The Fixed Price Lump Sum contract is generally used in one of two ways. The first is when a client has a completed set of drawings and is ready to build, typically with the building consent drawings complete and ready for submission. The concept is approved and construction drawings are completed. This contract model is used because there is very little room for change around the design, and the contractor can clearly see the required construction outcome. The second is when other forms of contracting are converted to a FPLS contract before the begining of construction. One example for this situation is an Early Contractor Involvement (ECI) contract, where a contractor is brought on board during the concept stage of a project. By the time the project reaches building consent and construction drawings, the ECI contractor has enough knowledge of the project to fix most, if not all, of the project under a FPLS contract. This form of contract is best suited to a client who has a fully documented project and is confident that the risks around the project are accounted for in the design documentation and specifications.
Pros & Cons: Fixed Price Lump Sum
Design control - 100%
Your ability to change the design after concept design sign-off - 50%
Pre-construction cost certainty - 30%
Statutory approval responsibility - 100%
Control of material selection and construction details - 10%
The Design and Build contract is a good choice for someone who wants strong control of the design at the onset of the project, but is then happy for the design and the build to be finished with minimal input. This contract is popular throughout the construction industry, but it requires a contractor with strong project, design and cost management capabilities to execute well. Therefore, DCD will work with you to design your home, working through the specifications and procuring your resource and building consents, while coordinating and engaging the required engineers and designers. Commonly referred to as Design/Build or Design/Construct, this form of contract is best suited to someone who wants cost certainty at the expense of control over the project.
Pros & Cons: Design Build
Design control - 30%
Your ability to change the design after concept design sign-off - 1%
Pre-construction cost certainty - 100%
Statutory approval responsibility - 10%
Control of material selection and construction details - 10%
The Cost Plus contract is best used when quality or control of the project are the most important drivers. In a Cost Plus contract, the contractor fees – P&G, Overhead and Profit are negotiated up front, and are applied to the entire project. The client pays the actual costs generated directly from the building activity on an ‘open book’ basis, and the contractor passes all their costs, with the agreed mark-up, directly to you. The margin can be fixed, either as a lump sum, a fixed percentage of total project cost, or on a sliding scale for larger projects.
This form of contract is best suited to someone who wants a high quality project, or a high level of control over every facet of the project. It is also best suited to technically challenging projects or projects with exceptional standards of construction required. The Cost Plus contract requires an incredibly high level of trust in the contractor, and an equally high level of integrity of the contractor in return.
Pros & Cons: Cost plus
Design control - 100%
Your ability to change the design after concept design sign-off - 100%
Pre-construction cost certainty - 70%
Statutory approval responsibility - 100%
Control of material selection and construction details - 100%