A negotiated contract in construction refers to an agreement between the owner and contractor, where they mutually decide on the terms and conditions of the contract. Unlike a competitive bid, where the owner selects the contractor based on the lowest bid, in a negotiated contract, the owner selects a contractor based on their qualifications, experience, and expertise.
Negotiated contracts are commonly used in construction projects because they offer several benefits like a collaborative approach, which allows the contractor to work closely with the owner to define project goals and objectives. This approach enables the contractor to understand the owner`s needs and priorities, ultimately leading to a project that meets the owner`s requirements.
Additionally, negotiated contracts offer flexibility in terms of adjusting the scope of work after the project has commenced, without impacting the project`s budget and timeline. Changes can be made quickly, and the contractor can adjust the project plan accordingly, leading to a successful project outcome.
One of the most significant advantages of a negotiated contract is that it helps prevent conflicts during the construction process. Since both the owner and contractor have mutually agreed on the contract`s terms and conditions, there is a reduced likelihood of disputes arising. This effectively reduces the potential for legal claims and disputes, which can significantly impact the project`s schedule and budget.
Another benefit of negotiated contracts is that they facilitate better communication between the owner and contractor. Since the contractor is involved early on in the project, they can offer valuable insights and recommendations to the owner. The contractor can provide input during the design and planning stages, which can lead to cost savings and better project outcomes.
In conclusion, negotiated contracts in construction are an effective way for owners to engage contractors and work collaboratively to achieve successful project outcomes. This contract type offers a collaborative approach, flexibility in project scope, and helps prevent conflicts during construction. If you`re planning a construction project, it`s worth considering a negotiated contract as an alternative to the traditional competitive bid process.