Construction in New Zealand is a thriving industry, and it is essential to understand the different types of construction contracts available to choose the one that suits your needs the best. Several contracts are commonly used in the industry, and we will take a closer look at each of them.
1. Lump Sum Contract
A lump sum contract is the most common type of construction contract used in New Zealand. This type of contract involves the contractor agreeing to complete the project for a fixed price. The contractor takes on the responsibility of managing the project, including materials and labor costs. Any additional charges incurred during the construction process are borne by the contractor.
2. Cost-Plus Contract
In a cost-plus contract, the contractor is paid for the actual cost of the project plus a percentage of the project costs as a fee. The percentage fee can be fixed or negotiated between the parties involved. This type of contract is suitable for projects where the scope and size of the project are uncertain.
3. Guaranteed Maximum Price Contract
This type of contract is a variant of the cost-plus contract. In this arrangement, the contractor agrees to complete the project within a stated budget. The contractor is paid the actual cost of the project plus a fixed percentage of the project cost as a fee. This type of contract is suitable for projects where the budget is a significant consideration.
4. Unit Price Contract
A unit price contract is a contract type where the contractor is paid based on the actual quantity of work done, usually measured in units. The unit price is agreed upon by the parties involved before the commencement of the project. This type of contract is suitable for projects where multiple similar units need to be constructed.
5. Design-Build Contract
In a design-build contract, the contractor is responsible for both the design and construction of the project. The contractor usually has a team of architects, engineers, and other professionals who work together to deliver the project. This type of contract allows for a more efficient process by having one entity responsible for both the design and construction.
In conclusion, before choosing a construction contract type in New Zealand, it is essential to consider the project`s size, budget, complexity and clarify the roles and responsibilities of each party. The right contract type will ensure a successful project delivery within the agreed time frame and budget. Be sure to consult with an experienced construction lawyer before signing a contract.