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A lump sum contract, sometimes called stipulated sum, is the most basic form of agreement between a contractor and a customer. This type of contract usually is developed by estimating labor costs, material costs, and adding a specific amount that will cover contractor's overhead and profit margin.
Stipulated Sum Contract This contract should be used if the scope and schedule of the project are appropriately defined to allow the contractor to fully estimate project costs. A stipulated sum contract requires that the contractor agree to be responsible for the proper job execution at a set price.
A lump sum contract, sometimes called stipulated sum, is the most basic form of agreement between a contractor and a customer. A lump sum contract or a stipulated sum contract will require that the contractor agree to provide specified services for a stipulated or fixed price.
A Lump Sum contract price will always be lower than the Guaranteed Maximum Price in a GMP/Cost-Plus contract because the GMP/cost-Plus contract will include a construction contingency (typically 5% plus or minus that is not included in a Lump Sum contract amount.
From Wikipedia, the free encyclopedia. A guaranteed maximum price (also known as GMP, not-to-exceed price, NTE, or NTX) contract is a cost-type contract (also known as an open-book contract) where the contractor is compensated for actual costs incurred plus a fixed fee subject to a ceiling price.
In its basic form, a guaranteed maximum price or GMP says a customer will pay you, the contractor, for the costs of doing the job plus an agreed amount of profit to youup to a predefined maximum level. You then have to absorb (eat) cost overruns, but cost underruns are reimbursed to the customer.
A Lump Sum contract price will always be lower than the Guaranteed Maximum Price in a GMP/Cost-Plus contract because the GMP/cost-Plus contract will include a construction contingency (typically 5% plus or minus that is not included in a Lump Sum contract amount.
Disadvantages to the contractor : He may miscalculate the costs and may have to bear losses in the event of cost overruns. Due to the possibility of losses, the contractor may quote the higher price for the job and may lose the contract in competitive bidding.
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