3 Construction Contract Negotiation Tips for Contractors

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How will contract and service contracts in Australia fundamentally differ when it comes to the construction industry? How to choose a profitable contracting strategy and which parties are involved in the work process? Detailed answers to these questions and useful construction contract negotiation tips for contractors you’ll find in this article.

1. Contracts are different

First of all, it is worth understanding what kind of construction contracts can be concluded:

  • work agreement;
  • a provision of services agreement;
  • sale and purchase agreement (supply of goods, future things, real estate, enterprises);
  • simple partnership agreement;
  • mixed contract.

In practice, one has to deal with the first two types of contracts more often. And if a work contract implies the performance of a certain work and the delivery of its result, then a paid service agreement is the performance of certain actions or the implementation of certain activities. Consequently, a number of their fundamental differences can be distinguished:

The subject of the contract: in the first case – responsibility for the result, and in the second – the obligation to make efforts.

The right to withdraw from the contract: in the first case – a mutual right, and in the second – only the right of the customer.

How the contract is executed: for example, the general contractor may hire other contractors to do part of the work.

Payment for work: in the first case – after the delivery of the work, and in the second – according to the terms of the contract.

Limitation of liability: if the customer withdraws from the work contract, he will reimburse costs and losses, but this amount is limited to the difference between the value of the contract and the value paid for the actual provision of services. In the case of a contract for the provision of services for a fee, there is no such restriction.

We advise you to always seek a professional opinion before making and signing any contract. Also, make sure that you consult with your clients and that they know what they are signing too. Construction lawyers from Sydney can make the process of choosing the right contract easy and effortless. 

2. Management and administration

Construction contracts traditionally contain general and specific clauses. The latter in each specific case are formulated individually, and we can say that they have priority. However, this does not mean that the group of general provisions has no meaning. Among them are such significant “points” as:

  • subject and object of the contract;
  • work performed by the contractor;
  • price and payment;
  • termination of the contract;
  • guarantees and insurance;
  • other “standard” terms.

3. Contract models

Finally, the last thing worth dwelling on are contract models. They are determined by the services that the contractor provides.

The EP (Engineering + Procurement) contract model assumes that the contractor carries out the design and supply of equipment.

The EPC (Engineering + Procurement + Construction) contract model is similar to the EP model, but construction and commissioning is added to the contractor’s tasks.

The EPS (Engineering + Procurement + Services) contract model adds technical services to the EP model, such as installation supervision.

The EPCM (Engineering + Procurement + Construction Management) contract model is not a regular contract, but a consulting contract.

The contract model EPCCM (Engineering + Procurement + Construction + Construction Management) essentially copies the EPC model, adding construction management to it.

Conclusion

The contract is a very important part of any business. Make sure you pay attention to the contracting process, and it is very important that you have an expert to help you with that. That way, both you and your clients will always be calm, and you will be able to do your job properly.

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