Fixed total price, also known as "closed price" and "guaranteed price". When it comes to fixed total price risk, most people will mention "winning the bid at a low price", but in fact, the essence of fixed total price risk is not that the tender offer is low, but that the contractor bears all the "quantity" and "price" risks.

1

First of all, the risk of the contractor's "price". As far as the contractor is concerned, once the fixed lump sum contract is signed, the contractor will bear the price risk, and the inquiry error during bidding and the price increase risk during contract performance will be borne by the contractor.

2

Secondly, the contractor "measures" the risk. In the fixed lump sum contract, the employer often only provides design drawings and descriptions, and the contractor should calculate the engineering quantity himself when quoting, and then get the total contract price according to the declared comprehensive unit price. Even if the employer provides the bill of quantities, it is only the reference of the contractor's tender offer, and the employer often declares that he is not responsible for the calculation error of the quantities. Therefore, the contractor has to bear the risk of missing or miscalculating the engineering quantity.

1. Risk sources

For the risk sources of fixed total price, two project management modes are mainly analyzed here:

Project general contracting mode

Under the project general contracting mode, the contractor designs according to feasibility study, scheme design or preliminary design, and relies on technical ability and resource integration ability to meet the requirements of the employer, and completes the procurement and construction with design as the core. Under the fixed total price mode, the contractor has the following risks:

1

bidding risk. The contractor makes a tender offer based on feasibility study, scheme design or preliminary design. When making a tender offer, the contractor should calculate the engineering quantity by himself, and then get the total contract price according to the declared comprehensive unit price. The tender offer is made according to the specifications, standards, design requirements and his own experience. For most contractors, they are better at and more experienced in bidding quotation under construction drawing design, while bidding quotation based on feasibility study, scheme design or preliminary design, or even "employer's requirements" is prone to high or low bidding price due to lack of experience. If the price is too high, it will not win the bid, and if the price is too low, it will lose money.

2

design capability risk. After the traditional construction unit undertakes the general contracting project, the design work is rarely completed by itself. Most project designs either form a consortium with the design unit when bidding, or design is subcontracted to other design units, and sometimes even the design unit designated by the owner. In view of the fact that the design cost of the general contracting project is calculated separately at present, under the fixed total price mode of the general contracting project, it is often the case that the design unit only meets the employer's requirements while ignoring the contractor's construction cost, which leads to the risk that the design is divorced from the cost, the fixed total price can't be covered, the design schedule is delayed, and even some contractors have insufficient technical ability and the design and engineering can't meet the quality acceptance.

3

Change pricing risk. For the general contracting project, before the design is confirmed, if there is any change, such as the change of the basic data of the project and the site obstacle data, the contractor shall timely apply for the change of pricing accordingly; After the design is confirmed, the contractor will carry out the construction according to the drawings. The design is the basis of the construction schedule and cost management. During the construction process after the design is confirmed, if the confirmed design changes due to the owner's reasons, the contractor may apply for a change in pricing. Therefore, the contractor should attach great importance to the owner's confirmation of the design, and take it as an important dividing point for changing the pricing method.

4

Risk of price increase in the market. The fixed total price often stipulates that the price increase risk of the talent machine shall be borne by the contractor himself, and it will not be adjusted due to market price fluctuation, so it will be included in the fixed total price.

5

Project acceptance risk. Different from the general general contracting of housing construction projects, the acceptance of general contracting projects is more complicated. In addition to meeting the requirements of specifications, some projects also involve trial run and trial operation.

construction general contracting mode project

in the construction general contracting mode, the contractor completes the self-construction part of the contract according to the design requirements and the employer's requirements, and assists the owner in the general contracting service and management of the designated subcontracting, materials supplied by Party A and parallel contracting parts (if any).

