What are two common types of highway construction contracts?

What are two common types of highway construction contracts?

• A. Fixed-rate and hourly-rate contracts.
• B. Cost-plus and percentage contracts.
• C. Lump-sum and unit price contracts.
• D. Time-and-materials and incentive contracts.

Answer: (C)

Lump-sum and unit price contracts are commonly used in highway construction projects due to their distinct characteristics that suit various project needs. A lump-sum contract requires the contractor to complete the project for a predetermined total price. This format provides clarity on costs for the owner, as it includes all aspects of the project under one fixed price. It encourages contractors to manage their resources efficiently since they assume the risk of cost overruns while also maintaining the incentive to complete the work promptly. On the other hand, unit price contracts are based on the measurement of work completed, where the contractor is paid a set price for each unit of work performed (e.g., per square yard of pavement laid or cubic yard of earth moved). This arrangement is beneficial when the exact quantities of work are not known at the time of bidding. It allows for flexibility and adjustment as project conditions change, ensuring the contractor is compensated fairly for the actual work completed. These two types of contracts cater to different project scopes and provide mechanisms to handle the risks and uncertainties inherent in highway construction.

Lump-sum and unit price contracts are commonly used in highway construction projects due to their distinct characteristics that suit various project needs.

A lump-sum contract requires the contractor to complete the project for a predetermined total price. This format provides clarity on costs for the owner, as it includes all aspects of the project under one fixed price. It encourages contractors to manage their resources efficiently since they assume the risk of cost overruns while also maintaining the incentive to complete the work promptly.

On the other hand, unit price contracts are based on the measurement of work completed, where the contractor is paid a set price for each unit of work performed (e.g., per square yard of pavement laid or cubic yard of earth moved). This arrangement is beneficial when the exact quantities of work are not known at the time of bidding. It allows for flexibility and adjustment as project conditions change, ensuring the contractor is compensated fairly for the actual work completed.

These two types of contracts cater to different project scopes and provide mechanisms to handle the risks and uncertainties inherent in highway construction.