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A lump sum contract the pros and cons.

also known as a fixed-price contract, is a type of procurement used in the construction industry. In these contracts, the price is agreed upon at the beginning and remains fixed throughout the project. The main advantage of a lump sum contract for the client is that their risk is minimized.

However, the contractor's risk is high in these contracts as they are responsible for completing the work within the agreed-upon budget and any issues with productivity or mismanagement can lead to losses. Some other disadvantages of lump sum contracts include the possibility of disputes over incomplete design details, delays due to financing issues, and the need for a complete design before the pre-contract process. In a lump sum contract, the contractor is responsible for completing the work according to the provided specifications and drawings and must request any missing information before submitting their price.

The payment process in a lump sum contract is typically based on a pre-agreed project program and payment schedule, with the client releasing payments upon the completion of each milestone. It is important for both parties to clearly communicate and document any changes to the design or specifications in a lump sum contract to avoid disputes.


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