In these modes, in addition to the above-mentioned bidding risk and market price increase risk, other risks include: design responsibility; Professional engineering; Damage to a third person; Geological conditions; Responsibility for the quality and progress of Party A's materials supply, designated subcontracting and parallel contracting.

ii. effectiveness of clauses

when a fixed-price clause is stipulated in a contract, how should it be recognized as effective and how can it be broken through?

fixed total price clause and "list specification"

Some people advocate that "list specification" can break through the fixed total price clause. It claims that the Code for Valuation with Bill of Quantities of Construction Projects stipulates:

1

The bill of quantities must be adopted in the construction project contracting with state-owned funds;

2

When contracting a construction project, the content and scope of risks in the valuation must be clearly defined in the bidding documents and contracts, and the content and scope of risks in the valuation shall not be stipulated by infinite risks, all risks or similar statements;

3

If the contract price adjustment is affected due to the following factors, it shall be borne by the employer:

1. Changes in national laws, regulations, rules and policies;

2. Labor cost adjustment issued by provincial or industrial construction authorities, except that the contractor's quotation for labor cost or artificial price is higher than that issued;

3. The prices of raw materials managed by government pricing or government guidance prices have been adjusted.

in my opinion, this proposition is difficult to realize. Because the bill pricing specification itself generally does not constitute a part of the contract, the bill pricing specification is generally less effective than the contract, and only when the contract clause violates the mandatory provisions of national laws and administrative regulations does it not apply. Therefore, when the fixed total price clause in the contract conflicts with the bill pricing specification, the contract shall prevail, unless it is clearly stipulated in the contract that the bill pricing specification shall be implemented and its interpretation order and effect are higher than the fixed total price clause, then the bill pricing specification can break through the fixed total price clause.

Fixed price clause and obviously unfair

Some people argue that the fixed price clause can be broken through by "showing fairness", which claims:

Article 151 of the General Principles of Civil Law

The provisions of obviously unfair's civil juristic act: "If one party takes advantage of the other party's situation of being in danger and lack of judgment, resulting in obviously unfair when the civil juristic act is established, the injured party has the right to request the people's court or.

Article 54 of the Contract Law

"Canceled Contracts" stipulates: "One party has the right to request the people's court or an arbitration institution to modify or cancel the following contracts:

(1) The contract was concluded due to gross misunderstanding; (2) obviously unfair at the time of conclusion of the contract. If one party leads the other party to conclude a contract against its true meaning by fraud, coercion or taking advantage of others' danger, the injured party has the right to request the people's court or arbitration institution to modify or cancel it. If a party requests a change, the people's court or the arbitration institution shall not revoke it. " ?

in my opinion, these claims are not valid. When the Employer invited bids, he had already prompted the relevant risks and bidding requirements of the project, and the bidder voluntarily responded to the bid with knowledge of the bidding requirements of the project; Moreover, when signing a contract, the agreed fixed total price is a kind of prediction and risk "silence" for possible future results. The actual settlement price in the future may be higher or lower than the closed total price, which is an agreed risk commitment. There is no such thing as "one party takes advantage of the other party's predicament and lack of judgment ability, which leads to obviously unfair's civil juristic act", so these claims cannot break through the agreement of the fixed total price clause.

Fixed lump sum clause and "change of circumstances"

Some people argue that the fixed lump sum clause can be broken through "change of circumstances", and their claims are as follows:

1

The Guiding Opinions on Several Issues Concerning the Trial of Civil and Commercial Contract Disputes under the Current Situation issued by the Supreme People's Court proposes that the principle of change of circumstances should be carefully applied and the interests of both parties should be reasonably adjusted. In order to prevent the abuse of the principle of change of circumstances and affect the normal trading order of the market, if the people's court decides to make a judgment by applying the principle of change of circumstances, it shall strictly perform the relevant review procedures for the application of the principle of change of circumstances in accordance with the requirements of the Supreme People's Court's Interpretation of Several Issues Concerning the Correct Application of the Contract Law of the People's Republic of China (II) Notice on Serving the Overall Work of the Party and the State (Law [29] No.165).

