Also called: fixed price, stipulated sum, fixed-price contract.
Lump sum is the default for most residential and small commercial property work, and it is the right structure when the scope is genuinely well defined.
Its weakness is that a lump sum is only as good as the scope it prices. Where the scope is vague, the contractor either pads the number to cover the ambiguity or bids it tight and recovers the difference through change orders.
The alternatives are cost-plus, where you pay actual cost plus a fee, and time-and-materials. Both shift risk to the owner and both require far more oversight.
Why it matters
People choose lump sum for price certainty, then undermine it with a scope too loose to deliver any. The certainty comes from the scope, not from the contract type.
Related terms
- Unit price — A unit price is a per-unit rate — per square foot, per linear foot, per sheet, per fixture — agreed in advance so that work of unknown quantity can be priced without renegotiation.
- Scope of work — A scope of work is the written, itemised description of exactly what a contractor will do on a job — the tasks, the materials, the quantities and the conditions. It is what a price is a price for.
- Change order — A change order is a written amendment to a signed contract that adds, removes or alters work, and adjusts the price and schedule accordingly. It is the mechanism by which a job's final cost stops matching the bid you accepted.
- Allowance — An allowance is a placeholder amount included in a bid for work or materials that have not been specified yet — a budget line to be reconciled against the actual cost once the choice is made.
Quotrium drafts the scope, sends it to the contractors you pick, and scores every bid against it line by line. See how it works.