How do construction contract trends impact your practice?

1 Fixed-price contracts

Fixed-price contracts are one of the most traditional and widely used contract types in the construction industry. They offer a clear and predictable budget for both the owner and the contractor, as well as an incentive for the contractor to complete the project efficiently and within the agreed time frame. However, fixed-price contracts also have some drawbacks, such as the difficulty of accommodating changes, the risk of underestimating costs, and the potential for disputes over quality and performance. To avoid these pitfalls, you should carefully review and negotiate the contract terms, scope, and specifications, as well as include clauses for contingencies, allowances, and change orders.

2 Cost-plus contracts

Cost-plus contracts are another common contract type that involve paying the contractor for the actual costs of the project plus a fixed or percentage fee. This type of contract allows for more flexibility and collaboration between the owner and the contractor, as well as more transparency and accountability for the costs. However, cost-plus contracts also have some challenges, such as the lack of cost certainty, the need for extensive documentation and auditing, and the potential for cost overruns and disputes over fees. To mitigate these risks, you should establish a realistic budget and schedule, monitor and control the costs, and define the scope and quality standards clearly.

3 Design-build contracts

Design-build contracts are a relatively new and innovative contract type that involve hiring a single entity to provide both the design and construction services for the project. This type of contract can offer many benefits, such as faster delivery, lower costs, better integration, and more creativity and innovation. However, design-build contracts also have some limitations, such as the reduced involvement and control of the owner, the increased complexity and liability of the contractor, and the potential for conflicts of interest and disputes over design and construction issues. To overcome these challenges, you should carefully select and vet the design-build team, communicate and collaborate effectively, and protect your rights and interests with a comprehensive contract.

5 Green contracts

Green contracts are a special type of contract that involve incorporating sustainability and environmental considerations into the project. This type of contract can offer many benefits, such as reducing the environmental impact, enhancing the social and economic value, and complying with the regulatory and market demands. However, green contracts also have some challenges, such as the need for specialized expertise and certification, the uncertainty of the costs and benefits, and the potential for disputes over performance and compliance. To manage these issues, you should clearly specify the green objectives and standards, allocate the costs and risks appropriately, and monitor and verify the results.

As you can see, construction contract trends can have a significant impact on your practice. By understanding the pros and cons of each contract type, you can choose the best option for your project, negotiate the terms effectively, and prepare for any potential disputes and risks.