After the contractor signs the contract and starts work, he discovers that the work cannot be completed at the agreed price. There is no guarantee that contractors will be protected against incorrect estimates or cost overruns.
Due to the uniqueness of the facilities built, it is almost essential to set a separate price for each facility. The price of a construction contract includes direct project costs, including the cost of a site supervisor, plus a general overhead and profit markup charged by the contractor.
Factors that affect facility prices also vary by facility type and location. Within the major construction categories such as residential construction, commercial buildings, industrial parks and infrastructure, there are smaller segments with very different framework conditions regarding pricing.
However, all price agreements have some common features in the form of legal documents that bind the facility owners and suppliers. Without getting into specific issues in various industry segments, the most common types of pricing can be described in general terms to explain the basic principles.
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