Construction Contracts

JFA Architecture, P.C. has the capability and experience to collaborate with a contractor to build a variety of projects under various contract formats. Design/Build, Stipulated Lump Sum, and Cost Plus Fee with a Guaranteed Maximum Price are some of the more typical contracts used today.

A brief synopsis of the various construction contracts:

Design/Build – This is a single contract between the Owner and an Architect/Contractor who will design and construct the project. Costs and fees for the project are generally established at the time of the contract. Costs and fees for the design phase only are then confirmed leaving the construction costs to be set as the project plans and scope are firmly established.

Stipulated Lump Sum – A stipulated lump sum agreement is used when an Owner contracts with a General Contractor to pay a specific amount for construction, regardless of what the actual costs might be. An owner may have received specific bids from numerous contractors or may have worked with only one contractor to arrive at a cost for construction. A stipulated lump sum contract simply defines the specific dollar amount which will be paid for the work.

Cost Plus a Fee with a Guaranteed Maximum Price (GMP) – This is really an extension of the Construction Manager At Risk in that the Construction Manager establishes the final budget during the design phase and is guaranteeing that this amount will not be exceed. Included in that GMP is a fee for the contractors overhead and profit, identified as either a percentage of the cost or simply set as a fixed fee. With this GMP identified, the Owner is assured of a Guaranteed Maximum Cost for the project. However, as a Cost Plus a Fee contract, the Owner may be able to realize some savings if the construction costs come in less that what was budgeted.

The type of contract to be used is as important as the timing and selection of the General Contractor. The traditional method of soliciting Lump Sum proposals for a specific scope of work is still used today. However, realizing that this method sometimes leads to ‘cheap’ construction (the low bidder) by someone who may not be fully qualified, other methods of selecting a Contractor have become prevalent in today’s construction market.

Selecting a Construction Manager to work with the Architect during the design phase of a project has rapidly become the more favored method of selecting a Contractor. Utilizing some of the same guidelines used for selecting an Architect, an Owner can select a Contractor/Construction Manager to work as part of the team during the design/pre-construction phase of the project. With this comprehensive team utilizing their various areas of expertise, the Owner is assured of getting the best product possible based on whatever budget parameters have been established. Based on the various contract types, jfa architecture, p.c. urges Owners to select a Construction Manager during the design phase and plan on using a Cost Plus a Fee, Guaranteed Maximum Price contract. The CM can provide valuable assistance during the design phase to help the Owner get the highest quality project that falls within the budget constraints. With a Cost Plus, GMP contract in place, the Owner is assured of paying only those costs incurred for construction of the project with the added guarantee that the costs will not exceed a specified amount.