Which contracting approach involves unit rates, cost plus, GMP, or lump sum?

The alternative contracting approach is characterized by its flexibility in the ways that costs can be managed and calculated. This includes methods such as unit rates, cost-plus contracts, guaranteed maximum price (GMP) contracts, and lump-sum contracts. Each of these methods allows for different financial arrangements that can better suit the needs of the project, fostering collaboration between parties involved.

In a unit rate contract, pricing is set per unit of work, providing transparency and adaptability to changes in project scope. A cost-plus contract allows for the reimbursement of actual costs incurred plus a fee, incentivizing contractors to focus on quality and efficiency rather than just cost-cutting. The guaranteed maximum price contract protects the owner from cost overruns while allowing for some flexibility in the execution of the project. A lump-sum contract provides the owner with a single price for the entirety of the work, promoting budget certainty.

These techniques contrast with more traditional approaches like competitive bidding, which typically involves fixed prices established through a bidding process, limiting flexibility and potential for collaborative innovation. Alternative contracting methods prioritize the unique needs of each project, often leading to improved outcomes through teamwork and shared risk management.