Fixed-price contracts

Abstract

A Fixed-Price Contract (also referred to as a lump-sum contract) is a contract where contractors and clients agree to an unchanged set price for a project. (3)

Basic Elements of A Fixed-Price Contract

A fixed-price contract is a contract where the agreed-upon price for the job is unchanged throughout the project. It doesn’t matter if more time, materials or labor must be used than first estimated, the price stays the same.

Therefore, the scope of work the contractor defines in their bid must be very accurate. Once the quote is determined, it is shared with the customer. If the customer agrees with the price for the work, it is cemented as final and no change in man-hours or cost of materials can be considered.

Basic Elements that are included in a Fixed-Price Contract

A Fixed-Price contract has similar components to a contract that outlines work and payment. In general, a fixed-price contract includes the following basic elements: Project Information:

• Owner: The person or organization who is hiring the general contractor for the project.

• General Contractor: The person bidding for the work. They are the overriding contractor, managing the project and any subcontractors and third-party vendors.

• Worksite: The site address for where the construction will take place.

• Scope of Work: Detailing of what the contractor will provide, project plans, schedule, specifications, etc.

• Price and Payment: The total price for the job, which is fixed and unchangeable throughout the project, how and when payments will be made by the customer to the contractor.

Supporting Documents and Costs:

• Documentation: Attach construction drawings, blueprints, exhibits, etc. need to be included in the contract.

• Materials and Labor: List of materials and the labor employed to execute the project.

• Start and End Dates: The schedule, including the starting and completion dates, milestones, and other important dates.

• Licensing and Permits: Who will be responsible for the permits and licenses required for the construction project.

Tasks:

• Subcontractors: Third-party vendors or subcontractors are listed and how they will be incorporated into the project.

• Work Changes: Identify how work change requests are processed throughout the project.

• Warranties: Warranties of the work, the contractor warrants the work and material defects.

Closure:

• Termination: When can the contractor can end the contract.

• Inspection: Inspection of the work to make sure it conforms to their contract.

• Insurance: Insurance obtained by customer and contractor protecting against damage, claims, etc.

• Liquidated Damages: Agreed-upon sum the contractor will pay for each day the project goes over the contracted deadline.

• Force Majeure: Neither party is responsible for events that occur due to circumstances beyond their control, such as weather, supply shortages, Corona, etc.

Types of Fixed-Price Contracts

1. Firm Fixed-Price Contracts: here the project's technical and marketp

2. Fixed-Price Incentive Contracts: here the project's technical and marketp

3. Fixed-Price Contracts with Economic Price Adjustment: here the project's technical and marketp

4. Fixed-Ceiling-Price Contracts with Price Redetermination: here the project's technical and marketp

5. Firm Fixed-Price Level-of-Effort Contracts: here the project's technical and marketp

• Big idea: describe the tool, concept or theory and explain its purpose. The section should reflect the current state of the art on the topic.

• Application: provide guidance on how to use the tool, concept or theory and when it is applicable.

• Limitations: critically reflect on the tool/concept/theory. When possible, substantiate your claims with literature.

• key references: (3-10), where a reader can find additional information on the subject.

References 1. https://www.projectmanager.com/blog/fixed-price-contract 2. https://www.levelset.com/blog/fixed-price-contract/ 3. https://www.coconstruct.com/blog/builders-use-fixed-price-construction-contracts-80-of-the-time