In which type of contract does the contractor agree to complete the project for a predetermined, specific price?

The type of contract in which the contractor agrees to complete the project for a predetermined, specific price is known as a lump sum contract. In this arrangement, the contractor submits a total price for the entire project, which allows for greater price certainty for both the contractor and the client. The agreed-upon amount covers all labor, materials, equipment, and overhead, making budgeting straightforward for the client. Once this agreement is established, any additional costs incurred due to changes or unforeseen issues will often be addressed through change orders or amendments, potentially affecting the total contract price.

Other types of contracts, such as cost-plus, unit price, and time and materials, do not provide this level of price certainty. In a cost-plus contract, for instance, the contractor is paid for all project costs plus an additional fee or percentage for profit, which can lead to variable total project costs. Unit price contracts establish payment based on specific units of work completed, which may fluctuate depending on the amount of work performed. Time and material contracts pay the contractor based on the time spent and materials used, lacking the fixed price characteristic that defines a lump sum contract.