Construction Contract Controls and Commitments

Construction projects are highly visible, complex undertakings requiring significant financial commitments. Whether you're spending public or private funds for your construction project, these management tools can help ensure your initiative isn't costing more than it should.

A construction contract is a mutual or legally binding agreement between two parties based on certain policies and conditions generally recorded in documentation form. The two parties involved are one or more owners, and one or more contractors. The owner has full authority to decide what type of contract should be used for a specific development to be constructed and to set forth the legally-binding terms and conditions in this type of contractual agreement.

 

A construction commitment is a mutual or legally binding agreement between a general contractor or construction manager based on certain policies and conditions generally recorded in documentation form. The two parties involved are typically between a managing contractor and a subcontractor or trade. The general contractor or construction manager has full authority to decide what type of contract should be used for a specific development to be constructed and to set forth the legally-binding terms and conditions in this type of contractual agreement.

 

Cost Events are changes that may occur after execution of the contract or commitment that would change the overall value of the originating agreement. Cost Events may occur for a variety of reasons; Errors and Omissions (E&O); Unforeseen Conditions ; Regulatory Changes ; Design Changes ; Scope Changes or New Scope. The typical cost events that would occur on a construction project are: Approval Letters (Approval to spend funds); Potential Change Items or Potential Change Orders ; Scope Change ; Request for Proposal ; Value Engineering ; Allowance Requests ; Change Order Request (COR) ; Notice of Change (NOC); or Change Order (Co).