Question
Why is the contract important in a construction project?
Answer
In construction projects, contracts are crucial as they define the legal framework, responsibilities, and relationships among all parties involved. They ensure clarity, manage risks, and facilitate smooth project execution.
Importance of Contracts in Construction Projects
Legal Framework and Clarity: Contracts serve as legal documents that bind parties, defining their rights, responsibilities, and authorizations. They regulate relationships from design to project completion, ensuring clarity and preventing misinterpretations and contradictions (Komurlu and Yeni, 2019; Zheng, 2018; Liu, 2015).
Risk Management: Contracts allocate risks among parties, which is essential for managing the complexities of construction projects. Different types of contracts, such as Design-Bid-Build and Design-and-Build, offer varying risk profiles, impacting project quality, cost, and duration (Surahyo, 2018; Gashi and Ivezaj, 2023).
Trust and Cost Efficiency: Trust in contractual relationships can significantly affect project costs. Mistrust often leads to increased costs due to exculpatory clauses and disputes. Establishing trust-based contracts can lead to cost savings and improved project management (Zaghloul and Hartman, 2003).
Project Management and Administration: Effective contract management is central to project management, helping to control investment, progress, quality, and safety. It involves regular inspection and management of contract performance to avoid disputes and ensure project success (Zheng, 2018; Wang, 2020; Liu, 2015).
Technological Integration: The integration of technology, such as smart contracts and Building Information Modelling (BIM), is transforming contract management. These technologies aim to automate and enhance contract performance, although challenges remain due to the complexity of construction projects (Rasti, Feili and Sorooshian, 2024; Mason, 2017).
Conclusion
Contracts in construction projects are indispensable for defining legal relationships, managing risks, and ensuring project success. They provide a structured approach to project management, facilitate trust, and are increasingly incorporating technological advancements to improve efficiency and reduce costs.
References
Rasti, H., Feili, A., & Sorooshian, S., 2024. Analysing critical success factor of smart contract in construction industry with DANP approach. Frontiers in Built Environment. https://doi.org/10.3389/fbuil.2024.1478239
Zaghloul, R., & Hartman, F., 2003. Construction contracts: the cost of mistrust. International Journal of Project Management, 21, pp. 419-424. https://doi.org/10.1016/S0263-7863(02)00082-0
Komurlu, R., & Yeni, K., 2019. Contract Management and Disputes in the Construction Industry. International Journal of Scientific and Technological Research. https://doi.org/10.7176/jstr/5-11-09
Zheng, F., 2018. Application Research on Construction Project Management Contract Management. **. https://doi.org/10.23977/ICIDEL.2018.063
Surahyo, A., 2018. Types of Construction Contracts. **, pp. 45-52. https://doi.org/10.1007/978-3-319-66685-3_5
Wang, T., 2020. Research on Contract Management and Claim of Construction Project. **, pp. 327-332. https://doi.org/10.2991/aebmr.k.200908.053
Liu, Y., 2015. Preliminary Discussion on the Management of Construction Contracts. **, pp. 496-499. https://doi.org/10.2991/AP3ER-15.2015.118
Gashi, E., & Ivezaj, M., 2023. Quality management for design – Bid-build versus design-and-build contracts for infrastructure projects. International Review of Applied Sciences and Engineering. https://doi.org/10.1556/1848.2023.00730
Mason, J., 2017. Intelligent contracts and the construction industry. Journal of Legal Affairs and Dispute Resolution in Engineering and Construction, 9, pp. 04517012. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000233#STHASH.WMGQA56Q.DPU
Eggleston, B., 2015. The NEC3 Engineering and Construction Contract. A commentary. 2nd Edition, Oxford: Blackwell Science.
Hughes, W., Champion, R. and Murdoch, J., 2015. Construction Contracts Law and Management 5th Edition. Oxford: Taylor and Francis.
Morledge, R. and Smith, A., 2013. Building procurement. Chichester: John Wiley & Sons.
Walker, A., 2015. Project management in construction. Chichester: John Wiley & Sons.
