An engineering contract is an agreement between two parties, usually client and contractor/consultant. The contract defines the parameters of the works and can include a detailed scope of works and/or a bill of quantities. Typically, the scope of works and value of the contract is negotiated between the parties before finalising. Once finalised, the contract becomes the legally binding agreement between the parties to complete the associated works for the agreed value. The Australian Standards: General Conditions of Contracts AS 2124 provides an insight to the rights and responsibilities of all parties once engaged in contract works.
Typical types of engineering contracts include:
· Lump Sum contract: This type of contract has a fixed fee and is most suitable if the scope and schedule of the project are adequately defined allowing contractors/consultants to sufficiently estimate the project cost. A risk for this type of contract is that if any required works are not defined within the scope of the contract, these are classed as variations to the contract and subsequent costs will follow.
· Unit Price contract: This type of contract is based on an estimated bill of quantities of items within the project where each item has an associated unit rate. This contract is most suitable to building construction or supplier contracts, due to the large amount of materials involved. A risk for this type of contract is that the bill of quantities forms the basis and all items involved with the contract may not be included, constituting a variation to the contract.
· Cost Plus contract: This type of contract involves the client agreeing to pay the contractor/consultant the cost of all labour and materials plus an amount for the contractor’s/consultant’s overhead and profit (usually a percentage). This type of contract is usually favoured when a scope of works is unable to be defined or highly uncertain, like emergency works. A risk associated with this type of contract is that no one knows how long the works may take and therefore how much the works will cost.
Which contract type is best for me?
· Scenario 1: I know exactly what works I need complete and am confident I can clearly define my scope of works.
o Type of Contract: The best option here would be the Lump Sum Contract, as an engineering contractor/consultant knows exactly what is required and can provide the best price.
· Scenario 2: I have been provided with a detailed bill of quantities for the works and require a contractor/consultant to bring my design to life. We may require some additional works, but have a base design to start with (for example a residential property is required, but we are still deciding on whether to put an additional bedroom in or not).
o Type of Contract: The best option here is the Unit Price Contract, as an engineering contractor/consultant can provide pricing for each item. That way if the decision is made to proceed with the additions, the price for these works can be quantified and no variations would be incurred.
Scenario 3: I have an engineering problem and I need it solved ASAP, as it is very unsafe.
o Type of Contract: The best option here is the Cost-Plus Contract. This allows the contractor/consultant to get in and fix the problem first, worrying about costs later.
J.C. Engineers Pty. Ltd. are well-qualified and experienced in all aspects of contracting and consulting. Our engineers can provide free advice on the best type of contract for your needs.
J.C. Engineers Pty. Ltd. has Chartered Professional Engineers (CPEng) and Registered Professional Engineers of Queensland (RPEQ) who can provide engineering certification to meet local, state and federal authorities’ requirements and quality assurance for your project.
Please do not hesitate to contact us to discuss and provide a quotation for your needs.