The Measured Contract
This type, one of the most widely used in the construction field, has become well-established from decades of application across a wide range of circumstances, in both stable and unstable social and economic conditions. The contract documents contain quantities of each item, which is accurately described and includes clear specifications. The contractor includes the price of each item, multiplying the price by quantity to determine the total cost of the item. The total project cost is the sum of all these quantities.
The advantage of this method is that a shortage or increase in quantities can be readily determined, along with any impacts on the price of this item which was agreed upon in advance on a basis stipulated in the contract.
Recently, in the wake of rising prices and other ongoing market changes, the presence of a fixed price throughout the project period has come to be seen as a potential source of damage to the interests of the contractor, who enjoys little or no explicit protection under this type of contract. As contractors have accordingly become reluctant, or have even refused, to tender for contracts that have not provided some safeguard against rising costs, there has emerged a widely-followed transnational commercial practice whereby, in the case of a project whose execution exceeds twelve months, a clause in the contract provides for allowing increased prices for labor, materials, or tools.
In European countries, a newsletter is published monthly to define the increase in prices through government institutions such as the Department of Environment.