, here the owner of the project suffers the unexpected costs of the project. This type of a contract is also used in the design bid build method of