What is a common form of a construction contract?

The Stipulated Sum contract is a common form of construction contract that specifies a fixed total price for a specific scope of work, providing clarity and predictability for both the owner and the contractor. This type of contract is advantageous because it allows the contractor to manage the project within the agreed-upon financial constraints, thereby reducing the risk of cost overruns for the owner. By establishing a clear budget from the outset, both parties can align their expectations and responsibilities.

In addition, the Stipulated Sum contract typically involves detailed documentation and a well-defined scope of work, which helps to mitigate misunderstandings and disputes during the construction process. The contractor is incentivized to manage resources efficiently since their profit is fundamentally linked to adhering to the established budget.

In contrast, other types of contracts, such as Cost Plus or Time and Material contracts, involve more variability and can lead to unpredictable costs, as they are based on actual expenses incurred rather than a fixed amount. The Design-Build method integrates design and construction under one contract but also differs from the traditional scope defined in a Stipulated Sum contract. This structure emphasizes teamwork and innovation but does not, by itself, provide the same cost predictability that a Stipulated Sum contract does.