My final saq research

CONSTRUCTION CONTRACTS COMPARING BETWEN LUMP UP AND COST PLUS CONTRACT

Students: Mashael Alsumairi -Felwa ALdugish-Areej AlarifiAlaa Hamedallah-Marwa Ali. Dr.Wafa labib - SPECIFICATIONS AND QUANTITIES ARCH354 - Section 256

TABLE OF CONTENTS

 ABSTRACT

Page 3

 INTRODUCTION

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 CONTRACTS

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 Specification and quantity in construction contracts  Cost-Plus Contracts

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 Definition and general information  Advantages  Disadvantages  Cost-Plus Contracts    

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Definition and general information Methods for changing Advantages Disadvantages

 COMPARING

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 SURVEY

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 Introduction and defend the Aim  Survey form  Survey analysis  MIDDLE EAST FORMS OF CONTRACT

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 SAUDI ARABIA-KSA  United Arab Emirates-UAE  BUILDING REGULATIONS AND COMPLIANCE 1

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 CONTRACT SAMPLE

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 Cost plus contract sample  Lumps sum contract sample  Sum-up for the contracts  CONCLUSION

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 REFERENCES

Page 30

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ABSTRACT

A construction contract is a shared and official obligatory settlement between two or more Partners based on policies and conditions verified in certificate form. There are many forms of Settlements. Each has its own properties, requirements, and advantages and disadvantages.

Two of the most commonly used forms of contracts in constructions are the lump sum and cost plus forms. This research is to discuss the definition of each form, compare both forms regarding pros and cons, show surveys, and show examples of both forms.

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A lump-sum contract is normally used in the construction industry to reduce design and contract administration costs. It is called a lump-sum because the contractor is required to submit a total and global price instead of bidding on individual items. A lump-sum contract is the most recognized agreement form on simple and small projects and projects with a well.defined scope or construction projects where the risk of different site conditions is minimal A cost-plus contract refers to a contract when the contractor gets paid for all construction related expenses as previously agreed. Some cost-plus-contract can be drafted to set a limit that will be used to restraint the contractor on not to exceed that specified amount. The term plus refers to the profit allowed to be earned by the contractor. A cost-plus contract provides a win-win situation for the contractor because all risks are basically covered, and all .expenses are likely to be paid Advantages of A lump-sum contract offer the following advantages: 1-Low risk to the owner.

2-'Fixed' construction cost. 3- Minimize change orders.4- Owner supervision is reduced when compared to time and material Contract.5- The contractor will try to complete the project faster. 6- Accepted widely as a contracting method. 7- Bidding analysis and selection process is relatively easy. 8- The contractor will maximize its production and performance.

A cost-plus contract has advantages and some drawbacks depending on which side you are, contractor or project owner, some of the advantages of a cost-plus contract are: The contractor will not be able to reduce workmanship, It can focus on quality instead of cost, It could cover all related expenses, Contractor's risk is minimized.

Disadvantages: final cost could not be easily determined, also requires additional

resources and management to reproduce and justify all related costs.

The most common arguing factors are: Unbalanced Bids: Some projects might require producing an application for payment using unit quantities and unit prices. Many contractors will produce an unbalanced bid by rising unit prices on items to be completed early in the project, such as mobilization, insurances, and general conditions, and lowering unit prices on items needed in later stages.

Change Orders: If the owner produces or receives a change order proposal from the contractor, the price quotation could be possibly disputed. 2- Scope and Design Changes: A contractor may suggest design changes based on their experience. 3- Early Completion: Lump-sum contracts might include an early completion compensation for the contractor.

Early completion might produce higher savings for the project owner; however, those clauses might be explicit in the construction contract.

The three main components of a Cost-plus-contract are:1- Direct Costs: Labor, materials, supplies, equipment and professional consultants being used by the general contractor.2Overhead Costs (or Indirect Costs): Business related expenses that are necessary to perform the contract. Overhead costs are usually a percentage of labor costs and can include office rent, insurances, office supply, communication expenses, mileage and drawing printing or reproduction. 3- Fee (or Profit): The profit is usually a fixed percentage based on the labor costs directly associated with the work.

This research will provide an analysis of (cost plus and lump sum) contracts

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PHASES

Delivery method

Project definition

Initial project design

Project approval

Detailed design, drawings and technical specifications

TASKS Decide the framework for taking the project from concept through to completion. The relationship between the partners (by way of contract), responsibilities and risks of each part are determined at this stage.

