Building Design and Construction Handbook - Merritt - Ventech!

17.14 SECTION SEVENTEEN
purposes. If the estimate from a specific contractor appears to be satisfactory to an
owner, and if the owner is desirous of establishing a contractual relationship with
the contractor early in the planning stage so as to benefit from the contractor’s
suggestions and guidance, a contract may be entered into after the submission of
the estimate.
On the other hand, the owner may refrain from formally entering into the contract,
but may treat the contractor as the ‘‘favored contractor.’’ When requested, this
contractor will assist the architect and engineers with advice and cost estimates and
will expect to receive the contract for construction on completion of plans and
specifications, if the cost of the project will lie within the budget estimate when
plans and specifications have been completed.
Separate Prime Contracts. Sometimes an owner has the capability for managing
construction projects and will take on some of the attributes of a general contractor.
One method for an owner to do this is to negotiate and award separate prime
contracts to the various trades required for a project. Administration of these trades
will be done either by the owner’s own organization or by a construction manager
hired by the owner (Art. 17.9).
Sale Lease-Back. This is a method used by some owners and government agencies
to obtain a constructed project. Prospective builders are asked to bid not only
on cost of construction, but also on supplying a completed building and leasing it
to the prospective user for a specified time. This type of bid requires a knowledge
of real estate analysis and financing, as well as construction. Contractors who bid
may have to associate with a real estate firm to prepare such a bid.
Developer/Sponsor-Builder. In this type of arrangement (Art. 17.1), the contractor
may not only have to prepare a construction-cost estimate but may also need a
knowledge of real estate and be prepared to act as owner of the completed project,
in accordance with the terms of a sponsor-builder agreement with a government
agency, or government-assisted neighborhood or nonprofit group.
The following types of contracts are used for general construction work:
Letter of Intent. This is used where a quick start is necessary and where there is
not sufficient time for drafting a more detailed contract. A letter of intent also may
be used where an owner wishes material ordered before the general contract is
started, or where the commitment of subcontractors requiring extensive lead time
must be secured immediately.
Lump-Sum Contract. (For example, Document A-101, American Institute of Architects,
1735 New York Ave., N.W. Washington, D.C. 20006.) Basis of payment
is a stipulated sum. Progress payments, however, are made during the course of
construction.
Cost-plus-Fixed-Fee Contract. (For example, A-111, American Institute of Architects.)
This type of agreement is used generally with an ‘‘up-set’’ or ‘‘guaranteed
maximum’’ price. The contractor guarantees that the total cost plus a fee will not
exceed a certain sum. (See types of bids, preceding.) Generally, there are provisions
for auditing of the construction costs by the owner.
Cost-plus-Percentage-of-Fee Contract. (For example, A201, American Institute
of Architects.) Similar to cost-plus-fixed-fee contracts, but the fee paid, instead of
being a lump sum in addition to the cost, is a percentage of the costs.