Summary
Summary PRO4801 CHAPTER 3 NOTES
- Institution
- University Of South Africa (Unisa)
Summarised notes for chapter 3
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
Content preview
Kinds of Contracts• A contract is an agreement between two parties wherein one
party (the seller, the project contractor) promises to perform a
service for another (the buyer, the client or customer), typically
in return for payment.
• Requirements about the service and the payment are clearly
spelled out in the contract, which typically includes the
following:
i. Scope of work to be done or items to be sold, including
support and ancillary (side) items such as manuals,
documentation, and training.
ii. Any specifications and standards referenced are considered
as part of the contract.
iii. Duties of the contractor in providing the work or items.
iv. Time schedule allowed.
, Cont`
i. Duties of the client regarding payments (including a schedule for milestones).
ii. How changes to the contract and disputes will be handled.
iii. How risks will be handled, including warranties, penalties, or bonuses/incentives.
• Different kinds of contracts provide different advantages to the client and the
contractor, depending on the project risk and difficulty in estimating costs.
• Each party tries to negotiate the kind of contract and the terms that best serve its
own interests.
• The two fundamental kinds of contacts are fixed price and cost-plus.
• In the fixed price contract, the price is agreed upon and remains fixed as long as
there are no changes to the project scope or provisions of the agreement.
• In the cost-plus (cost reimbursement) contract, the contractor is reimbursed for all or
some of the expenses incurred during the project, and as a result, the final price is
unknown until the project is completed.
• Within these two types are several variations including some with incentives for the
contractor to meet cost, time, or performance targets.
• Most projects involve multiple contractors and, hence, multiple contracts and a
combination of contract types, for example, cost plus for engineering and design, and
fixed price for construction.
• This is often a good way to contract project work, especially for large projects.
, Fixed Price Contracts
• Under a fixed price (FP) or “lump sum” agreement the
contractor agrees to perform all work at a fixed price.
• The contractor must be careful in estimating the target cost
because, once agreed upon, the price will not be adjusted.
• If the contractor in the bidding stage estimates the target cost
too low, he might win the job but make no profit; if he
overestimates, he may lose the job to a lower priced bidder.
• When project work is straightforward and can be specified in
detail, everyone prefers this kind of contract.
• Clients like it because they are less concerned about project
costs.
• Contractors like it because clients tend to request fewer
changes to the contract.
• The disadvantage of an FP contract is that it can be more
difficult and costly to prepare.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller tatendamuzavazi. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R100,00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53022 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now