Construction Contract Types Nz
When it comes to construction projects, one of the most important documents you need is a construction contract. This document outlines the terms and conditions that govern the relationship between the owner of the project and the contractor who will be handling the construction works. Construction contracts in New Zealand come in different types, each with its own unique set of features and benefits. In this article, we will explore the different construction contract types in NZ and help you choose the best one for your project.
1. Lump-sum contract
A lump-sum contract, also known as a fixed-price contract, is one of the most common construction contracts used in New Zealand. With this type of contract, the contractor provides the owner with a fixed price for the entire project. The owner and contractor agree on the scope of work and the specifications before the project begins. Any changes in the scope of work or specifications during the course of the project may result in additional fees or delays. One of the benefits of this type of contract is that it provides certainty in terms of cost, making budgeting and financing easier for the owner.
2. Cost-plus contract
A cost-plus contract is another type of construction contract used in NZ. With this type of contract, the owner pays the contractor for the actual cost of the materials, labour, and other expenses incurred in the construction project, plus a fee or percentage for profit. The fee is typically negotiated between the owner and the contractor before the project begins. This type of contract is often used for projects where the scope of work is uncertain or where the project is expected to take a long time to complete.
3. Guaranteed maximum price (GMP) contract
A guaranteed maximum price contract is a hybrid of the lump-sum and cost-plus contracts. With this type of contract, the owner and contractor agree on a fixed maximum price for the project. The contractor is responsible for completing the project within the agreed-upon budget. If the actual cost of the project is lower than the maximum price, the owner receives a refund. If the actual cost is higher than the guaranteed maximum price, the contractor is responsible for the difference. This type of contract provides the owner with some cost certainty, while also providing flexibility for the contractor to make changes during the project.
4. Unit price contract
A unit price contract is a type of contract where the contractor charges the owner for each unit of work completed. For example, the contractor may charge a set price per square metre of concrete poured. This type of contract is often used for projects where the scope of work is uncertain, or where the project involves a lot of variation in the work to be completed.
In conclusion, choosing the right construction contract type in NZ requires careful consideration of the project scope, budget, and timeline. Each contract type has its own unique features and benefits. It is important to work with an experienced contractor and legal team to ensure that the contract is fair and comprehensive, and that both parties understand their obligations and responsibilities. With the right contract in place, your construction project is more likely to be successful and completed on time and within budget.
