Architecture / June 6, 2018 /
The payment arrangements adopted on a contract directly affects the level of risk borne by the contractor. Where the contract is let on the basis of a drawings and specification lump sum the contractor assumes the risk for both the quantity and pricing. In lump sum contacts based on bills of quantities and remeasurement contracts the contractor assumes the risk for the pricing only. With reimbursement contracts the client assumes the risk for the quantity and pricing. The payment arrangement, therefore, directly motivates the contractors efforts to carry out the work in an efficient and economic manner. This in turn has a major impact on the final price paid by the client.
This is where a client appoints consultants to produce the design, select the contractor and supervise the work through to completion. The contractor is usually selected on some basis of competition. The traditional procurement route prioritises quality aspects of the project and is also effective in delivering economic designs on most projects. The chief drawback of the approach is the extended project duration due to the need to complete the design prior to tender.