Lump sum contract meaning.

Lump sum contract vs fixed price pdf. Lump sum contracts may consist of provision for an early completion compensation for the contractor. Lump sum contracts are the most favourite contract type used in the construction industry. Is defined as a fixed price contract where contractors undertake to be responsible for executing the complete contract work for a stated total sum of money. In a lump sum contract the owner has essentially assigned all the risk to the contractor who in turn can be expected to ask for a higher markup in order to take care of unforeseen contingencies.

A lump sum contract or a stipulated sum contract will require the supplier agreeing to provide specified services for a stipulated or fixed price. Lump sum and measurement are both types construction contracts. In industry this contract type is recognizing as one of the safest contract types for clients. A lump sum contractagreement will require the contractor to agree to provide specified works for a fixed price.

It is defined as a fixed price contract where the contractors agree to execute the work for a stated total sum of money. But the contractors responsibility and risk are very high in fixed price contracts. A lump sum contract also called fixed priced contract is used when the scope of work and schedule is clear and has been reviewed and agreed upon. Also known as fixed price contractsbecause in these contracts the contract price is fixed and agreed at the initial stage.

Compensation for early completion. The above issues emphasize the fact that the fixed price provision in the contractual document of lump sum contract is far from being permanent and are very much liable to changes and alterations. Lump sum contract makes contract management simpler because you enter a single value for each item.