Pick the wrong contract type and you carry risk you never priced for. Here are the four main types, what each one puts on the line, the standard forms (HIA, MBA, AS 4000, AS 4902) you will actually see, and the AS 4000 traps a subbie on back-to-back terms has to know.
The four contract types
- Lump sum (fixed price): a defined scope for a fixed price. Best when the design, scope and site are known — but the price risk is on you, so load your contingencies and be strict on variations.
- Cost-plus: the owner reimburses your actual costs (labour, materials, subbies) plus an agreed fee or percentage. Suits an uncertain scope; the owner carries the cost risk but gets full transparency.
- Cost-plus with a Guaranteed Maximum Price (GMP): cost-plus, but capped — overruns beyond the GMP are usually on you (subject to change orders), often with a savings-share below the cap. For a moving scope that still needs a hard budget.
- Design & Construct (D&C): you take on both the design and the build, usually lump sum on a performance brief. Single point of responsibility, but you carry the design-coordination risk.
Rule of thumb: scope clear → lump sum; scope emerging with flexibility → cost-plus; emerging but a budget cap is critical → GMP; one point of responsibility for design and build → D&C.
The standard forms you will see
- HIA New Homes (state variants) — residential new homes, renos and extensions; Housing Industry Association.
- MBA Residential (e.g. HC-7 in VIC) — residential, commercial and subcontract; the state Master Builders Associations.
- AS 4000-1997 — construct-only, lump-sum head contract (Standards Australia); commercial and larger jobs.
- AS 4902-2000 — the Design & Construct general conditions.
HIA and MBA are the two dominant private residential forms (both have state variants); which one turns up depends on the builder's membership and local norms, not legal preference. AS 4000/4902 appear on commercial and institutional work, usually with heavy special conditions — get unusual special conditions checked.
AS 4000 — the traps for a subbie on back-to-back terms
The head-contract mechanics get pushed down into subcontracts, so know these:
- Payment: progress claims certified by the superintendent, paid within the annexure time — with your state SOP rights overlaid, and "pay when paid" generally void even in back-to-back terms.
- Variations: the superintendent directs; you price and claim under the procedure. You get extra money for a variation, but not automatic extra time — you must claim time separately under the EOT clause.
- Time and EOTs: practical completion by the contract date or liquidated damages run; EOT claims generally must be notified within 28 days of when you should reasonably have known of the delay, or you can lose the right (see EOT & Liquidated Damages).
- Termination/suspension: either side can terminate for substantial breach after notice and a cure period; suspend-for-non-payment rights exist but must line up with the contract and SOP.
- Disputes: staged — notice, conference, then arbitration — but your statutory SOP process runs independently of the dispute clause.
Practical rule for subbies: be obsessive about notices (EOTs, variations, disputes), understand how LDs and delay risk are pushed down, and remember your SOP rights are separate from the contract.
Common mistakes
- Taking a lump sum on a half-baked design.
- Assuming a variation gives you time — it does not, on AS 4000.
- Missing the 28-day EOT bar on a commercial job.
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