An agreement which is legal and used in binding people or parties with various rights and responsibilities together is known as a contract. Many contracts are signed when there is an exchange of services, products and money. The terms and conditions of the contracts are not supposed to be broken since you may pay the damages and the canceling of the contract may be done. In this article, we shall look at the contacts in construction. In construction, you should either time and materials contract and fixed-price contract. Fixed-price contracts are favorable for projects which have predictable costs. It is good to pick a contract method with utmost care to avoid eating into your profits. The following are advantages and disadvantages of Fixed-price contracts.
The fixed-price contract is for a contractor who knows what he/she will spend in the project and the profit he/she will get. The fixed-price contract is for well-defined projects. If your project goes out of scope, you need to reduce your profit. If you choose the fixed-price contract, please have a pricing buffer to make sure that your profit is intact.
The greatest pro of the fixed-price contract is an assurance of price. The fixed-price contract process is also easier since it is well-defined and has phases together with respective deadlines.
The cons of the fixed-price contract are a longer plan development duration. By coming up with the fixed-price contract plan carefully, you will be assured of an intact profit. You should know that fixed-price contracts cannot be corrected or flexed once the project has started. If you doubt if the course of the project will remain unaltered, you should avoid choosing a fixed-price contract.
The following are the advantages and disadvantages of time and material contract.
The higher the amount spent on materials and the longer the duration, the higher the amount the client will pay. Since the time and material contract plan has no deadlines which are rigid, it is simple to develop. Some of the projects which are favorable for time and material contract are software development, advertising, construction, and other subscription services. You will also realize that a lot of clients love time and material contract since they can see the time taken and materials bought. It is good to break the time and material contract into phases and talk with the client after the end of each phase.
The main advantage of the time and material contract is flexibility. If you want to avoid eating into your profit, you should pick time and material contract.
The other advantage of the time and material contract is that it is most preferred by clients. As a client in time and material contract, you can will see the materials which have been purchased and the time which the project has taken.
If the management of time and materials in your contract is challenging, you should look for apps and software such as Rhumbix.