Potential partners involved Lot feeder, project manager, design consultant, construction contractor, construction subcontractors, suppliers.

Scoping, feasibility, schematic design.

Lot feeder, design consultant.

Prepare detailed layout and design calculations for the aspects of the project that require regulatory approval.

Lot feeder, design consultant.

Obtain regularity approval for the project to proceed.

Lot feeder, design consultant.

Detailed design drawings, bill of quantities, technical construction specifications prepared.

Design consultant.

Project tendering

The process for procuring construction services.

Lot feeder, design consultant, project manager, tenders.

Project management

Managing the construction process.

Lot feeder, design consultant, project manager or construction contractor.

construction

Construction activities, project completion, project handover.

Lot feeder, project manager or construction contractor, construction sub-contractors, suppliers.

Defects period, warranties, post-construction activities (i.e. survey), financial closure.

Lot feeder, project manager, construction contractor, construction sub-contractors.

Post construction

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Specification and quantity in construction contracts

Cost-Plus Contracts Definition and General Information Cost plus contracts are used when works on the site are required to be started immediately even if the design itself was not fully finished yet. This system is not usually encouraged, but it can be beneficial under certain situations when an instant start on site is needed (for example for crucial repair work, or if there has been an accident that caused damage, requiring fast renovation for the building so that the client can proceed to run their businesses).

Bidding proceeds on the grounds of general descriptions, any sketches and estimates of costs. The Contractor is waged the contract’s price (the actual cost of labor, plant and materials) and a fee for additional expenses and profit. The price of the contract can be decided by discussion or through a competition, and can be a lump sum (where it can be possible to adjust the price of the contract if the actual cost turned out to be different that the estimated cost), or a fraction of the fees (the can be able to be revised if the client decides on changing the essence of the work). Other methods for payment are also conceivable, including combinations of lump sum and fraction fees. For instance, it is likely to fix some components of the cost all while applying a percentage to other elements and to profit. This form is likely to uncover risks of procurement for the client because they are dependent on the contractor working professionally and obtaining sub-contracts economically. Sub contracts can be obtained through competitions, but there may be little encouragement for the contractor to find or choose economic bids. Some of these complications can be lessened if a partnering connection has been agreed on between the client and the contractor.

Some people in the field would define a cost plus contract as one in which the client takes all the risk, however, a cost plus contract is one in which the cost of the works packages (the cost plus) are paid but the main contractor takes a risk on employment, general costs and profit which could be bided on a secure price.

Cost-Plus Contracts- Pros and Cons:  Advantages: A cost-plus contract is normally used when performance, quality or delivery time is more important than cost, such as in the United States space program. Final cost may be less than the estimated price in the contract because contractors do not have to expand the price to cover their risks, specifically when their ability to estimate costs is not normally accurate.

Cost plus contracts cost less than fixed price contracts especially when there is little price competition or when the market itself is not big. It tolerates more error and control over the worth of the contractor. It is flexible and allows for changes in the initial specifications.

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 Disadvantages: The final cost can’t always be determined and then used as it is in the contract.

Therefore the element of certainty is missing. Requires stricter supervision and management to guarantee that only necessary costs are paid and that the contractor is exercising and controlling the costs suitably.

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Lump Sum Definition and General Information A lump sum contract is a traditional method of purchasing construction and the most used form of construction contract. In a lump sum contract, a single price for all the works is agreed upon before the works are launched.

Its definition in the CIOB Code of Estimating Practice as, ‘a fixed price contract where contractors undertake to be responsible for executing the complete contract work for a stated total sum of money.’ This is, in general, suitable where the project is clear when estimates are required and noteworthy alterations to the requirements are improbable. This means that the contractors are able to precisely decide a cost to the works they are being asked to perform. Lump sum contracts might be less suitable when speed is required, or when the works are not as clear as desired. Other forms of contract that can be more fitting in such situations include measurement contracts (used when the works can be described in rational details, but the quantities cannot be), cost reimbursement contracts (used where the nature of the works cannot be properly defined at the beginning, often used where an instant start on site is required), target cost contracts and so on. Lump sum contracts assign more risk to the contractor than most of the other forms of contracts, as there are fewer systems to allow them to change the initial price, and they give the client a sense of confidence about the possible cost of the works. However, a lump sum contract does not assign all the project risk to the contractor, and there is not a secure price, nor even a definite maximum price.

