It should come as no surprise that contracts make the business world go ‘round, and construction contracts are no exception. A construction company or contractor relies on this document to formalize the terms and conditions of the work between them and their clients, the owners who will accept the completed project. This arrangement that often also covers work between subcontractors, vendors, suppliers and other third parties, is a legally binding document that covers the scope of work, terms of payment, schedule and cost budgeting, liabilities, assumption of risks, insurance requirements and other stipulations.
A poorly put together contract can put any business at a disadvantage when it comes to being profitable. For example, an agreement that doesn’t address changes to scope, cost and schedule may threaten your construction business’s financial health. It’s good to have a construction contract checklist to make sure that everyone’s interests, yours as well as the clients and any third parties, are completely covered and addressed in contractual agreements. Contractors tend to do the same types of work for their clients repeatedly, so it makes good sense to develop a template as a go-by for subsequent jobs.
What Goes Into a Construction Contract?
Before developing a construction contract template PDF or any checklists, it’s important to be clear about what this formal commitment should include. This legally binding agreement should always include these elements:
Scope: The scope defines all the work to be done under the project. It enumerates all project deliverables and defines who is responsible for what, when and how. Clear definition of the scope up front helps to avoid delays and issues that may arise from work being informally added to or deleted from the contract.
Cost: The contract should specify the total cost of the project based on the agreed-upon scope. The agreement will also indicate how and when the builder is paid. The language should be clear on invoice submittals, payment schedules, disputing payments, penalties, interest, subcontractor payment verification and liquidated damages. A detailed contract will also have specific information about hourly rates for the various roles involved on this project.
Schedule: You’ve probably heard the adage “time is money” before and a complete contract should have details regarding the work schedule. How long will the duration of the project be? What happens if there is a delay that causes the completion date to slide? Will charges be assessed against the contractor? What should the builder do if a major schedule impact is discovered ahead of time? A construction contract checklist should always include clear language about the project time and schedule.
Contingencies: Risks are present in every situation. The contractual agreement should include discussions about contingencies for project impacts that may delay schedule, increase costs or affect the scope. There should be a clear process for implementing contingencies as necessary for the job.
When building your construction contract review checklist and templates, make sure that they cover these basic elements.
What Type of Contract?
Different clients or owners will procure different types of contracts depending on their needs. The type of arrangement also informs how a construction company gets paid and what liabilities may exist. A contract checklist or template needs to account for the type of construction contract:
Unit Price: Cost is determined by the number of quantities to be installed and their individual unit prices, which account for manhours as well as the cost of subsidiary or incidental items.
Cost Plus: In this agreement, the construction company is paid for all allowed expenses including labor, equipment and materials, plus an additional fee for profit. When the scope is not clearly defined, this is a preferred approach to contracting.
Lump Sum: The constructor is paid a single price that covers all the work. Any costs that exceed this price will be borne by the constructor, but any savings between the final and agreed prices is kept as profit.
Your construction contract checklist should account for the type of contract and have the appropriate language regarding terms and conditions.
What’s the Big Deal With Checklists?
A checklist helps to ensure that your processes or workflows contain all the necessary steps. It also helps standardize these processes within an organization and among multiple parties. This is especially useful for anyone who is responsible for preparing agreements with owners, subcontractors, suppliers, vendors and other stakeholders.
If your company is responsible for preparing the agreement, a construction contract checklist helps ensure that the terms and conditions are complete and in accordance to the way you do business. Your clients, especially if they’re larger companies or government entities, may be responsible for preparing these formal arrangements. A construction contract review checklist helps you make sure that your concerns are properly addressed with your clientele before the work starts.
How Can Technology Help?
Paper contracts are susceptible to loss and physical destruction. A construction contract template PDF can be backed up and stored remotely, while remaining easily accessible to put together multiple agreements quickly. Construction document management system provides a powerful way for multiple persons to access documents on their mobile devices in a process that is efficient, streamlined, comprehensive and consistent.
Construction principals who are responsible for making contractual representations and certifications can be notified when a contract is ready for review, signature and submission. The Fluix platform can help you work better by generating checklists and templates for agreements with subcontractors, clients and other third parties as necessary. With no need for special programming or operating systems, Fluix helps you generate, manage and maintain contracts. Check out our free, no-obligation trial for better contracting today.
Manage Contracts Faster & Easier
- Record expectations of a project
- Define the procurement timeline & costs
- Ensure legal protection for all parties involved