Negotiated Contract - GC at Risk
RMR's Negotiated Contacts have historically accounted for most of its fixed-rate / GC at Risk contracts. Under this contract method; the Owner and Contractor negotiate a Firm Fixed Price contractor mark-up (FFP) for the specified and projected scope of work. The Owner then establishes a formal budget for the project and works closely with the Architect and Contractor to design within the budgetary constraints.
RMR provides three estimates during the design phase to verify plans and specifications are tracking with the construction budget. The three estimates will be generated at the completion of each of the following design phases.
- Design Development
- Final Construction Documents
The first estimate is based on the schematic plans to establish a schedule of values and allowances for the project. With the schematics tracking the budget, plans will proceed to the next phase of design.
When design development plans have been completed, RMR will again provide an estimate based on the current plans and discussions for the level of finish. The Owner, Architect and Contractor will review the current estimate and make changes accordingly.
Once final Construction Documents are compete, RMR will bid out each of the items in the schedule of values with qualified sub contractors. When all bids have been received, the team will review the bids and select vendors’ bases on reputation, price, proposal, etc (buyout process). With all subcontractors being selected, the Contractor will generate a final estimate based on the total sum of selected sub contractors and negotiated FFP and lock the estimate as a Guaranteed Maximum Price (GMP) General Contractor at Risk contract.
All changes and modifications to the plans or specifications after the GMP contract is generated will be handled by the Change Order process.
Under its cost-plus fixed rate or fee contracts, RMR charges clients for its costs plus negotiated rates based on its indirect costs. In negotiating a cost-plus fixed rate or fee contract, RMR estimates all recoverable direct and indirect costs and then adds a profit component, which is a percentage or total agreed fee of total recoverable costs to arrive at a total dollar estimate for the project.
Competitive Fixed Bid
Competitive Fixed Bid contracts are quickly becoming a contract of the past for both private residential and commercial construction. Under this bidding/contract method, the Contractor is required to submit a Fixed Bid solely based on the plans and specifications. All liability falls to the Owner for the accuracy of the plans.
All errors, omissions or changes in the plans or specifications are subject to a Contractor generated change order.
Change orders are modifications of an original contract that effectively change the provisions of the contract without adding new provisions. Only the Owner, Owners Representative or Contractor may initiate change orders. These typically include changes in specifications or design, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders occur when changes are experienced once contract performance is underway. Change orders are documented by both the Owner and Contractor generally before any modifications to the price and/or scope occur.
The change order markup value is negotiated with the Prime Contract and based on the total sum of labor, materials and equipment to perform the work. The value is typically at twice the prime contract markup rate.