The price of a lump sum contract is able to change.

Methods for changing the contract price on a lump sum contract include: Variations: These are changes in the essence of the works. Most contracts will contain facilities for the contractor to supply advice to vary the design, quantities, and quality, sequence or working conditions.

Relevant events: A relevant event may be caused by the client (for example, inability to supply equipment or directions), or maybe a neutral event (such as unusually bad weather) and the consequences may contain a claim for loss and expense by the contractor.

Provisional sums: 8

A budget for a precise element of the works that is not clear in enough detail for estimators to decide a price for.

Fluctuations: A method for coping with the rising prices on projects that may last for a few years where the contractor estimates the price based on current prices and then the contract requires for the contractor to be repaid for price changes over the time of the project.

Payments to nominated sub-contractors or nominated suppliers.

Statutory fees.

Payments relating to the opening-up and testing the works. The clearer the works are when the contract is agreed, the lesser the possibility that the contract sum will change.

It is important to point out that a truthful price contract would not certainly be beneficial for the client as it would necessitate that the contractor set a price for risks over which they may have no control over. It would also give a very limited room for the client to modify their requirements.

Lump Sum Contract- Pros and Cons: 

Advantages: Lump sum contracts can be used to decrease client risk as the price is fixed (although in reality it is still likely to vary, but not by as much as some other forms of contracting). It is a commonly acknowledged and understood method of contracting.

The bidding study and choice process is rather straight-forward.

The larger degree of certainty on the client’s side can make it simpler and easier to guarantee a construction loan. Changes are reduced. The management necessary from the client is reduced. There can, under specific circumstances, be a grander margin for return for the contractor. Lump sum payments are made in systematic, foreseeable installments. Providing the contractor with a dependable and stable budget and making financing easier for the client.

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Disadvantages: It can give greater risk to the contractor than some other contract forms, as there are only a few methods available for them to change the price. As a result of the added risks faced by the contractor, they may raise their estimated price. Detailed recording of any change in orders is required, which can be time-consuming.

Preparing for the bid may be more expensive for the contractor. As a result, there may be a slower bidding process for lump sum contracts than for other contract forms.

Development may be slower as the design will need to be finalized before the works begin. The employer may have to pay a higher price for any modifications or add-ons that are necessary but are outside the range of the contract. It is viewed as an adversarial form of contracting rather than a collaborative one. Arguments relating to change orders, scope and design changes, and so on, become very likely to happen.

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COMPARING BETWEEN THE TWO CONTRACTS:

Lump Sum Contract    

Cost Plus Contract 

This one is the most commonly used contract for remodeling work with a firm price.

Accurate estimate is required for builder to make a profit.

The risk of extra cost is born by the builder.

Its lack in flexibility.



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The builder will be reimbursed for the costs incurred while doing the work, and will receive a fee for the job.

The fees can be percentage of the cost, or fixed amount or variable amount.

SURVEY We spread a survey to different companies and contractors to identify which type of construction contracts is preferable.

We received 71.4% feedbacks from Project owners, and 28.6% from contractors.

What you will see now are questions which is give us a clear .vision of what we're looking for

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With the aim to assess the state of the regional construction industry, we also analysed regional companies’ survey; therefore, the result from people with experience gave us a clear answer.

ARAMCO CONTRACTORS AND PROJECT OWNERS SURVEY:

What type of contract does your company prefer? Give one reason at least.

From your experience, which type of these two contracts has more issues and difficulties in working field?

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Is it possible to combine two types of contracts into one project?

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As a project owner or contractor, you prefer to determine project budget.

ANALYSIS: Due to Aramco Project owners and contractor, we can clearly analyse that project owners prefer Cost plus contracts and contractors prefer Lump sum contract, therefore as a project progresses the project owners want the flexibility to make changes but contractors prefer lump sum contract due to the tight project budget to be in the safe side, cost plus basis has uncertainty about the project price cost.

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ROYAL COMMISSION CONTRACTORS SURVEY

What type of contract does your company prefer?

Give one reason at least.

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From your experience, which type of these two contracts has more issues and difficulties in working field?

Is it possible to combine two types of contracts into one project?

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As a project owner or contractor, you prefer to determine project budget.

