What is a fixed price contract? #
A fixed price contract specifies that the scope of work quoted by a contractor will be performed for a fixed sum of money. Even if the contractor ends up spending much more than she/he expected to in order to complete the work, she/he will still be contractually obligated to only charge the client the fixed price she/he quoted. However, to the extent that the client requests something that it outside the scope of the original quote, the contractor will not have to perform that work under the fixed-price contract; instead, the contractor will likely submit a change order, which will quote an additional fixed price for the new work.
Also known as: Lump sum
Example of a fixed price contract in construction #
A homeowner asks a contractor to bid on a bathroom renovation. After carefully budgeting the costs of the job to be ~$2,000 in labor and ~$1,500 in materials, she/he quotes a fixed price of $6,000. The client accepts the bid and the contractor gets to work. Her/his crews are very productive, and they manage to complete the job in slightly less time than budgeted. Still, because it is a fixed price job, the contractor bills the full $6,000.
Fixed price in Knowify #
Knowify supports fixed price contracts of all sorts. You can choose to break down your contract into as many line items as you wish. You can also decide whether you want to display quoted pricing for each line item, or just a lump sum for the overall contract. Knowify also offers comprehensive change order management, so you will be covered as changes come up on your jobs.
See how it works:
Fixed price jobs and progress invoicing | Knowify Pro webinar series
Other types of construction contract #
- Time & Materials contract
- GC contract