One Step to Peace of Mind

Lump sum contracts are an excellent option for a client who’s willing to invest a bit more for the assurance that the project will get done no matter what. In other words, the owner of the project is assigning all risk of the project to the contractor. In return, the contractor typically charges a higher markup.

The Whole Enchilada

The benefits of lump sum contracts are clear: the client writes a check and leaves the worries to the contractor. Unforeseen circumstances don’t pose a threat because the whole enchilada is turned over to the contractor to manage.

Looking Out for Both Sides

To make sure the project is a success, the contractor does require specific submittals to ensure they have the materials they need. These include:

  • A specific schedule for building
  • A management reporting system
  • A quality control program

Bidding for the Project

When it comes to striking one of these deals, a contractor has a few things to consider when they put in a bid for a project of interest. If the actual cost of the project is underestimated, the contractor’s profit will be reduced by that amount. If the project is overestimated, it has the opposite effect but the chance of getting the project may be lowered by providing a higher estimate.

What are my other options?

Cost Plus

Target Estimate

Guaranteed Maximum Price


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