AEC definitions
A lump-sum contract, also called a stipulated sum, pays the contractor one fixed price to complete a defined scope. If the work costs less, the contractor benefits. If it costs more, the contractor pays the difference, except for changes and for risks the contract assigns to the owner.
Definition
The price is only as fixed as the scope is clear. Drawings, specifications, and inclusions define what the sum buys. Owner changes, differing site conditions, and owner-caused delay adjust the sum through change orders. A lump sum is the usual result of an invitation for bid. It is a poor fit for a scope that is still moving, unless the owner enjoys a stream of changes. A GMP is not a lump sum: the owner pays cost up to a cap and often shares savings. A lump sum does not open the books.
In depth
The agreement should incorporate the drawings, specifications, addenda, and accepted alternates. A proposal exclusion survives only if the agreement gives it priority.
Ambiguous scope becomes a change argument. Money spent clarifying the bid set is cheaper than money spent litigating the lump sum.
Owner-directed work, design errors, and conditions the contract assigns to the owner still change the price and often the time. The change process is part of a lump-sum job, not a failure of it.
Contractors who bid low and hunt changes will find only the changes the documents support. Owners who rewrite the job informally will pay for it.
Applications for payment break the lump sum into line items. The total of the lines must equal the contract sum. Overbilling a early line and starving a later one is a schedule-of-values problem, not extra contract value.
Retainage is withheld from the sum under the contract. It is not an extra discount.
Cost-plus pays actual cost. GMP pays actual cost up to a maximum. Unit price pays measured quantities. Lump sum pays the bid. Pick the one that matches how complete the documents are.
Converting a lump sum to cost-plus midstream is a new deal. Do it with an amendment.
Productivity, buying out subcontractors, and ordinary weather they accepted are inside the number. They are not later claims. Escalation is inside the number only if the contract has no escalation clause.
A bid that assumes a perfect set on an incomplete set is not a clever lump sum. It is a claim.
Examples
A school is awarded at a stipulated sum of a stated price, including two accepted alternates. The agreement lists the drawings and addenda.
The owner adds a classroom. A change order increases the lump sum. The original scope stays fixed.
The schedule of values totals the contract sum. Pay applications draw down those lines.
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