As a contractor, when you enter a new contractual agreement with a buyer, you know that your firm’s success depends on the details drafted into the contract. There are many different types of construction contracts, but not all of them are inherently suitable for your next project.
At Cotney Construction Law, our Houston construction lawyers are familiar with the various types of construction contracts. In part one of this two-part article, our team explored lump sum contracts and time and materials contracts. In part two, we will examine design-build and unit price contracts.
Design-build contracts task a single contractor with designing and building a structure for a project. Utilizing this type of contract benefits the buyer because they can save money by having a single entity complete two phases of the project while making the builder’s job easier since there’s no intermediary between the design and building stages of the project. In order for a single contractor to capably fulfill the buyer’s needs, they must be willing to provide in-depth, exhaustive detailing of the requested project. If the project enters the bidding process, contractors must be able to reasonably determine the necessary budget to complete the requested project. Certain projects require extensive planning and a singular vision to succeed. Despite the countless benefits of collaboration, a design-build contract is best served for projects with small, experienced teams.
When managing costs is vital to the success of a project, a unit price contract can help itemize each “unit of work” with a correlating value to create comprehensive price breakdowns for each party. By itemizing work into separately billed tasks, both parties can monitor expenses closely and reallocate costs according to a project’s ongoing needs. Flexibility is one of the boons of a unit price contract. Since you only work on one unit at a time, you can build the design alongside the buyer. Unfortunately, this makes it difficult to estimate the total cost of completing a project and can lead to frustrating relationships with uncertain buyers, discrepancies in order quantities, inconsistent workforce requirements, and unreliable timelines.
Entering a contract with a buyer is exciting. The promise of new business is extremely enticing, and the chance to prove your worth to a client can help build your firm’s rapport. Unfortunately, you must carefully consider which type of contract will best serve you and your client. Signing the wrong contract can leave you tethered to a project that you can’t turn a profit on, so consult a Houston construction lawyer before making any rash decisions.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.