Lump sum contract

A lump sum contract in construction is one type of construction contract, sometimes referred to as stipulated-sum, where a single price is quoted for an entire project based on plans and specifications and covers the entire project and the owner knows exactly how much the work will cost in advance.

[1] This type of contract requires a full and complete set of plans and specifications and includes all the indirect costs plus the profit and the contractor will receive progress payments each month minus retention.

A Contractor under a lump sum agreement will be responsible for the proper job execution and will provide its own means and methods to complete the work.

At pre-tender stage the contractor evaluates the cost to execute the project (based on the above documents such as drawings, specifications, schedules, tender instruction and any clarification received in response to queries) and quotes a fixed inclusive price.

[7] Variations occur due to fluctuation in prices and inflation, provisional items, statutory fees, relevant events such as failure of the owner to deliver goods, etc.