What are the two main types of contracts used in construction projects?

The two main types of contracts used in construction projects are indeed fixed-price contracts and cost-plus contracts.

Fixed-price contracts establish a set price for the completed project regardless of the actual costs incurred during the construction process. This provides both parties with budget certainty, as the contractor agrees to complete the work for a predetermined price. This type of contract is particularly advantageous in projects where costs can be reliably estimated, and it transfers the risk of cost overruns to the contractor.

Cost-plus contracts, on the other hand, involve the contractor being reimbursed for actual costs incurred plus an additional amount for profit. This arrangement can be beneficial in situations where the scope of work is not fully defined, allowing for greater flexibility. It enables the contractor to be compensated fairly for work while also giving the owner insight into the actual expenses. The cost-plus model often requires careful management to ensure budgets are monitored closely.

In contrast, options like labor contracts and materials contracts typically refer to separate agreements related to specific aspects of a project rather than comprehensive contract types that govern the construction project as a whole. Similarly, the terms capped contracts and adjusted contracts do not represent standard classifications recognized in the construction industry, making them less applicable in this context. Therefore, recognizing fixed-price and cost-plus contracts