The strength of an owner's negotiating
position during a construction
downturn can result in a contract
that ultimately lowers a builder's profit.
But even in hard times, there are
ways contractors can protect themselves.
Construction contracts are usually
based on one of two principle types of
• The lump-sum method, which
allows the contractor to receive a
specific amount for completion of
the construction project.
• The cost-plus method, which
allows the contractor to receive
actual costs for completing the project
plus a specific fee.
The Lump-Sum Method
With the lump-sum method, the
contractor examines the final plans
and specifications for a project, estimates
costs, adds profit, and submits a
binding price for the entire project.
The lump-sum method provides
great security for