What is a  Fixed Price/Lump Sum Contract?

This form of contract is most frequently used in the construction setting. The fixed price contract is an agreement whereby the party performing the work will perform the work described in the contract in return for a payment in the stated price . the selected contractor absorbs the risk of potential cost/budget overrun or the benefit of budget cost reduction ; and risk of delay or changed conditions, unless otherwise addressed in the primary contract.

When is a fixed price/Lump sum contract used?

 

This type of contract is most suitable for a project where the designers have prepared the plans, specifications, and related construction documents to a point that is sufficiently complete so that a contractor can provide a reasonably accurate cost estimate.