The Different Construction Contracts

There exist several ways to acquire a construction project. Here are the most popular ones:

1. All-Inclusive Projects
2. Increased Rate Project
3. Design and Construction Projects

1. All-Inclusive Projects
The All-Inclusive Project is the most widespread and well-known in the industry. The customer is required to hire an Architect or a Designer for the conceptualization of the project. Once the concept is completed, the customers go to one or more entrepreneurs to get offers and to compare the prices. The construction project will be allocated to the contractor according to the customer’s choice. The Architect will be responsible for the follow-up between the contractor and the customer from the start to finish of the construction project.
Main Advantage: The customer has the opportunity to choose from several contractors’ offers and can compare; the price, the skills, and the time-frame for the completion of each offer.
Main disadvantages: The customer does not know the overall cost of his project until he has already invested his funds in the architect and requested tender from the contractors. It is a suitable methodology which includes extra cost compared to your projected budget.

2. Increased Rate Project
This type of project is a variable of the All-Inclusive Project. It is the same process to start, that is, the customer hires an Architect or a Designer for the conceptualization. But, instead of acquiring several offers from contractors, the customer can go directly to a trusted contractor. Then the total cost price will be calculated in collaboration with the customer. Meaning that the contractor will subcontract workers and middlemen on the construction site based on the agreements of the customer. Hence, the competition is between the subcontractors instead of the main contractors. The trusted contractor is paid on a %, varying from 10% to 15%, based on the cost of the task.

Main Advantage: There are a transparency and collaboration with the customer for the choice of the workers on the construction site.
Main disadvantages: The real cost of the project is unknown until the whole project is completed. However, the customer and the contractor can estimate a maximum price during the initial agreement.

1. Design and Construction Projects
It consists of the contractor being responsible for the design and construction of the project. The customer will settle the agreement with the main contractor only. The contractor will manage the designed project in collaboration with the architects and designers. The customer will entrust his total budget to the main contractor, who will create a project that matches the requirements and needs of the customer’s concept and budget
Main Advantage: The total cost is known initially without spending a single penny and the expenditures are better controlled as only one entity is managing everything.

Main disadvantages: In case there is a disagreement, the customer does not have an intermediary (architect) to defend his positions.

There are advantages and disadvantages in each of these approaches. You simply need to choose the one method that will match your needs and requirements before engaging in your project.

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