Types of Construction Contracts

The management of a company plays an important role in taking the decisions in an organization. The management of a company is responsible for the success or failure of the decisions. Even before the project initiation, there are lots of steps that are carried out by the management of a company. The steps may involve preparation of reports such as analysis and estimation reports. The management has to take the board approval from various boards and departments again. The management may have to prepare fully fledged reports. After preparation of various fully fledged reports, the employers are called. Here employers can also be described as contractors. Then the employers will submit the tender related documents. Then various kinds of discussions will be held between the management and the contractors such as price negotiation, work experience and after showing various work experience certificates. Single or multiple employers are chosen to work on a specific package, specification or a contract. The employer has to complete the carious formalities before starting to work on the contract. The construction contracts are of three types. The types of contracts may be different in various countries.

There are three types of contracts, these contract types may vary based on the country, based on the market type.

The three types of contracts are total turnkey, discrete turnkey and non turnkey contracts.

Total Turnkey Contract:
In this type of contract, the contractor is completely responsible for everything. The responsibilities may include submitting the design documents; process the engineering which may include erection, re-design, testing using various testing techniques. The responsibility also includes supply of various equipment or material at the construction site, installing the material and as described earlier, testing the installed or erected material, commissioning and demonstrating the performance of the erected material and handling over everything that is performance tested successfully to the management of the company. Then the management will approve the payments to the contractor.

Discrete Turnkey Contract:
This type of contract is different from the other two contracts. In the discrete turnkey contract, the design, engineering, supply of the material or the equipment, erection of equipment, commissioning the equipment is done by a single agency.

The management of the company or the employer will appoint other contractors to carry out the construction work. Here, the drawings may be given by the management themselves based on the supply of the equipment by the contractor. The management is also involved in approving the drawings if any submitted by the contractor.

Non-Turnkey Contract:
This type of contract is completely different from the other two contracts. Basically, the non turnkey contracts are also called as the item rate contracts in which the drawings may be prepared and given by the management of the company of the drawing consultant if any employed by the management of the company. The contractor will only work based on the drawings given to him. The non-turnkey contracts mostly involve the civil and structural contracts.

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Source by Ravi Aiyer Shankar