Give the meaning and situations
where the following type of payments are made to the contractor.
Secured advance
Interim payment
Secured advance
It is the advance given to the
contractor for purchase of materials required for completion of work. The materials
of only unperishable nature are considered and only 75% of cost of such
materials is given to the contractor after the material comes on site. It is
referred as secured advance because the authorities maintain a right over the
ownership or securance of the materials brought by the contractor.
e.g. Advance for ‘street’ brought
by the contractor.
Interim payment
It means the payment made on a
running account to a contractor for work done or supplies made by him, when the
work is still in progress. The work done or supplies are duly recorded in the measurement
book and the contractor is paid from time to time in such a way that during
progress of work he receives an amount which corresponds to the extent of work
done by him.
Give the meaning of cost plus
percentage contract and state the advantages and disadvantages of it.
Cost plus percentage contract
It is a contract between the
owner and the contractor in which the contractor is given by fee for work
execution as some percentage of the total final construction cost. The percentage
may be fixed one or could be variable.
Advantages of cost plus
percentage contracts
Suitable for fluctuating market
conditions.
Work can be started without
waiting for all the plans of work and detailed estimate.
A fixed % is guaranteed to the
contractor and hence, he can work without financial tensions.
High quality of work can be
obtained.
Disputes regarding extra item
of work do not arise.
The contractor can reduce the
final construction cost when he is being paid % for the amount of cost reduced.
Hence, optimum use of materials and labour is achieved.
Work can be completed before
time period hence reducing overheads etc.
Contractor can work in the
owners interest only.
Disadvantages.
If the final cost increases by
an appreciable amount the owner could be in financial crisis.
If the % given to the
contractor is a fixed one based on the final cost the contractor may tend to
increase the final cost.
Work of meagre quality may have
to be demolished at the owner’s money and also changes in plans etc will effect
the owners finance.
The contractor’s accounting may
include intentional or unintentional mistakes and the owner may not be able to
check them which will enhance the final cost.
