General Contracting usually is a fixed price contract. The contract terms between the client and general contractor. Under the fixed price contract the general contractor is responsible for delivering the project whit in time frame and budget. In the construction industry on a residential or commercial project a general contractor is the individual or entity that negotiates with the owner or developer the type of overall contractual scheme that will be utilized for the project.
The process of developing what the contractor will propose as the basis for a fixed price construction contract begins with negotiations with the various subcontractors who will be involved on the project. As much as possible, the contractor will in turn attempt to obtain fixed price contracts from the various subcontractors lined up for the project. The overall economic climate and the health of the local construction industry dictates how readily a fixed price construction contract will be utilized across the board in a particular project.
The most essential benefit associated with a fixed price construction contract is budget reliability for the developer or owner. Essentially, a fiscal wall is built between the developer (or owner) and the general contractor. If cost overruns exist that travel upward to the general contractor, they do not pass any further, alerting the agreed-to bid on the project itself. If the general contractor is able to win fixed price contractors from all or most of the subcontractors associated with a project, he also will be in an enviable position of being able to avoid the expenses of potential cost overruns.