What Does Lump Sum Agreement Mean

Unlike flat-rate contracts, unit-price contracts are fairly well treated with the amendments. In the event of a major problem, the contractor can treat it as an additional unit and provide a price. This allows the owner to make changes as he or she sees fit and work with the contractor to create a better project. The completion of these activities requires significant planning and can represent a heavy capital burden for which the contractor can be paid in advance through a previously agreed mobilization fee (not separate from the lump sum contract) with the client. They may also include these fees in their first intermediate application. In lump sum contracts or fixed-price contracts, the contractor assesses the value of the work in accordance with the available documents. Mainly, these documents can be specifications and drawings. In the pre-auction process, the contractor takes into account the costs of implementing the project (based on the above documents, such as drawings, specifications, schedules, tender instructions and details received for the requests raised). And the contrast with these contracting documents evaluates and has agreed with the owner (or employer) to complete the work without exceeding the agreed lump sum. [7] For example, if the latter proceeding is taken, when it makes its initial request for payment, a contractor will assess the actual costs it has incurred in relation to the mobilization work it has undertaken to launch the project. This is something that the client must pay, because these „facilitation work“ are part of the total lump sum and payment is necessary to move the project forward. It is generally the responsibility of the client`s PQS to assess the amounts due to the contractor on a fair and appropriate basis for all work related to mobilization, in the absence of prior agreement. The time frame for awarding a contract contract is also longer; However, it will minimize modification tasks during construction.

Even for contract contracts, these projects are rarely a predetermined number of units. They can quickly become runaway trains with a total cost well in excess of the owner`s. If an owner has an overview of what he wants, but the roadmap to get there is not very clear, unit-price contracts can work very well. Unit price contracts are essentially a series of lump sum contracts throughout the project.