Lump Sum

Lump Sum (also known as Fixed Price or Design-Bid-Build) is a construction project delivery method in which the contractor agrees to complete a project for a predetermined, fixed price.

Key Features:

Fixed Cost: The contractor is responsible for delivering the project within the agreed-upon price, bearing the risk of schedule and productivity.
Defined Scope: The scope of work, including all specifications, materials, and schedule, is clearly outlined in the contract.
Minimal Flexibility: Since the cost is fixed, any changes or additions to the project scope require a change order, which could increase the overall cost and extend the timeline.

Advantages:

Budget Certainty: The project owner knows the total cost upfront, which helps with financial planning and reduces the risk of budget overruns.
Simplicity: The contract is straightforward, with a single price for the entire project.
Risk Transfer: Much of the financial risk is transferred to the contractor.

Disadvantages:

Potential for Cost Escalation: Change orders may be required if the owner’s needs are not clearly defined in the agreed-upon scope of work or if unexpected changes occur.
Conservative Bidding: Contractors carry contingency in their bid to cover potential risks, leading to higher costs.
Limited Flexibility: Making changes during construction can be costly and complicated.