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Fixed Price Contract

Lump Sum Contracts: In this type of contract the contractor agrees to do specified construction for a fixed price set forth in the contract. The only changes allowed to the contract amount are for changes to the construction documents or change orders. This is the most common type of contract; bids are requested based on a complete set of plans and specifications.

Unit Price Contracts: In this type of contract the price for each unit of work is set. The unit may be for example: number of meters of pipe, manholes, cubic yards of soil, square footage of brick. Anything that can be measured in units can be the basis for a unit price contract.

Fixed Price Incentive Contracts: In this type of contract the contract is a fixed price contract that provides for adjusting profit and establishing a total final price by application of a formula based on the relationship of total final negotiated cost to total target cost. A fixed price incentive contract is appropriate when firm price contract is not suitable.

Key Benefits

  • Allows for easy bid comparison
  • All inclusive – the price includes the complete set of construction documents
  • Allows for alternates and contingencies

Cost Reimbursable Contract

Cost Plus contracts are those in which the contractor is paid its actual cost of the contract plus a specified markup to cover overhead and profit.

Time and Materials or Cost Plus Percentage of Cost: In this type of contract, the contractor is paid its actual cost of the contract plus a specified percentage of those cost to cover overhead and profit.

Cost Plus Fixed Fee: In this type of contract the contractor is paid its actual cost of the contract plus a specified fee that is set in advance.

Cost Plus Incentive Fee: In this type of contract, the contract specifies the time and quality criteria. If the contractor meets the criteria, the contractor receives the cost plus a specified fee, if the contractor exceeds the criteria, it receives an additional fee, and if the contractor does not meet the criteria, the fee is less. This type of contract encourages early completions.

Key Benefits

  • Do not have to have a complete set of construction documents
  • No large contingencies due very complex designs or unforeseen conditions
  • Allows to define what items are and are not eligible for reimbursement


Guaranteed Maximum Price Contract

This is type of contract is a variation of the cost plus contracts. In this type of contracts the owner and contractors agree that the project will not cost the owner more than a set price, the guaranteed maximum. A savings clause in the contract provides that if the project cost less than the maximum guaranteed price, the owner and contractor are to split the difference between the cost and the maximum guaranteed price.

Key Benefits

  • Contractor will keep cost as reasonable as possible
  • Encourage Value engineering
  • Ensures that the price will not go beyond the specified amount


Design Build Contract

This is a type of contract that focuses on combining the design, permit, project management, and construction in order to streamline the design-build environment. This does not shorten the time it takes to complete the individual tasks of creating the construction documents, acquiring permits, or actually constructing the building, instead, the general contractor brings together all the elements in a collaborative environment to complete these tasks at the same time.

Key Benefits

  • Increased accountability by general contractor
  • Single source project delivery
  • A value based project feedback system

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