Quick Answer: What Is The Meaning Of Lump Sum Contract?

A lump sum contract (or stipulated sum contract) is the traditional means of procuring construction, and still the most common form of construction contract.

Under a lump sum contract, a single ‘lump sum’ price for all the works is agreed before the works begin.

When would you use a lump sum contract?

When to Use This Type of Contract

A lump-sum contract is a great contract agreement to be used if the requested work is well-defined and construction drawings are completed. The lump-sum agreement will reduce owner risk, and the contractor has greater control over profit expectations.

What is the difference between fixed price and lump sum contract?

Lump sum (or stipulated sum) contracts are sometimes referred to as ‘fixed price’ or ‘firm price’ contracts, although strictly this is not correct. On a lump sum contract, a single ‘lump sum’ price is agreed before the works begin.

What is a lump sum price?

A lump sum refers to the single aggregate price a contractor offers to undertake the work and cover all risks accepted by the contractor under the contract. However, don’t assume that a lump sum price is a fixed price or that it will be the final price.

What are the advantages and disadvantages of lump sum contract?

8. Lump Sum Contract( Advantages)  Low risk on the owner, Higher risk to the contractor  Cost known at outset  Contractor will assign best personnel  Contractor selection is easy. 9. Lump Sum Contract(Disadvantages)  Changes is difficult and costly.

What are 3 types of contracts?

There are 3 basic Types of Contract:

  • Fixed Price (FP) Contracts.
  • Cost Reimbursable (CR) Contracts – This is also called Cost Plus (CP) Contracts.
  • Time and Material (T&M) Contracts.

How does a lump sum contract work?

Under a lump sum contract, a single ‘lump sum’ price for all the works is agreed before the works begin. It is defined in the CIOB Code of Estimating Practice as, ‘a fixed price contract where contractors undertake to be responsible for executing the complete contract work for a stated total sum of money.

What are the 4 types of contracts?

What are the Different Types of Contract?

  1. Contract Types Overview.
  2. Express and Implied Contracts.
  3. Unilateral and Bilateral Contracts.
  4. Unconscionable Contracts.
  5. Adhesion Contracts.
  6. Aleatory Contracts.
  7. Option Contracts.
  8. Fixed Price Contracts.

What are four types of contracts?

Different Types of Contracts: Everything You Need to Know

  • Lump Sum or Fixed Price Contract Type.
  • Cost Plus Contracts.
  • Time and Material Contracts When Scope is Not Clear.
  • Unit Pricing Contracts.
  • Bilateral Contract.
  • Unilateral Contract.
  • Implied Contracts.
  • Express Contracts.

What are the most common types of contracts?

Some of the most common types include:

  1. Partnership agreement. A partnership agreement spells out the relationship between partners, as well as their individual obligations and contributions to a business.
  2. Indemnity agreement.
  3. Nondisclosure agreement.
  4. Property and equipment lease.

What is lump sum salary?

A lump-sum payment is an often large sum that is paid in one single payment instead of broken up into installments. They are sometimes associated with pension plans and other retirement vehicles, such as 401k accounts, where retirees accept a smaller upfront lump-sum payment rather than a larger sum paid out over time.

What are the 6 components of a lump sum estimate?

Chapter 5: Name the six components of a contractor’s detailed lump – sum estimate.

  • Materials.
  • Labor.
  • Equipment.
  • Indirect costs.
  • Subcontractor quotations.
  • Contractor’s markup.

What is a fixed price lump sum contract?

The term firm fixed price or lump sum contract refers specifically to a type or variety of fixed price contract where the buyer or purchaser pays the seller or provider a fixed total amount for a very well-defined product, however there is the allowance within these for a variance in the event there are incentives

What is the meaning of turnkey contract?

A Turnkey Contract is one under which the contractor is responsible for both the design and construction of a facility. The basic concept is that in a Turnkey Contract the contractor shall provide the works ready for use at the agreed price and by a fixed date.

What is time based contract?

Time-based contract means a contract under which the Services are provided on the basis of fixed fee rates and payments are made on the basis of time actually spent.