Are you wondering some of the pros and cons of contract constructor? If yes, then this article has got you covered. You will explore the distinct advantages and disadvantages of fixed price contract construction below.
Pros of fixed price contract construction
You must already be well-equipped with the definition of Fixed price contractor. They are those people who are readily available to provide their service on the total cost.
You will have to sign a contract which will possess all the details regarding the deadline and other clauses. These types of fixed-price contract construction are generally helpful because it offers stability. You must already know that the buyers are generally worried about service price as they fluctuate. Similar is the case with sellers. They are generally concerned about the value of service dropping or mounting. You must have gotten an idea by now that why buying companies prefer fixed-price contract construction, simply because they provide a low budget opportunity. Fixed price contract construction is also beneficial in terms of defining the overall parameters. The company stays in control as everything remains within the contract. In such types of contracts, there are no surprises in the end as everything is clear cut.
Cons of fixed price contract construction
It was not difficult to talk about the clear benefits which a fixed price contract construction has to offer. There can be a huge probability of seller realizing that they might be at risk. Once the seller realizes that fixed price is not benefiting them much, they will in no time demand an increase. You will be paying more than the price due if this turns out reality. You need to realize that the costs of services and goods can be reduced dramatically and if this happens then the seller will be at a disadvantaged position. It allows a buyer more predictability about the service or goods costs in the future, but it can come with a price. Sellers might realize they’re taking a risk by having a fixed price, so they’ll end up charging more than they would normally for a price that’s fluid. If the price of the service or good drops suddenly, the seller has a disadvantage and the buyer has an advantage.
Risk involved in fixed price contract construction
The other advantage of a fixed-price contract is that it comes with calculated risk. The risk figured by fixed price contract construction is quite balanced. There are uncertainties which this sort of contract covers. Risk helps the parties to remain protected from the surprise which may land up any time and blow up the whole business model. Estimates have some serious implications and they can not be taken lightly for they tend to stick for quite a long time. One who delivers the project is actual people to deliver the estimates. These estimates need to be accurate. Any issues regarding the fixed price contract construction need to get settled down before agreeing upon the estimates.