Various types of contract its advantages and disadvantages


Royal Member
Types of Procurement Systems

Item rate, Percentage Rate and Lump sum contracts Non-traditions:- Construction Management and Project management

Single source:
Design and construct, Turnkey, BOOT and variations

Partnering, Joint venture and Alliances

Traditional Benefits:
  • Client involvement in the design and construction is limited.
  • Control systems, documentation and organization of a large industry players are setup to manage in this way
  • Where designs are completed prior to tenders being invited, the client can have a high degree of confidence in the contract price. The provision of detailed drawings, specifications, quantities provides a basis for better completion and facilitates quicker evaluation of tenders.
  • The contract provides for variations/ extra items necessitated during execution
  • Where a quantity surveyor is engaged in the project, a high level of cost control and monitoring can be achieved.

Non-Traditional Construction Management
  • Client engages an architect and a construction manager A Team approach is created
  • Client is contracted to the architect, construction manager and the individual trade contractor through separate contract
  • The construction manager is usually engaged as an agent to the client on a fee.

Non-Traditional Project Management
  • A Project Manager is appointed by the client as the first manager of the project team
  • A Project Manager may be required to work with the representatives of the client’s organization
  • The client enters separate contract with the Project management, Design Consultant and the Builder.
  • The project manager is required to take the lead in the overall management of the design process though there is no direct contra ct between him and the designer.

Design and Build
Design and Build and Turnkey procurement methods are closely aligned
The contractor is singularly responsible for both the design and the construction
It is the client’s responsibility that the concept design and / or performance specifications are prepared.
A Variation to the design and build may include design, innovate and build strategy.

The builder undertakes all the components of a project.
It faces all He design, construction and performance responsibility under a single entity.
Turnkey projects can be done by lead company which subcontracts out the different aspects of the project, or the principle participant join in a consortium or joint venture agreement

BOT family of Contracts
BOOT: Build Own Operate and Transfer
BOT : Build Operate and Transfer
BOO : Build Own and Operate
BTO : Build Transfer and Operate
BT : Build Transfer
BLT : Build Lease and Transfer
ROT : Rehabilitate Operate and Transfer

The client normally provides a detailed performance criteria The bids are normally required to include information relating to the following fundamentals of the project
  • Design concept
  • Contract firm
  • Transfer Period
  • Level of Service to be provided during the operation period Financial security to complete and operate the facility Operational cost of the facility upon transfer


Partnering involves the commitment of two parties to establish a cooperative relationship that promotes a spirit of goodwill and fair dealing with the common view towards the success of a project and is therefore a strategy that is very strongly focused on the win/win principle

Joint Ventures:
A joint venture is the project-specific joining of firms, on a temporary basis, through combined investment of capital and expertise to undertake the works. It is defined as the legal binding of two companies for the purposes of providing a competitive advantage that would be difficult to attain alone.

Strategic Alliances:
Strategic alliances take the partnering concept one step further, promoting not only cooperative relationships but focusing on the benefits of long-term relationships or alliances between the contracting parties. Effectively strategic alliances can be described as an extension of a partnering agreement to encompass a number of projects in order to attain the common long-term goals of both parties.
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