EPC vs Design-and-Build vs Item-Rate Contracts: How Architects Appoint a Fit-Out Contractor

The short answer: who carries the design, who carries the quantities

The Department of Expenditure’s Manual for Procurement of Works (Second Edition, 2025) lists the contract types most used on Indian public works. Four of them matter for a commercial fit-out. Each moves design responsibility and quantity risk to a different place.

• Item-rate (unit rate): the architect or client designs and issues a BOQ; the contractor quotes a rate for every item and is paid for measured quantities. Quantity risk stays largely with the client.
• Percentage-rate: the contractor quotes one percentage above or below the client’s estimated cost; bills are prepared at the estimated item rates, adjusted by that percentage, for measured quantities.
• Lump-sum (fixed price): the contractor quotes one price for a scope drawn and specified in full; there is no remeasurement except for additions and omissions.
• EPC, also called design and build: the contractor takes responsibility for investigation, design and construction for a lump sum, against output or performance requirements rather than a finished design.

Item-rate contracts: the architect’s BOQ, the contractor’s rates

In an item-rate tender the procuring entity provides the bill of quantities and each bidder quotes a rate against every item. The manual calls it the most commonly used contract type for civil works and says it carries the least risk of uncertainty for the parties.

Payment is made at the contract rate for the quantity actually measured. The manual notes that reasonable variations in BOQ quantities, typically plus or minus 10% to 15%, can be allowed during execution, and that larger variations, typically 25% to 30%, need the competent authority’s sanction.

For an architect-led fit-out this is the natural form. The architect’s drawings, specification and schedule of quantities go out as the tender. Bidders compete on rates for the same scope. When a partition moves or a ceiling area grows, the change is priced, within the agreed variation limits, at a rate everyone agreed before the work began.

• Design stays with the architect, who issues the GFC drawings and answers the contractor’s queries
• Bids are comparable line by line, because every bidder prices the same BOQ
• Quantity changes within the variation limits are paid at contract rates, so the final cost follows what was built
• The weak point is an incomplete BOQ: a missing item becomes a variation priced after award

Percentage-rate contracts: one number against the estimate

A percentage-rate bidder quotes a single figure: so many percent above or below the client’s estimated cost. The manual describes it as working best where the work does not involve major design and simple drawings are enough, such as small routine works and repairs.

It appears on interior work too. The Mumbai Port Authority’s 2026 tender for renovating offices at Port Bhavan, which covers civil, flooring, false ceiling, carpentry, furniture, painting, electrical, HVAC, fire fighting and plumbing, asks bidders to quote a percentage above or below the estimated rates for each part of the BOQ, applied to every item in that part. The comparison between bidders then comes down to a few numbers, so the quality of the client’s estimate matters more than in an item-rate tender.

Lump-sum contracts: a fixed price for a fixed scope

In a lump-sum contract the bidder quotes one fixed price for completing the work to the given designs, specifications and functional requirements. The manual says it is easy to administer, because it is a fixed price for a fixed scope, and that it suits work that can be defined in full, where the risk of changes in quantity or specification and of unforeseen site conditions is minimal.

The manual is also direct about the weakness. With a fixed price, a contractor may be tempted to cut corners on quality and scope, and disputes can arise over what the scope and quality were meant to be. It recommends that the contract provides for evaluating quality and scope, and notes that a schedule of rates may still be specified to price additions and alterations.

On a fit-out, a lump sum works for a repeat format, such as a branch or store built to a standard design already proven on earlier sites. It works less well on a one-off floor where the architect is still resolving details, because every unresolved detail becomes an argument about what the fixed price included.

EPC and design-and-build: the contractor designs as well

The manual defines Engineering, Procurement and Construction contracts, which it says are also called design and build, as assigning responsibility for investigations, design and construction to the contractor for a lump sum set by competitive bidding. The client specifies core requirements and output or performance standards, and the contractor is free to design and plan the construction to meet them.

Risk moves with the design. Soil conditions, weather, and the commercial and technical risks of design and construction sit with the contractor. The client keeps the risk of delays in handing over the site, approvals from local authorities, clearances and the shifting of utilities.

For public EPC works the manual also caps scope changes at 10% of the contract price, beyond which additional work has to be procured separately, and limits sub-contracting by the EPC contractor to 50% of the contract price.

In private fit-out, design-and-build usually means an interior firm that designs the space and then builds it. That can be quick, and one party owns both design and execution. The trade-off for a project that already has an architect is plain: under EPC or design-and-build, the architect’s role shrinks to setting requirements and reviewing someone else’s design.