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One of Project owners Comment: Alignment of interest and clarity of the term and condition are the first steps in successful relationships between project owners and contractors.

ANALYSIS: Under the lump sum agreement it’s a closed book – unlike cost plus it’s an open book agreement- most of the time as the contractor does not have to submit any report for the materials or cost, making changes in the contract is flexible to cost plus contract that’s the reason many project owners prefer this type of contract

Middle East Forms of contract SAUDI ARABIA Construction contracts in the private sector are amended to suit the particular conditions for each project. Employers prefer lump sum and normally exercise control in the administration of the construction process by imposing many restrictions on the engineer’s (consultant) authorities under the contract.

In addition, construction contracts are based on the Standard Conditions for Public Works, which are amended to suit particular projects. But with greater control given to the employer for the administration of the contract. All public work contracts are let on remeasured basis and subject to the Saudi Government Tendering and Procurement Regulations, as issued by Royal Decree.

UAE The growing number in the construction contracts in uae of large scale developers and major repeat clients in the region has led to the 19

development of various forms of contract, tailored to each individual client, amended to a greater or lesser degree depending upon the risk profile of each client. This also applies to works procured by Dubai Municipality.

Therefore, civil works contracts within the UAE are mostly procured on a re-measurable basis, whereas building works will generally be based on a fixed price lump sum. However, there are exceptions. More and more clients are procuring projects using a fast track approach and will therefore incorporate a re-measurable element, reflecting those parts of the design which are incomplete at tender stage.

Building regulations and compliance

The procedures for obtaining building permission in Kingdom of Saudi Arabia

Obtaining a Building Permit in the Kingdom of Saudi Arabia depends on the city, which varies from region to region, therefore they tend to follow the same basic principles. The various procedures and approvals from the Main Municipality, the Branch Municipality and the Fire Department need to be obtained. Obtaining these approvals normally takes between three to four months depending on the nature and size of the building/project. The following is a general outline of the steps needed to obtain a Building Permit: Stage 1: Obtaining letter from the Main Municipality, first, a letter from the owner is submitted to the main Riyadh Municipality, along with a copy of the land deed. The Municipality checks the master plan of the area to ensure the suitability of the plot for the construction of a building. The Municipality then writes a letter to the Branch Municipality of the area 20

where the plot is located. This process takes about five days and does not incur a charge.

Stage 2: Obtaining Preliminary Location Permit from Branch Municipality, The owner submits a copy of the letter obtained previously from the Main Municipality to the Branch Municipality, requesting an inspection of the plot to ensure that the plot length, width and total area are as indicated on the deed. The Branch Municipality then issues an approval to use the land. This process takes normally five days and does not incur a charge.

Stage 3: Obtaining approval from the Fire Department, The Branch Municipality writes to the Fire Department, or Civil Defense, to obtain its approval of the plan submitted by the owner for the fire-alarm and fire-fighting systems. The Fire Department approves these plans and sends them back to the Municipality. This process takes normally ten days and does not incur a charge.

Stage 4: Obtaining a Final Building Permit The Branch Municipality issues a Building Permit and sends it to the Main Municipality for approval, which is given depends on the nature of the building. The owner can collect the Permit from the Main Municipality after about approximately one to three months. The cost of this Permit is SAR 1,200.

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CONTRACT SAMPLE You will find below two construction contract to give you a clear idea of each type of them. The contracts are made by the students who are writing this research from what they learn and the skills they gained from .Specification and Quantities Course

:COST PLUS CONTRACT SAMPLE

Part (1): Agreement between partners ……… On the day …… , date :Have been agreed between ..……… .The 1st part ………….. called the owner, with ID No ..…………………………… :The address: ………….. Mobile No .The 2nd part company ………… called the contractor :The record number …………….., Address: ………………………. , Mobile No .…………………… ………………… And represented by Professor / Engineer

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Part (2): The Agreement The first part wants to establish a villa in its land located in the neighborhood ‌‌‌..

Consisting of two floors and swimming pool, as stated in the plans, as well as building permits for the plot number ...... with plan No. ...... and municipal permit No. .................. Where the second part accepted the construction of the mentioned piece according to the conditions, specifications and plans licensed by the municipality, and according to the conditions and specifications agreed upon by this contract and at the prices agreed upon in the price items and within the time period and its terms. The introduction and the drawings shall be regarded as an integral part of the contract and complementary thereto. The second part shall review the plans approved by the Municipality and undertake to abide by the plans and instructions of the Municipality and follow the conditions of security and safety and instructions of the supervisor by the first part and any additional item or different in the cost the 1st part will pay it.

