Tenders and Contracts MCQ with answer and solution

Concept

Types of civil engineering contracts used in project execution and tendering.

Step-by-step solution

1. Understand the definition of a lump sum contract, which provides a fixed total price for all works specified in the drawings and specifications. 2. Evaluate other contract types: Item Rate involves payment based on measured quantities and pre-agreed item rates; Cost Plus involves reimbursing actual costs plus a fee; Percentage Rate involves items executed at a fixed percentage above or below the schedule of rates.

Explanation

A lump sum contract is an agreement where the contractor agrees to complete the entire project for a fixed, predetermined total cost. The contractor takes on the risk of cost overruns, while the owner knows the exact final cost beforehand.

Why the other options are wrong

A: Item Rate Contract involves payment based on actual quantities executed at scheduled rates. C: Cost Plus Contract pays the actual cost of construction plus an agreed percentage or fee for profit. D: Percentage Rate Contract quotes rates as a percentage above or below the estimated cost in the schedule of rates.

Shortcut

Lump sum = Fixed total cost for the whole project.

Common mistake

Confusing Item Rate Contract with Lump Sum Contract where Item Rate depends on actual quantities measured at site.