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Is there a difference between fixed price and lump sum contracts? No, fixed price contracts and lump sum contracts are interchangeable terms for contracts that provide clients with one price to pay for goods and services. Both terms are widely acceptable and used in the residential construction industry.

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.

In a lump sum construction contract, the contractor tenders one set price for all work carried out during the project. This approach is often used for big or complex construction projects, and it is considered standard practice.

A lump sum contract in construction is one type of construction contract, sometimes referred to as stipulated-sum, where a single price is quoted for an entire project based on plans and specifications and covers the entire project and the owner knows exactly how much the work will cost in advance.

Lump sum contracts offer advantages for both owners and contractors in the form of simplicity. More straightforward for owners to budget for a project. Often easier to secure financing with a fixed project cost. Potentially higher profit margins with strong project execution.

A lump sum contract is an agreement that sets a predetermined cost for construction work. In other words, the contractor performing the work agrees to complete the project for a fixed amount ? no more or less.

Key Takeaways. A lump-sum payment is an amount paid all at once, as opposed to an amount that is paid in installments. A lump-sum payment is not the best choice for everyone; for some, it may make more sense for the funds to be annuitized as periodic payments.