Lump-Sum Contracting
The proper calculation of contract rates for the project to be dredged is vital regardless of whether it is either a unit cost or a lump sum cost. A lump sum agreement or “fixed cost contract” is a standard method of procurement where there is a one-time “lump sum” price for all the work is set prior to the beginning of the work.
Advantages for project owners
The proper calculation of contract rates for the project to be dredged is vital regardless of whether it is either a unit cost or a lump sum cost. A lump sum agreement or “fixed cost contract” is a standard method of procurement where there is a one-time “lump sum” price for all the work is set prior to the beginning of the work.
However lump sum contracts do have particular requirements that could be both beneficial but also a hindrance for the prefab construction of a project.
Constructability and Budget Control
Our preconstruction specialists apply the best practices and learnt experience to maximize the efficiency of construction and design and also continuous value engineering to provide the best price for the least amount of money without jeopardizing your concept.
Cost fluctuations
The cost of materials and labor can be variable and subject to fluctuation throughout the course of the course of the project. Lump sum contracts typically do not take into consideration these changes, which means that contractors must absorb the costs when prices rise. However, they benefit from savings when rates fall. The risks are more evident in projects that are longer.
Contractors should consider possible increases in the market and cost according to the potential price increase when preparing the estimate.
Provisional sums
However, while lump sum contracts appear to be solid in terms of price and scope the scope and cost are concerned, stipulated or provisional sums represent the cost of project work that is optional. The amount is provided in a separate estimate inside the contract. It is only changed when the owner decides that it’s best to continue with the elective work.
The work that is associated with budgeted amounts could cause problems in the project’s schedule particularly if it is applied later within the scope of work. This can lead to changes that require formal change orders. It’s the reason it’s important that the provisions of a lump sum define how to handle the provisional sums as well as the limitations of any associated changes.
