L4M3 Exam Dumps : Commercial Contracting

There are two main types of specification: performance specification and conformance specification (sometimes called prescriptive or technical specifications).

A conformance specification establishes the characteristics a commodity must possess, including details of how the commodity will be manufactured; engineering plans, drawings, or blueprints may be included. The design specification states in prescriptive terms what the potential offeror must provide to the buyer.

Conformance specifications have following features:

- Focus on inputs

- Give specific method, processes and materials

- May identify specific manufacturers or components

- The 'how' as well as the 'what'

- Ties supplier to set details

Advantages of using fixed pricing arrangement are as below:

- Budget/income certainty - prices are fixed up front and should not change

- The impact of changes to the supplier's cost base is not fed through to the purchaser. If costs diminish, the supplier will benefit from this, and if costs rise, the purchaser will benefit

A cost reimbursable contract (sometimes called a cost plus contract) is one in which the contractor is reimbursed the actual costs they incur in carrying out the works, plus an additional fee. Option Eof the NEC3 Engineering and Construction Contract (ECC) is an example of a cost reimbursable contract.