iv. Contracts, Procurement & Cost Control

Contracts, procurement, and cost control govern how construction work is scoped, priced, purchased, and financially managed. These mechanisms allocate risk, define responsibilities, and provide the controls needed to manage budgets and prevent cost overruns throughout a project.

Allowance

A predefined budget amount for a specific scope of work or material selection that has not yet been finalized.

Bid Package

A defined portion of work issued to subcontractors for pricing during procurement.

Change Order

A formal modification to the construction contract that adjusts scope, cost, or schedule.

Construction Contract

The legally binding agreement defining scope, price, responsibilities, and risk allocation between parties.

Contingency

Funds set aside to cover unforeseen costs or risks during construction.

Cost Breakdown Structure (CBS)

A hierarchical organization of project costs used for budgeting and tracking.

Guaranteed Maximum Price (GMP)

A contractual arrangement establishing an upper limit on construction costs, subject to approved changes.

Procurement Process

The method of sourcing labor, materials, and services required for construction.

Schedule of Values (SOV)

An itemized list of contract components used to allocate costs and process progress payments.

Subcontract Agreement

A contract between a general contractor and a subcontractor defining scope and compensation.

Value Engineering

A cost-optimization process that evaluates alternative materials or methods while maintaining performance and intent.