Part (3): Terms of the contract The partners agreed on the terms and conditions and specifications as follows: a) First part Commitments: 1. Agreement with the contractor of drilling and rubble and the contractor of electrical wiring, plumbing, insulation and concrete.

2. Secure the security of the site.

3. Provide water for the building.

4. Payment of additional works immediately after implementation.

5. The first part shall bear the costs if the site requires reinforcement around the walls of neighbors or the withdrawal of groundwater.

6. Details of the wooden doors and windows for the owner at the expense of the implementation of the work are at the expense of the contractor.

7. The first part shall pay the payments agreed upon in the contract. b) second part Commitments: Review architectural plans with structural and sections and interfaces with air conditioning and utility. The second part shall comply with all the approved plans, while maintaining the requisitions required by the Municipality. If the Owner wishes to modify, remove or add any external works from the approved agreement, the cost of the additional works and the duration shall be calculated in time and before the next stage is initiated.

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A written agreement paper signed by the partners shall be agreed upon.

1. Drilling and burial: Supervision of drilling work within the approved levels of the scheme specified in the drawings, as well as the process of depositing the land for the places returned with the compactor after the completion of the excavation or the dredging without increase, and make sure that all the work of the deposit on the layers according to the assets of the work around the rules and cascades with water submerged and do not bury around the rules and synapses only after Approval of the Supervisor Engineer. The Contractor shall bear additional drilling work after the completion of the drilling contractor and delivery of the site.

2. Employment: Commitment to bring in highly qualified workers with sufficient experience to complete all work according to the assets of the factory.

And shall be responsible for correcting any errors resulting from the poor implementation of such employment or any municipal or legal violations during the execution resulting from him or his work and to take the necessary precautions and safety assets to prevent damage to neighboring buildings due to the implementation of this undertaking and any damage that may occur to the safety of his workers or others. As well as erect scaffolding and recall what you need to complete the work of tools and tasks, machines and equipment and expenses on the shoulders and follow all regulations of the organization, police, passports and others, and is solely responsible for any violation of laws in force or may be issued during the work. The Consultant shall in all cases have the right to object and request the Contractor to withdraw immediately from the work site, any person who uses it for the performance and maintenance of the works or any business related thereto if he considers that he is bad, incompetent or negligent in his duties. In such case, such person and the contractor may not be replaced as soon as possible.

3. Carpentry Work: The second part is committed to providing and using new wood for premium columns, 18mm blackboard for new facades, slabs and drawers.

All wood for interior and exterior will be 18 mm thick with the use of foam skimmer with special putty and mastic to fill slots. The moldings must perfectly match the woodwork to the dimensions and shapes as shown in the drawings and be solid and not allow the mortar to leak and 24

withstand the load without any shocks to the partially connected concrete during decomposition. The pillars needed to be constructed around the pillars surrounding the columns, which are connected to the bridges to prevent the leaks, and the decomposition of wood must be taken into account in the following period: columns 24 hours Bridges and ceilings 15 days, And 28 days for large halls over 8 meters.

4. Concrete work: The contractor shall calculate the quantities required for the execution of all concrete and concrete casting works (which can be manually poured for works less than 3 m3 after the owner's approval) according to the drawings, the normal levels, the required reagents and adherence to the thickness. The wooden packaging’s shall be sprayed with water before the concrete is poured half an hour At least, in order to lock the joints between the wood panels and maintain the water of the concrete, and does not allow the addition of water to the concrete site construction or during casting, and must be available rocking and the last reserve for use at all stages ready in all stages So that the use of the vibrator does not separate the concrete components from each other as well as does not allow to stop the work of casting in the columns and bridges, And the contractor does not cast in the case of high temperatures above 43 ° C. In this case, wet wadding should be used and the areas cast in it should be used. And all the concrete buried and adjacent to the soil shall be resistant and be 150 kg / cm2 for regular and 250 kg / cm2 for walls and 300 kg / cm2 for columns and ceilings (contractor shall bear more than 1 cubic meter of the order of the lost concrete).

5. Blacksmith: All types of blacksmiths shall be cut, detailed and monitored for reinforcing steel for reinforced concrete according to the dimensions and details in the drawings and according to the technical foundations. This includes the laying of floors, the installation of biscuits in the necessary areas, the tilting of columns and the sharing of the floor with the floor.

