What type of contract is a Fixed Price/Lump-sum contract?

A Fixed Price/Lump-sum contract is characterized by its stipulation of a predetermined price for a project, which encompasses all costs associated with the work being performed by the contractor. This means that the contractor agrees to complete the project for a specific total amount, thereby providing cost certainty to the client.

The key advantage of this type of contract is that it simplifies budget management for the client, as they are aware of the total cost upfront and are not subject to fluctuations based on the contractor's expenses or material costs. This essentially places the risk of cost overruns on the contractor, incentivizing them to complete the work efficiently and within the budget they provided.

In contrast to the other choices, this contract structure does not allow for variability in pricing based on material costs or project delays, nor does it involve negotiations after project completion. Instead, it is focused on a set price agreed upon before the work begins, which is why it is an attractive option for many clients seeking predictability in their financial commitments to development projects.