8/7/2019 Lump Sum Contracts

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Lump Sum Contract

ALump Sum contract is one where the Bidder is required to provide a lump sum price for allitems covered by the drawings and specifications in the works contract.

There is no re-measurement either during execution or on completion of the contract.

This is the simplest approach to payment for the services of a contractor.

However, this system is only practicable for;

o Contracts involving a small total construction end product,o Involving fairly limited number of component work activities (e.g. the

construction of an individual culvert or group of similar culverts),

o where the total amount of work to be undertaken can be stated in thebidding documents with great accuracy.

o Construction works contracts of short duration.Bidders would be required simply to submit their financial bid as aLump Sum quotation for

satisfactory completion of the entire works.

The major draw-back of such a system is;

o its lack of flexibility in the total payment under the Contract.o it does not readily accommodate any subsequent changes by the Employer.

A schedule or bill of quantities normally should not be included in a Lump Sum contract asthis could be interpreted by the bidder as implying that re-measurement is part of the contract.

The bidding documentation would necessarily have to state the methodology by which thelump sum would be paid to the Contractor in the interim payments. This could be based simply ontime (e.g. equal payments per month) or, alternatively, various proportions of the lump sum

disbursed upon completion of the work to various stages.