Fixed fee with a bonus and penalty. With this type of fixed fee, the contractor is reimbursed the actual cost of construction plus a fee. A target cost estimate is set up and, if the cost is less than the target amount, the contractor receives a bonus of a percentage of the savings. If the cost goes over the target figure, there is a penalty.
Changes in contract
It is standard practice that a construction contract gives the owner the right to make changes in the work within the general scope of the contract during the construction period. Depending on the contract and its terms, such changes might involve additions to or deletions from the contract, modifications of the work, and changes in the methods or manner of work performance, changes in owner-provided materials or facilities, or even changes in contract time requirements.
On a unit-price contract, changes are automatically tract, unless changed work involves items that were not included in the original contract, unless the changes are so extensive the contractor and owner is authorized by the contract to request adjustment in the unit prices affected, or unless an extension of time will be required. When a change to a publicly financed project is involved, the contractor may be well advised to determine if the change is with in the scope of the changes clause of the contractor and that public agency has followed the procedural requirements of the applicable statue.
When the owner or its agent orally approved the additional work and promised to pay extra for it, had knowledge that it was being performed without written authorization and did not protest, the courts have ruled either that the work was done under an oral contract separate and distinct from the written one or that the clause requiring written authorization was waived. The courts have sometimes disregarded the requirements for a written order on the grounds that it is unjust enrichment for the owner to enjoy the benefit without having to pay for it.