The Hurdi separates with one straightness and is surrounded by iron without any space between the nerves of the iron and the chard. It is also committed to installing ground bridges, making inverted bridges with surfaces and places necessary to ensure the quality of the building.

6. The buildings: The building works shall be carried out with concrete or red concrete insulation for the exterior and black walls of the internal walls with thickness of..... cm according to the drawings with the followers of the 25

technical assets and specifications in the works of the buildings and the mixing and the mixing ratios for the mortar and the straightness of the walls and the head and not to waste and break the block or mortar under the walls and the use of riders And taking into account the absence of any of the columns at all when the installation of bricks and in the case of the emergence of bridges under the decoration and prominent buildings are reviewed by the owner and the supervisor engineer. Bricks should be sprayed thoroughly with water before use. Walls and concrete are sprayed twice daily for three days, as windows poured from all sides and pour the pipes. As well as taking into account the dimensions of the internal walls so that they are equal in all points on the opposite wall, and should not be less than the height of the internal buildings about 3, 40 m and the external walls of 3 m from the top of the cushion and jacket surface and reservoirs about 2.50 m and fences and jackets with a bridge over the top 10 cm of Both sides.

The contractor shall be in coordination with the other contractors to carry out the electrical, sanitary, insulation and other works and not to start at any stage that may harm their business.

The second part undertakes to clean up the site from the inside and outside of the waste and deliver the site to the supervisor after completion of building clean structure of waste and building remains. c) Payment The two partners agree that the owner shall pay the Saudi Riyal (…………..SR) for the implementation of the square meter and....... Saudi Riyal (…………..SR) for the longitudinal meter of the fences at the expense of the meter by the meter for the ceilings and fences, the meter by one and a half for the swimming pool, The meters are calculated by two meters for the tanks and the basement. The internal drawers are calculated according to the spaces that are exposed by the ceilings and the external by the square meters are deducted. The final adjustment shall be under the supervision of a specialized office at the expense of the partners.

The partners also agreed on the following payments for all works without any division of the two buildings: 1) (5%)...... Thousands of advance payment when signing the contract.

2) (15%)....... After the reservoir and reservoirs for all buildings.

3) (20%)....... After pouring the ceiling of the ground floor and building walls.

4) (25%)....... After pouring the roof of the first floor and building walls.

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5) (20%)....... Thousands after pouring the supplements and building the walls and the surface jacket.

6) The final payment after the final delay and the determination of the fines. d) Duration and fines: The period of completion of the works for this contract (........ Gregorian Months) shall commence from the date of the approval of the Engineer on the rules and shall be divided into 4 stages for all buildings each stage of two months (sixty days) First: the stage of the rules and reservoirs and the work.

Second: Column phase, walls and roof of the ground floor.

Third: the stage columns and walls and the roof of the second round.

Fourth: the stage of annexes and walls and the delivery of the building.

In case of delay for the period specified for each stage of the contract, the first part shall be entitled to deduct SR 200 for each day of delay (200 Riyals), provided that it does not exceed 15 days for each stage and takes into consideration the period of the next stage. In the event of delay or suspension of the contractor for more than 30 consecutive days, the owner shall have the right to terminate the contract, after notifying the contractor thereof. If the building is destroyed or part of it before it is handed over to the owner, the contractor can’t claim the price of his work or refund his expenses, as well as the case if the goods that he has received are destroyed or stolen.

And also in the case of the death of the contractor, God forbid, the other part shall be entitled to consider this contract as a breach of its own accord without the need for an alert or warning directed to the heirs and all of its obligations shall be paid by them. The heirs shall deliver the prepared materials and the drawings that have been initiated and shall apply in the case of the loss of the second part by declaring bankruptcy, insolvency or quarantine. In the event of a dispute or problem on the ground which is not known to the owner and is beyond his will and emerged during the implementation of the right to terminate the contract with the assessment of the work performed and the payment of dues.

This contract shall be governed by the regulations in force in the Arab Republic of Saudi Arabia and shall be interpreted, implemented and adjudicated in the courts of the courts of Saudi Arabia in whole and in the first instance.

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This contract shall be issued in two original copies.

