What is contract, contract based on specification and drawings, the specification will serve there main purposes, describe them, (b) define prime cost percentage contract, prime cost plus fixed fee?

A contract is a legally binding agreement between two or more parties that outlines the terms and conditions of a specific project or transaction. In a contract based on specifications and drawings, the parties agree to the terms and conditions outlined in the specifications and drawings provided.

The specifications in a contract serve three main purposes:

1. They define the scope of work: The specifications outline the specific details and requirements of the project, including materials, dimensions, and quality standards. This helps ensure that both parties have a clear understanding of what is expected and prevents misunderstandings or disputes.

2. They establish the basis for pricing: The specifications provide the basis for determining the cost of the project, as they outline the materials and labor required to complete the work. This helps ensure that the project is completed within budget and prevents cost overruns.

3. They serve as a reference for quality control: The specifications provide a standard against which the completed work can be evaluated. By referencing the specifications, both parties can ensure that the work meets the required quality standards.

Prime cost percentage contract is a type of contract where the contractor is reimbursed for the actual costs of labor and materials, plus a percentage of the total cost as profit. This type of contract is often used when the scope of work is not well-defined or when there is a high level of uncertainty regarding the final cost of the project.

Prime cost plus fixed fee contract is a type of contract where the contractor is reimbursed for the actual costs of labor and materials, plus a fixed fee for profit. This type of contract is often used when the scope of work is well-defined and the total cost of the project is more predictable. The fixed fee provides the contractor with a guaranteed profit margin, regardless of the final cost of the project.

A. Contract Based on Specification and Drawings

A contract based on specification and drawings is a construction agreement where the contractor agrees to build or renovate a structure according to specific plans and specifications that define the materials, methods, and standards to be used.

B. Main Purposes of Specifications

1. Define Design and Construction Standards:
Specifications provide detailed instructions and requirements for all aspects of construction, ensuring that the project meets the intended design and quality standards.

2. Establish Payment Schedule:
Specifications may include provisions for payment as different stages of construction are completed, based on the value of work performed and materials supplied.

3. Protect Owner's Interests:
Specifications help protect the owner by setting clear expectations for the scope of work, materials, and quality of workmanship, reducing the risk of disputes or unsatisfactory performance.

C. Prime Cost Percentage Contract

A prime cost percentage contract is a construction agreement where the contractor receives the actual cost of materials, labor, and equipment plus a percentage markup for profit and overhead. The percentage markup is typically negotiated and fixed at the beginning of the project.

D. Prime Cost Plus Fixed Fee

A prime cost plus fixed fee contract is a construction agreement where the contractor receives the actual cost of materials, labor, and equipment plus a fixed fee for profit and overhead. The fixed fee is agreed upon at the beginning of the project and remains unchanged regardless of the actual costs incurred.