Lump-sum contract
A lump-sum contract (also called fixed-price or stipulated-sum) sets one total price for a defined scope of work. The price changes only through a signed change order, not because the job cost more or less than expected.
Updated November 9, 2026 · 1 min read
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Who carries the risk
The contractor. If labor runs over or materials go up, that comes out of their margin; if the job goes smoothly, they keep the savings. The federal definition puts it plainly: a firm-fixed-price contract's price isn't adjusted for the contractor's cost experience, which places maximum risk on the contractor.
| Type | Owner pays | Cost risk sits with |
|---|---|---|
| Lump sum | One agreed price | The contractor |
| Cost-plus | Actual cost plus a fee | Mostly the owner |
| Time and materials | Hours at set rates plus materials | Mostly the owner, up to any cap |
What keeps it fair
A tight scope with written exclusions, allowances for items the owner hasn't picked, and unit prices for things nobody can see yet. Without those, every surprise becomes an argument.
An example
SignMaster's roofing contract template is built this way: one total contract price for the re-roof, plus a price per sheet for any rotten decking found during tear-off, so the one real unknown is priced before anyone signs.
Sources
- Federal Acquisition Regulation 16.202-1, firm-fixed-price contracts · acquisition.gov