Types of Contract

Choose the one that best addresses your desire for control, cost certainty, quality and time

Design and Build

Where the builder is the one point of contact for the entire project, overseeing both the design and construction.

Fixed Price Lump Sum

When cost is the most important factor and the project is well defined.

Cost Plus

The best option for projects in which complexity, owner control or quality are the critical drivers.

Guaranteed Maximum

Suited to projects where the scope is not fully defined, or when specialty items or trades need to be organised before a contract price is agreed.

Design and Build

The Design and Build contract is a good choice for someone who wants strong control of the design at the onset of the project, but is then happy for the design and the build to be finished with minimal input.

This contract is popular throughout the construction industry, but it requires a contractor with strong project, design and cost management capabilities to execute well. Therefore, DCD will work with you to design your home, working through the specifications and procuring your resource and building consents, while coordinating and engaging the required engineers and designers.

Commonly referred to as Design/Build or Design/Construct, this form of contract is best suited to someone who wants cost certainty at the expense of control over the project.

Pros & Cons: Design and Build

  • Design control 30%
  • Your ability to change the design after concept design sign-off 1%
  • Pre-construction cost certainty 100%
  • Statutory approval responsibility 10%
  • Control of material selection and construction details 10%

Fixed Price Lump Sum (FPLS)

The Fixed Price Lump Sum contract is generally used in one of two ways. The first is when a client has a completed set of drawings and is ready to build, typically with the building consent drawings complete and ready for submission. The project is well-defined and construction drawings are completed. This contract model is used because there is very little grey area around the design, and the contractor can clearly see the required construction outcome.

The second is when other forms of contracting are converted to a FPLS contract before commencement of construction. One example of this an Early Contractor Involvement (ECI) contract, where a contractor is brought on board during the concept stage of a project. By the time the project reaches building consent and construction drawings, the ECI contractor has enough knowledge of the project to fix most, if not all, of the project under a FPLS contract.

This form of contract is best suited to a client who has a fully documented project and is confident that the risks around the project are accounted for in the design documentation and specifications. In this instance a FPLS contract will transfer the financial risk associated with building to DCD, as a result of the high quality of the project documentation.

Pros & Cons: Fixed Price Lump Sum

  • Design control 100%
  • Your ability to change the design after concept design sign-off 50%
  • Pre-construction cost certainty 30%
  • Statutory approval responsibility 100%
  • Control of material selection and construction details 10%

Cost Plus

The Cost Plus contract is best used when quality or control of the project are the most important drivers. In a Cost Plus contract, the contractor fees – P&G, Overhead and Profit are negotiated up front, and are applied to the entire project. The client pays the actual costs generated directly from the building activity on an ‘open book’ basis, and the contractor passes all their costs, with the agreed mark-up, directly to you. The margin can be fixed, either as a lump sum, a fixed percentage of total project cost, or on a sliding scale for larger projects.

This form of contract is best suited to someone who wants a high quality project, or a high level of control over every facet of the project. It is also best suited to technically challenging projects or projects with exceptional standards of construction required. The Cost Plus contract requires an incredibly high level of trust in the contractor, and an equally high level of integrity of the contractor in return.

Pros & Cons: Cost Plus

  • Design control 100%
  • Your ability to change the design after concept design sign-off 100%
  • Pre-construction cost certainty 70%
  • Statutory approval responsibility 100%
  • Control of material selection and construction details 100%

Guaranteed Maximum Price (GMP)

The Guaranteed Maximum Price contract is a good option if the project scope is not clear, or has not yet been defined. Often, GMP projects are a combination of the above contract models, with the contractor being brought onboard early in the design.

The GMP contract value may not be fixed until quite late in the design process, depending on the project’s requirements. This form of contract, upon agreement of the contract amount, typically sets out a performance standard for the project that must be adhered to (function, size, utility, “fit for purpose”, etc.). The specifics of how to achieve this falls within the contractor’s area of responsibility.

This form of contract is best suited to a party who has a fixed budget, a clear idea of building performance and is happy to be “hands off” from the moment the contract is agreed.

Pros & Cons: Guaranteed Maximum

  • Design control 50%
  • Your ability to change the design after concept design sign-off 50%
  • Pre-construction cost certainty 100%
  • Statutory approval responsibility 100%
  • Control of material selection and construction details 10%

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