Fixed Price Contract Types
Overview
A contractor undertakes to complete specified works for a specified price.
The employer must have fully completed their design and specification.
Any re-measure provisions in the contract are deleted.
The contractor bears the risk of inflation, costs escalation, or simply getting his price wrong.
The employer bears the risk that the contractor's price may increase for any discrepancies in the employer's design, or if the employer instructs any changes, or is responsible for any delays.
Risk is shifted to the contractor.
The contractor's price will be higher.
May take longer to procure.
A “Guaranteed Maximum Price” may put a lid on the employer's cost risk.
Definitions
Bill of Quantities or “BOQ”: A document provided to contractors at tender stage, which sets out every item of work, materials etc. The contractor puts his price next to each item, and the bottom line is the tender price, which he bids for the contract.