The construction industry is based on contracts or agreements. When a construction project is decided, the project owner searches for contractors who will tell them the right prices for the completion of the project with the help of construction takeoff services. The contract for the construction project is different for different types of construction projects. The contracts are based on project scope, project location, timeline requirements, project schedules, budget allocations, and the number of parties involved in the construction project. 


No construction project can be completed without a well-negotiated construction contract. You should have a clear idea about the type of construction contract for your construction project. In this article, we will tell you about 5 important types of construction projects.


What is a Construction Contract?

If you are here then you might be confused about the construction contracts. Here is a simple definition for you. In any construction project, there are two main individuals involved; the project owner (search for work) and the contractor (take the work). The project owner describes the project details to the contractor and the contractor responds to these details. This process occurs in the form of documentation. This process of legal documentation is called a construction contract. 


Still confused about the legal documents, let me tell you! Both parties sign on a set of legal documents, these documents are all the comprehensive information about the project such as project cost, delivery, schedules, scope, specific tasks, and all other terms and conditions of the project. If both parties agree on this condition they sign and continue the process. 

Types of Construction Contracts

Lump Sum Contract

In a lump sum construction contract, the contractor delivers the project at a preset price. This type of contract does not require any complicated estimations, the contractor has planned estimates according to his experience and if the project is straightforward. These types of contracts are straightforward and only helpful for smaller projects.

Cost-Plus Contracts

In some contracts, the contractor gets payments for all their expected and calculated costs at the time of project execution. The contractor gets the data about the project’s expenses along with their profit with the help of construction estimating companies. Let me tell you more about the construction costs, construction costs may include overhead costs, insurance costs, mileage costs, rental services costs, labor salaries costs, fuel costs, and many more. This is called a cost-plus construct.

Design Build Contract

If you have some knowledge about the construction industry then you must know that the construction project begins after the competition of a project design. It takes two types of contracts, one is for the design and the other is for the actual construction. There is a type of contract that involves both procedures in one contract which is called a design-build contract. In this contract, the construction work begins even before the completion of the complete project design. The main benefit of this contract is that it saves time for the contractors and project owners. 

GMP Contracts

GMP contracts stand for Guaranteed Maximum Price Contracts. In normal contracts, the owner pays the contracts and in cases when the costs are overrun the contractor requires more money from the owner. This disturbs the project budget and profit margins. But in a GMP contract, the owner pays a maximum amount of money to the contractor and in case of budget deficiency, the contractor will be responsible and the owner does not have to pay any extra amount.

Incentive Construction Contract

This type of construction contract is based on conduction between the contractor and the owner. In this type of contract, the contractor agrees on a specific project timeline. He has to finish the project before the specified date or specified budget. If the contractor is successful in achieving that milestone then he will get some extra payment from the owner. 


The construction contract is the heart of any construction project. No construction project will be done without a well-discussed and estimated contract. A project owner offers a project to contractors and the contractor reads the project details and prepares accurate estimates. They take estimates from multiple estimation companies in the USA. After that, they bid for the project which ensures the project completion in time allowing them to earn good profits from it.