Multiple Prime Contracts

For example, the owner may contract directly with the major specialized trades such as:

• the electrical contractor

• the plumbing contractor

• the heating ventilating and air conditioning contractor

• and the contractor for construction of the building itself.

This system can result in lower cost to the owner because it avoids the compounded profit and overhead margins that are common to the single contract method.

The multiple contract system may also permit the owner to divide the work into smaller packages.

This permits more firms to bid for the work.

This increased competition may result in lower prices.

There are also disadvantages to the multiple contract system.

As the construction cost estimator, more time and expense may be required in receiving separate bids or negotiating separate contracts.

Someone will have to coordinate the work of the various contractors and form the construction terms.

This may be done by the owner himself, the design professional, a construction manager or the contractor who is constructing the building structure.

As the construction cost estimator, the owner must determine the cost that will be incurred in connection with the coordination work.

A second disadvantage is that the lines of responsibility and accountability under multiple contracts is less clear than a single contract system.

When defective work is the issue, a contractor may claim that his work was proper when he performed it, but that another contractor’s work caused the problem.

In any event, the owner (or his design professional) who is responsible for the construction project management must coordinate a solution to these competing claims under the multiple contract system.

Had there been only a single contract, the prime contractor would be responsible for construction management.

He would be required to resolve the problems since the contractor would be responsible for the work of his subcontractors.

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