Construction contracts can be either Competitively Bid or Negotiated.
Competitively Bid contracts give the Owner certainty as to price, however they do require the design documents to be complete and accurate as to the Scope of Work. After construction commences, any Scope of Work changes will routinely extend the project schedule and have negative cost impacts to the Owner. Bid contracts are also the most time consuming, needing time to fully complete the design documents prior to bidding, a time allowance for contractors to inspect the proposed site and produce a knowledgeable bid, and a time allowance for the Owner to evaluate these bids, and finally award the contract.
Although, the exact project price is not initially determined, Negotiated Contracts offer the decided advantage of early contractor involvement. Contractor feedback during the design phase can provide substantial cost and time savings to the Owner. These cost savings may take the form of proposed alternates, substitutions, design modifications, value engineering, and efficiencies in construction means and methods. In addition, any gaps in the Scope of Work can be minimized or eliminated by pre-construction contractor input. This minimizes unwanted and sometimes costly time consuming change orders. This approach also shortens the project schedule by eliminating the bid phase. Negotiated Contracts can be either, a Stipulated Sum Contract or a Cost Plus a Fee Contract. Negotiated Contracts offer a more synergistic approach to the construction process.