Types of Construction Contracts in Australia: Understanding Your Contracting Options with Shafbuild

In the dynamic world of construction, understanding the types of construction contracts is crucial for every project. Whether you’re a homeowner, a builder, or a contractor, knowing the different types of construction contracts available in Australia can help you manage risks, control costs, and ensure successful project delivery. At Shafbuild, we specialise in guiding you through the maze of different types of contracts in construction. In this comprehensive guide, we’ll explore a wide range of construction project contract types and explain the nuances of types of contracts in construction. You’ll learn about various types of contract in construction, from fixed-price to cost plus, and discover the best contracting options to suit your project’s needs. We also delve into topics like construction contract types, and types of building contracts, and even provide insights on a contract for contractors and a contractors agreement template. This guide will also cover key aspects of a cost plus contract in construction, ensuring that you understand all contracts and types of contract available in today’s market.

Introduction to Construction Contracts

Construction contracts are the backbone of any successful construction project. They define the obligations, responsibilities, and expectations of all parties involved. Understanding the types of construction contracts is essential because each contract type allocates risk differently and impacts how you manage your project. Whether you are considering a fixed-price agreement or exploring cost plus contract in construction models, knowing the types of contracts in construction available in Australia can save you time and money while protecting your interests.

Key Categories of Construction Contract Types

Below, we break down the major types of construction contracts that you need to be familiar with:

1. Lump Sum Contracts

• A lump sum contract is one where the contractor agrees to complete the work for a fixed price.
• Advantages: Cost certainty and straightforward administration.
• Disadvantages: Limited flexibility for changes during the project.

Lump sum contracts are one of the most common construction contract types used in Australia. They are ideal for projects where the scope is well-defined and changes are minimal.

2. Time and Materials Contracts

• Payment is based on the actual time spent and materials used.
• Advantages: Flexibility in project scope and adjustments.
• Disadvantages: Uncertainty in the final cost, which can lead to higher expenses if not managed carefully.

This contracting option is useful when project details are not fully defined at the outset. It is an example of a different type of contract in construction that offers adaptability, especially in projects where unforeseen changes are likely.

3. Unit Price Contracts

• The work is divided into measurable units, each with an assigned price.
• Advantages: Ideal for projects with repeatable tasks, as the final cost depends on the actual quantities used.
• Disadvantages: Requires accurate measurement and estimation.

Unit price contracts are popular in projects where the scope of work can be broken down into discrete units. They are an important component of construction project contract types that provide clarity on pricing based on measurable work.

4. Guaranteed Maximum Price (GMP) Contracts

• The contractor agrees on a maximum price, and any cost overruns are generally the contractor's responsibility.
• Advantages: Provides cost control and risk mitigation for the owner.
• Disadvantages: May limit design changes and add pressure on the contractor.

GMP contracts are crucial types of contracts in construction when budget certainty is a priority. They offer a clear ceiling on costs, which is highly attractive for many construction projects.

5. Cost-Plus Contracts

• The contractor is paid for all project costs plus a fixed fee or percentage.
• Advantages: Transparency in costs and flexibility in project execution.
• Disadvantages: The final cost is less predictable and requires careful oversight.

Cost plus contract in construction is a popular model in projects where flexibility is needed. It’s one of the key types of building contracts that allow for changes in scope while ensuring the contractor is fairly compensated.

6. Design-Build Contracts

• The same entity is responsible for both design and construction.
• Advantages: Streamlined communication and faster project delivery.
• Disadvantages: Can reduce owner control over the design process.

Design-build contracts are considered one of the most innovative construction contract types. They integrate design and construction phases, which often results in improved project efficiency.

7. Integrated Project Delivery (IPD)

• A collaborative approach where all major participants share risk and reward.
• Advantages: Enhanced collaboration and potential cost savings.
• Disadvantages: Requires a high level of trust and commitment from all parties.

IPD represents a modern, different type of construction contracts approach. It focuses on a partnership model that aligns the interests of owners, designers, and contractors.

8. Construction Management Contracts

• A construction manager is hired to oversee and coordinate the project, while multiple trade contracts are separately managed.
• Advantages: Increased flexibility and specialised management.
• Disadvantages: More complex coordination and higher management costs.

This is another significant type of contracts in construction that is particularly beneficial for large, complex projects. It allows for greater control over individual trade agreements while still centralising project management.

Standard Form Construction Contracts in Australia

There are numerous standard form construction contracts in Australia that are widely recognised in the industry. Below is a table summarising 15 standard forms that serve as benchmarks in the market:

These types of construction contracts are standard in the industry and provide a framework for everything from contract for contractor to a comprehensive contractors agreement template. They represent a range of different types of construction contracts and contracting options to suit various project needs.

Expert Tips for Selecting the Right Contract

Choosing the correct types of contracts in construction depends on several factors:



• Project Scope and Complexity: Determine whether a fixed-price, cost-plus, or unit price model is best for your project.
• Risk Allocation: Assess how risk is shared between owner and contractor. For instance, a cost plus contract in construction might be ideal if flexibility is required.
• Legal Considerations: Ensure that your chosen contract complies with Australian standards and includes a robust contract and types of contract clause.
• Budget Certainty vs Flexibility: Decide if you prefer the predictability of a lump sum contract or the adaptability of a time and materials agreement.

Navigating Contracting Options with Confidence

Selecting the right types of construction contracts is a fundamental step in achieving a successful construction project. Whether you opt for a lump sum contract, cost plus contract in construction, or any of the other different types of construction contracts available, understanding your options is key. At Shafbuild, we are committed to guiding you through the process, ensuring that you choose the best construction project contract types for your needs. By leveraging expert advice and industry-standard contracts, you can confidently navigate the complexities of types of contracts in construction and secure the most appropriate contracting options for your project.

In today’s competitive market, knowing the different types of contract in construction and the benefits and drawbacks of each can make all the difference in your project’s success. Whether you are a seasoned contractor or embarking on your first building project, the right contract is your foundation for a smooth, efficient, and successful build. Trust Shafbuild to help you understand and implement the best construction contract types that meet your unique needs, ensuring every project is managed with clarity and precision.