• The contractor’s design replaces or develops the architect’s, within the output requirements
• Price is a lump sum, adjusted only by any price-variation formula and approved scope changes
• Design risk and most construction risk sit with the contractor
• Site handover, local approvals and clearances stay with the client

How the four compare on the questions that decide the choice

Put side by side, the four forms differ on five points. These are the points worth settling before the tender is drafted, because changing contract form after bids are in means starting again.

• Who designs: the architect in item-rate and percentage-rate contracts, and usually in lump-sum, though the manual allows a lump sum on the contractor’s design; the contractor in EPC or design-and-build
• What the bid prices: every BOQ item (item-rate), one percentage on the estimate (percentage-rate), one fixed price (lump-sum and EPC)
• How payment works: measured quantities in item-rate and percentage-rate; milestones or stages in lump-sum and EPC
• Who carries quantity risk: mostly the client in item-rate and percentage-rate; the contractor in lump-sum and EPC
• How much the design must be finished before tender: complete for lump-sum; complete for item-rate, with quantities able to move; enough for an estimate in percentage-rate; only requirements in EPC

Which form fits an architect-led fit-out

The Council of Architecture’s Manual of Architectural Practice sets out what the architect does at tender stage: it prepares coordinated tender documents, including drawings, specifications and the schedule of quantities, helps the client and PMC set shortlisting criteria for the contractor, and later reviews the contractor’s shop drawings, product data, samples and requests for information.

Every one of those duties assumes the architect owns the design. That is why item-rate contracts, or lump sum on a fully drawn and repeatable scope, fit an architect-led office, hotel, hospital or terminal interior best. EPC or design-and-build makes more sense where the client wants one party to own both design and delivery and is content for the architect to act as reviewer.

• Design complete, quantities may move: item-rate against the architect’s BOQ
• Design complete and repeatable, little risk of change: lump sum, with a schedule of rates for additions
• Small routine or repair work against a reliable estimate: percentage-rate
• Client wants one party responsible for design and delivery: EPC or design-and-build, with the architect setting requirements

Where “turnkey” fits in

Turnkey is used loosely. The manual uses it alongside EPC, for work undertaken in the EPC or turnkey mode. In private fit-out, clients often use it to mean something narrower: one contractor for every trade, from bare shell to handover, building the architect’s design.

Those are different contracts. Single-point responsibility for execution does not have to mean the contractor also designs. If a tender says turnkey, it is worth stating which one is meant: all trades under one contract against the architect’s drawings, or design and delivery by the contractor.

What to fix in the tender, whichever form you choose

The manual advises appraising specifications, drawings and contract conditions before tender, to minimise variations, claims and disputes. These are the items worth writing down whichever contract form you use. The examples come from a 2026 public tender and a 2026 private airport expression of interest for interior and MEP work.

• The status of the drawings: GFC drawings for construction, or concept drawings the contractor must develop
• The mode of measurement for item-rate and percentage-rate work, and which document prevails if they conflict
• Variation limits and how rates for new items are set
• The programme, milestones and any liquidated damages for delay
• The defect liability period: one year for civil and MEP works, with a longer period for waterproofing, in the Mumbai Port Authority tender, and 24 months in Mumbai International Airport’s September 2026 expression of interest for interior and MEPF works
• Performance security and retention, which the Mumbai Port Authority sets at 5% each
• Submittals: shop drawings, samples and mock-ups the contractor must provide for approval
• Handover documents: as-built drawings, test records and O&M manuals
• Sub-contracting: which trades may be sub-contracted and whether subcontractors must be named, as the Mumbai Port Authority requires for electrical, HVAC and fire fighting
• Who obtains licences, permits and NOCs, and whether liaison is inside or outside the contractor’s price

How IBS works within these contract forms

IBS is an execution contractor. It builds the architect’s design: it takes the GFC drawings, specification and BOQ and executes them with its own civil, MEP, fire fighting, HVAC, interiors, painting and furniture teams. It prices tenders against the architect’s GFC drawings, specification and BOQ, so it is not competing with the architect for the design.

Within the contract, IBS raises written queries against the drawings and tracks each to an answer, offers value engineering only as priced alternates for the architect to accept or reject, builds mock-ups or sample areas where the contract asks for them, and reports progress to the PMC against the programme with QA and HSE plans. Its largest single order executed to date was worth ₹25 crore, and it is BCAS-cleared to work across the entire airport premises, including airside.

The client obtains licences, permits and NOCs. IBS can handle liaison as a separately charged service, which is worth stating in the tender so it is priced once rather than argued over later.