Which type of contract involves the contractor submitting a fixed price for the scope of work?

A stipulated sum contract, often referred to as a fixed-price contract, is structured to ensure that the contractor agrees to complete the specified scope of work for a predetermined amount of money. This type of contract provides clarity on the price from the outset, offering both parties a level of financial certainty throughout the project. It is favorable for clients who want to control project costs and minimize the risk of cost overruns, as the contractor is responsible for completing the project for the set price, regardless of potential challenges that may arise.

Under a stipulated sum contract, any changes in the scope of work typically require a formal change order, which can lead to adjustments in the price. However, the initial agreement establishes clear expectations regarding costs, timelines, and deliverables. This makes it particularly advantageous in projects where the scope is well-defined, enabling smoother project management and accountability for both the contractor and the client.

In contrast, a cost plus fee arrangement can lead to unpredictable expenses since the contractor is reimbursed for actual costs plus an additional fee, making it difficult to estimate the total project cost upfront. A unit price contract focuses on pricing each component of work separately, which works well for projects that have variable quantities but is less suited for fixed-price agreements. Value engineering is not