Construction Contracts in Colombia: Types, Warranties, and Common Disputes

## Pricing structures in construction contracts

The type of pricing chosen determines who bears the risk of cost overruns:

Lump sum The contractor commits to completing the entire project for a fixed price. If actual costs run higher, the contractor absorbs them. If they come in lower, the extra profit belongs to the contractor. Recommended for: projects with detailed designs and well-defined scope.

Unit prices The price is set per unit of measure (square meter, linear meter, unit). The final value depends on the actual quantities executed. Recommended for: projects where the exact scope isn't known at the outset.

Cost-plus-fee (delegated administration) The owner pays all actual costs plus a percentage fee to the contractor. Maximum transparency, but the owner bears all cost risk. Recommended for: research-driven projects, complex renovations.

Essential clauses in a construction contract

Detailed scope Precisely describe what is and isn't included in the work. The most expensive disputes come from ambiguities in scope.

Construction schedule Milestone dates with consequences for non-compliance (late-delivery penalties). The schedule must be realistic and agreed upon by both parties.

Change management Every change in scope, design, or specifications must be documented with: - A description of the change - Its cost impact - Its schedule impact - Both parties' signatures

Verbal changes are the number one source of construction litigation.

Warranties For private projects, it's advisable to include: - Performance bond: covers the case where the contractor abandons the project - Quality warranty: covers hidden defects (a minimum of 5 years for buildings) - Payment bond: covers the contractor's debts to subcontractors

Subcontracting Can the contractor subcontract? With or without the owner's authorization? Who is liable to the owner for the subcontractors' work?

Acceptance and handover of the work

The handover and acceptance record is the single most important document in the contract. It should include: - A punch list of pending items - Deadlines for fixing pending items - The date warranties begin to run

Common disputes

Unfinished work or abandonment If the contractor abandons the project, the owner can enforce the performance bond, or hire a third party at the contractor's expense and bill it the difference.

Unauthorized cost overruns The contractor bills for additional work the owner claims was never approved. The way to prevent this is to document every scope change.

Hidden defects Defects that weren't visible at handover but appear later. Colombia's Civil Code establishes 10 years of builder liability for a building's structural collapse.

Do you have a dispute with a construction contractor, an unfinished project, or questions about how to structure a construction contract? Our team can review your situation.

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