Contract

Legal agreement between two or more parties, which may be of the types enumerated below:

1. In cost plus contracts the contractor agrees to furnish to the client services and material at actual cost, plus an agreed upon fee for these services. This type of contract is employed most often when the scope of services to be provided is not well defined.
   1. Cost plus percentage burden and fee - the client will pay all costs as defined in the terms of the contract, plus "burden and fee" at a specified percent of the labor costs which the client is paying for directly. This type of contract generally is used for engineering services. In contracts with some governmental agencies, burden items are included in indirect cost.
   2. Cost plus fixed fee - the client pays costs as defined in the contract document. Burden on reimbursable technical labor cost is considered in this case as part of cost. In addition to the costs and burden, the client also pays a fixed amount as the contractor's "fee".
   3. Cost plus fixed sum - the client will pay costs defined by contract plus a fixed sum which will cover "non-reimbursable" costs and provide for a fee. This type of contract is used in lieu of a cost plus fixed fee contract where the client wishes to have the contractor assume some of the risk for items which would be reimbursable under a cost plus fixed fee type of contract.
   4. Cost plus percentage fee - the client pays all costs, plus a percentage for the use of the contractor's organization.
2. Fixed price types of contract are ones wherein a contractor agrees to furnish services and material at a specified price, possibly with a mutually agreed upon escalation clause. This type of contract is most often employed when the scope of services to be provided is well defined.
   1. Lump Sum (LS) - contractor agrees to perform all services as specified by the contract for a fixed amount. A variation of this type may include a turn-key arrangement where the contractor guarantees quality, quantity and yield on a process plant or other installation.
   2. Unit price - contractor will be paid at an agreed upon unit rate for services performed. For example, technical work-hours will be paid for at the unit price agreed upon. Often field work is assigned to a subcontractor by the prime contractor on a unit price basis.
   3. Guaranteed Maximum Price (GMP) (TARGET PRICE) - a contractor agrees to perform all services as defined in the contract document guaranteeing that the total cost to the client will not exceed a stipulated maximum figure. Quite often, these types of contracts will contain special share-of-the-saving arrangements to provide incentive to the contractor to minimize costs below the stipulated maximum.
   4. Bonus/Penalty - a special contractual arrangement usually between a client and a contractor wherein the contractor is guaranteed a bonus, usually a fixed sum of money, for each day the project is completed ahead of a specified schedule and/or below a specified cost, and agrees to pay a similar penalty for each day of completion after the schedule date or over a specified cost up to a specified maximum either way. The penalty situation is sometimes referred to as liquidated damages. (11/90)^[2]

Agreement

The written agreement between the owner and the contractor covering the work to be performed; other contract documents are attached to the agreement and made a part thereof as provided therein.^[2]

Alternative Dispute Resolution (ADR)

Any procedure or combination of procedures used to resolve issues in controversy without the need to resort to litigation. ADR typically includes assisted settlement negotiations, conciliation, facilitation, mediation, fact-finding, mini-trials, and arbitration.^[2]

Amendment

A modification of the contract by a subsequent agreement. This does not change the entire existing contract but does alter the terms of the affected provisions or requirements.^[2]

Anticipatory breach

A specific refusal by the contractor to perform within the terms of the contract documents before performance is due; or a clear indication that the contractor is unable or unwilling to perform.^[2]

Arbitration

A method for the resolution of disputes by an informal tribunal in which a neutral person or persons with specialized knowledge in the field in question renders a decision on the dispute. An arbitrator may grant any award which is deemed to be just and equitable after having afforded each party full and equal opportunity for the presentation of the case. Arbitration does not strictly follow the rules of evidence and discovery procedures found in litigation. Arbitration may be conducted under the auspices of an organization (e.g., the American Arbitration Association) which is available as a vehicle for conducting arbitration.^[2]

Breach of contract

Failure, by either the owner or the contractor, without legal excuse, to perform any work or duty owed to the other person.^[2]

Contract change

An authorized modification to terms of a contract. May involve, but is not limited to: 1) A change in the volume or conditions of the work involved; 2) The number of units to be produced; 3) The quality of the work or units; 4) The time for delivery; and/or 5) The consequent cost involved.^[2]

Contract completion date

The date established in the contract for completion of all or specified portions of the work. This date may be expressed as a calendar date or as a number of days after the date for commencement of the contract time is issued.^[2]

Contract dates

The start, intermediate, or final dates specified in the contract that impact the project schedule.^[2]

Contract documents

The agreement, addenda (which pertain to the contract documents), contractor's bid (including documentation accompanying the bid and any post-bid documentation submitted prior to the notice of award) when attached as an exhibit to the agreement, the bonds, the general conditions, the supplementary conditions, the specifications and the drawings as the same are more specifically identified in the agreement, together with all amendments, modifications and supplements issued pursuant to the general conditions on or after the effective date of the agreement.^[2]

Contract price

The monies payable by the owner to the contractor under the contract documents as stated in the agreement.^[2]

Contract time

The number of days within which, or the dates by which, the work, or any specified part thereof, is to be completed.^[2]