In a lump sum (stipulated sum) contract, the contractor commits to a single price for a defined scope. The owner doesn’t see your costs. If you buy out cheaper, you keep the difference. If you blow the estimate, you eat it. The price only changes through change orders for scope changes, unforeseen conditions or other contract-defined events. Billing usually follows a schedule of values approved at the start.
Why it matters
Lump sum puts the most cost risk on the contractor. Margin depends on estimate quality, buyout discipline, and catching change-worthy events fast. Every hidden condition that you don’t turn into a change order comes straight out of profit.
Worked example
Illustrative: a $10.0M lump sum job is estimated at $9.1M cost, a $900,000 (9%) margin. Unbilled extra work of $86,400, like the fire dampers behind RFI-212, would cut margin to $813,600 (about 8.1%) if it isn’t captured as a change order. That’s why the RFI-to-CO path matters most on hard-bid work.
Common mistakes
- Front-loading the SOV so aggressively that the owner rejects it or you end up underbilled late.
- Treating RFI answers as “free” clarifications when they change scope.
- Missing notice deadlines that forfeit change order rights.
How os.construction handles it
We’re building the RFI, change event and change order flow on one record so scope changes on fixed-price work are less likely to slip through unpriced. It’s being shaped with founding contractors.