WHAT IS A FIXED-PRICE OR LUMP-SUM AGREEMENT?
A Lump-Sum or Fixed-Price agreement is often preferred by Owners because they feel they have a fixed price of what their job will cost. A Fixed-Price agreement is often used by subcontractors for smaller jobs with an easily definable scope of work and materials needed but, I have found that in the case of a custom home with a lot of unknown details before the project starts, a Fixed-Price agreement creates complications for both the Owner and the Contractor. In order for a Fixed-Price agreement to work well, all aspects of the construction should be clearly defined, building plans completed, all selections for finishes should be predetermined and the scope of the work should stay as true to the original plan as possible. Even a very experienced builder can make mistakes when trying to calculate every detailed cost to build your new custom home. In order to adjust for the possibility of making a mistake or a miscalculation he will add in a percentage to the “fixed price” to cover the co
