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The payment arrangements adopted on a contract directly affect the level of risk borne by the client and the contractor. This study has examined various approaches used to pay for building construction work and explains the circumstances in which they used. Most substantial building contracts in Ireland are entered into by way of lump sum arrangements based on either detailed works requirements, bills of quantities or contractor’s proposals; the contractor quotes a price ‘up front’ under these arrangements. Occasionally, measurement approaches may be used where the extent of the works are established in-situ and valued in accordance with tendered rates. On rare occasions, the contract may be arranged on a cost reimbursement basis whereby the client pays the contractor’s production costs plus a fee to manage the construction process. The degree to which the design has been completed will influence the choice of payment arrangements. The arrangements employed, in turn, directly motivate the contractor’s efforts to carry out the work in an efficient and economic manner. This ultimately has a significant impact on the final price paid by the client.
Cunningham, T. (2015) Payment Arrangements in the Irish Construction Industry - An Overview DIT, 2015.