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Here are four main construction contracts to choose from, plus their pros and cons: Lump-Sum Contracts. Cost-Plus-Fee Contracts. Guaranteed Maximum Price Contracts. Unit-Price Contracts.

A lump sum contract provides a fixed price for completing a construction project. Also called a stipulated sum contract, this type of construction agreement provides simplicity for both owners and contractors, and it's often used for projects with a clear scope of work.

A stipulated sum contract also called a lump sum or fixed fee contract, is a contractual agreement in which the contractor agrees to complete the project for a predetermined set price. A stipulated sum contract binds the contractor to agree to be accountable for project execution at a predefined cost.

price contract, also referred to as a lumpsum contract, determines the exact price of a project before it begins. A T&M contract may be used when it's difficult to accurately determine that final figure because the exact scope or duration of the project is unclear.

Payment - In a fixed price contract, you pay for the whole project after the final product is delivered. In a time and materials contract, you pay ing to an agreed-upon increment of work completed, with the payment determined by the hourly or daily rate of the roles involved.

What is the Contract Sum? The Contract Sum is the price paid to the contractor for the scope of work to be completed. As a general rule, the Contract Sum will be stated in the formal instrument of agreement and can take the form of: a lump sum figure.

Cost-plus contracts are similar to lump sum contracts in that the owner agrees to pay the contractor's costs, including labor, subcontractors, equipment and materials and an amount for the contractor's profit and overhead. But instead of a lump sum to cover all the expenses, those costs are reimbursed individually.