2

the Supreme People's Court's Interpretation of Several Issues Concerning the Correct Application of the Contract Law of the People's Republic of China (II) Notice on Serving the Overall Work of the Party and the State stipulates: "II. Interpretation of Several Issues Concerning the Strict Application of the Contract Law of the People's Republic of China (II) Article 26 In order to cope with the development and changes of the economic situation, the trial work can achieve the unity of legal and social effects. According to the principles and spirit stipulated in the General Principles of the Civil Law and the Contract Law, this paper explains the provisions of Article 26: After the establishment of a contract, the objective situation has changed significantly, which is unpredictable by the parties when concluding the contract and is not a commercial risk due to force majeure. If it is obviously unfair for one party to continue to perform the contract or the purpose of the contract cannot be achieved, and the parties request the people's court to modify or terminate the contract, the people's court shall decide whether to modify or terminate the contract according to the principle of fairness and the actual situation of the case. The people's courts at all levels must correctly understand and carefully apply the above interpretation provisions. If it is really necessary to apply it in a case according to the special circumstances of the case, it shall be reviewed by the higher people's court. If necessary, it should be reported to the Supreme People's Court for review. "

according to the above-mentioned relevant provisions, the court applies the "change of circumstances" cautiously. If it is really necessary to apply it in a case according to the special circumstances of the case, it should be reviewed by the higher people's court. If necessary, it shall be submitted to the Supreme People's Court for review. Moreover, it is rare in judicial precedents, and these claims are difficult to realize.

To sum up, the fixed price clause of the contract has legal effect because the market competition and adjustment mechanism are adopted in the valuation of construction projects. Even if the contract is deemed invalid, according to Article 2 of the Interpretation of the Supreme People's Court on Applicable Legal Issues in the Trial of Construction Contract Disputes (Fa Shi [24] No.14), the construction contract of the construction project is invalid, but if the construction project passes the completion acceptance, the contractor's request to pay the project price according to the contract shall be supported, and the project price shall still be settled by referring to the pricing method agreed in the contract.

therefore, the breakthrough principle of the fixed total price is to renegotiate the pricing and change the contract. Therefore, under the premise of effective constraint of the fixed total price clause, its risk response is particularly important.

iii. Risk response

Grasp bidding and inquiry

1

For general contracting projects, bidders should improve their "budgetary estimate" level, and accurately evaluate the project when the project only has feasibility study, scheme design or preliminary design.

2

Before bidding, the bidder should clarify the relationship between information price and market price, the difference between bid price and purchase price of the brand designated by the owner, and the difference between bid price and purchase price of the brand selected by the contractor.

design confirmation

the total price is fixed. In many cases, the price is determined but the construction content may not be confirmed. Therefore, the contractor should determine the construction content as soon as possible, that is, the owner's confirmation to complete the construction drawing design. If the design can't be "finalized", the cost can't be fixed, the owner's change is not obvious, and it is difficult to break through the fixed total price itself, so the delay in design is extremely unfavorable to the contractor. At the same time, the author believes that the changes after design confirmation should be priced according to the changes in the general construction contract.

Grasp the scope of contracting

Focus on: opportunity study in the early stage of the project, project development planning, construction scheme, feasibility study and economic evaluation; Engineering investigation and overall planning scheme; Engineering design (scheme design, technical design, construction drawing design); Engineering procurement and construction; Commissioning and production operation organization; Project maintenance and property management, etc.

Grasp the risk scope

1

The accuracy risk of bill of quantities: including missing items, missing items and deviation of quantities;

2

Handling construction-related permits: including permits and approvals for construction land planning permits, construction project planning permits, construction project construction permits, temporary water use, temporary electricity use, road traffic interruption, temporary land occupation, etc.;

3

Time and quality risks of handing over the construction face;

4

Risk of construction conditions: temporary water and electricity, temporary land use, road traffic, etc.

5

risk of basic data: the time and accuracy of providing geological survey data, underground obstacle data, surrounding pipeline data and design data;

6

Time and accuracy of providing datum points, datum lines and leveling points;

7

Price adjustment of people, materials and machines;

8

Changes in laws, regulations and policies cause engineering changes;

9

Increase or decrease of quantities.

control of budgetary estimate

The contractor shall be clear about the budgetary estimate amount of the project, reasonably control the construction scale during the construction process, and avoid the over-estimation of the project; If the project is not over-estimated due to the contractor's reasons, the contractor shall ask the owner to confirm it and ask the owner to adjust the budget estimate during the process.