First Part (Owner)

Second Part (Contractor)

Name:

Name:

Signature:

Signature

:LUMP SUM CONTRACT SAMPLE ARTICLE 1. AGREEMENT BETWEEN PARTNERS This contract is made and entered into on this the day of _________, 20 , by and between city/county of__________________________________________________, hereinafter called the ENTITY, and____________________________________________________, hereinafter called the CONTRACTOR. ARTICLE 2. SCOPE OF WORK This contract is issued pursuant to the Solicitation and Procurement on ______________. for the removal of debris caused by the sudden natural or humanmade disaster of ________________ to ____________________. It is the intent of this contract to provide equipment and resources to remove all hazards to life and property in the affected communities.

Cleanup, demolition, and removal will be limited to 1) that which is determined to be in the interest of public safety and 2) that which is considered essential to the economic recovery of the affected area.

The Work shall consist of cleanup or demolition and removal as outlined in the specifications on drawings and on block sector maps attached to the invitation for bid number .

ARTICLE 3. SCHEDULE OF WORK Time is of the essence for this debris removal contract. Notice to proceed with the Work: The Work under this contract will commence on____________, 20 _. Maximum allowable time for completion will be calendar days, unless the ENTITY initiates additions or deletions by written change order. If the CONTRACTOR does not complete the work within the allotted time, liquidated damages will be assessed in the amount of per day.

ARTICLE 4. CONTRACT PRICE The lump sum price for performing the Work stipulated in the contract documents is________________ .

ARTICLE 5. PAYMENT

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The CONTRACTOR shall submit certified pay requests for completed work. The ENTITY shall have ten (10) calendar days to approve or disapprove the pay request. The ENTITY shall pay the CONTRACTOR for his performance under the contract within twenty (20) days of approval of the pay estimate. On contracts over 30 days in duration, the ENTITY shall pay the CONTRACTOR a pro-rata percentage of the contract amount on a monthly basis, based on the amount of work completed and approved in that month. The ENTITY will remunerate the CONTRACTOR within thirty (30) days of the approved application for payment, after which interest will be added at a rate of per annum. Payments shall be subject to a retainer of_________ on each payment.

Retainer shall be released upon substantial completion of the work.

Funding for this contract is authorized pursuant to Public Law of the State of Washington and (local statute or ordinance).

ARTICLE 6. CHANGE ORDERS If the scope of work is changed by the ENTITY, the change in price and contract time will be promptly negotiated by the partners, prior to commencement of work.

ARTICLE 7. CONTRACTOR’S OBLIGATIONS The CONTRACTOR shall supervise and direct the Work, using skillful labor and proper equipment for all tasks. Safety of the CONTRACTOR’s personnel and equipment is the responsibility of the CONTRACTOR. Additionally, the CONTRACTOR shall pay for all materials, equipment, personnel, taxes, and fees necessary to perform under the terms of the contract. Any unusual, concealed, or changed conditions are to be immediately reported to the ENTITY. The CONTRACTOR shall be responsible for the protection of existing utilities, sidewalks, roads, buildings, and other permanent fixtures. Any unnecessary damage will be repaired at the CONTRACTOR’s expense.

ARTICLE 8. ENTITY’S The ENTITY’s representative(s) shall furnish all information, documents, and utility locations necessary for commencement of Work. Costs of construction permits and authority approvals will be borne by the ENTITY. A representative will be designated by the ENTITY for inspecting the work and answering on-site questions.

THIS CONTRACT IS DULY SIGNED BY ALL PARTNERS HERETO: ENTITY (City, County, Town, Etc.) (Include Address, City, State)_________________________________________ Seal CONTRACTOR

by_________________________________________________________

The Principal of the Firm

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CONTRACTS SUM-UP To sum up, in the two contracts samples you find that they are both starts with agreement part. They specify dates, work needs, all the quantities, number of Labourers, materials, hardware, etc. But when it comes to the payment and the financial part each contract .has his own roles and conditions

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CONCLUSION Construction contracts proved to be the most appropriate method when owners choose to build complicated and large projects. It permits to bridge the gap between the owner and contractor in order to maximize the outcome for the owner and the adversarial relationship is reduced.

In addition, this research shows the differences between two important types of contracts by analysing them and proves their minor issues in the working field in Saudi Arabia, Riyadh. Furthermore, some modifications were brought forward of the main stages of the procedures for obtaining building permission in Kingdom of Saudi Arabia.

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