Construction
Lump Sum Contract
A contract where the contractor agrees to perform the entire scope of work for a fixed price, regardless of actual costs incurred.
What is a Lump Sum Contract?
A lump sum contract (or fixed-price contract) is the most common contract type in construction. The contractor agrees to complete the entire scope of work for a single, fixed price.
Advantages
- Price certainty for the owner
- Simpler administration
- Contractor has incentive to control costs
Disadvantages
- Higher risk for the contractor
- May include higher contingency in the bid
- Less flexibility for changes
When to Use
- Well-defined scope and drawings
- Minimal design changes expected
- Competitive bidding environment
Common Forms
- AIA A101 — Standard Form of Agreement Between Owner and Contractor (Stipulated Sum)
- ConsensusDocs 200
Related Terms
- Unit Price Contract
A contract where the contractor is paid a fixed price per unit of work, with the final cost determined by the actual quantity of work performed.
- Cost Plus Contract
A contract where the owner pays the contractor for actual costs plus an agreed-upon fee for overhead and profit.
- Construction Contract
A legally binding agreement between the owner and the contractor that defines the scope, schedule, price, and terms of a construction project.
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