There are three basic types of construction contracts: lump sum, unit price, and cost reimbursable. Each contract has its advantages and disadvantages and the choice of which type to use relies on the owner's needs and circumstances, and the benefits that can be derived from one type over the other. 1) A lump sum contract is most effective when the owner has completed the design, is not schedule driven, is committed to no significant changes, and the construction bid climate is favorable [7]. 2) Unit price contracts are appropriate when the work to be done can be quantified in multiple units with the same specifications such as highway construction in miles, or military barracks of the same size, shape, etc., And, 3) Cost reimbursable contracts are most frequently used because most construction projects do not fit the lump sum or unit price requirements.
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