Contract sum
The contract sum is the price agreed with the contractor and entered into the contract. The agreed contract sum should be calculated and checked very carefully as errors are deemed to have been accepted by both parties.
However, the contract sum does not constitute a 'fixed price' even if the contract is described as a fixed price contract, a lump sum contract or a guaranteed maximum price contract. A truly fixed price would actually not be in the interests of the client as it would mean they could not make changes to the works, and would require that the contractor price risks over which they may have no control, and which might not arise.
As a result, contracts generally allow for the contract sum to be adjusted, for example:
- Variations.
- Fluctuations.
- Prime cost sums.
- Provisional sums.
- Payments to nominated sub-contractors or nominated suppliers.
- Statutory fees.
- Payments relating to opening up works for inspection and testing.
- Loss and expense.
When the contract sum is adjusted, this adjustment should be taken into account in the valuation of subsequent interim certificates.
Preparing the final account is the process of calculating and agreeing any adjustments to the contract sum at the end of the defects liability period so that the amount of the final payment to the contractor can be determined. The amount of the final payment is then set out in the final certificate (or final statement).
NB: It is possible for the final certificate to show that money is owed to the client, rather than due to the contractor.
Construction contracts may in fact not require the preparation of a final account, although they generally do require the contractor to provide all documents necessary for the adjustment of the contract sum within a specified time, and set out the time scale for, and consequences of, issuing the final certificate.
On contracts such as measurement contracts, the contract sum may not be known when the contract is entered into, but instead is calculated as the works progress based on some agreed method of measurement.
[edit] Related articles on Designing Buildings Wiki
- Accounting.
- Base date.
- Construction contract.
- Contract sum analysis.
- Difference between lump sum and measurement contracts.
- Escalation.
- Final account.
- Final certificate.
- Fluctuations.
- Hard costs v soft costs.
- Interim certificates.
- Opening up works for inspection and testing.
- Outturn cost.
- Payment schedule.
- Provisional sums.
- Right to payment.
- The difference between a prime cost and provisional sum.
- Variations.
- What is a final account.
[edit] External references
- JCT: Deciding on the appropriate JCT contract.
Featured articles and news
The UK's Modern Industrial Strategy: A 10 year plan
Previous consultation criticism, current key elements and general support with some persisting reservations.
Building Safety Regulator reforms
New roles, new staff and a new fast track service pave the way for a single construction regulator.
Architectural Technologist CPDs and Communications
CIAT CPD… and how you can do it!
Cooling centres and cool spaces
Managing extreme heat in cities by directing the public to places for heat stress relief and water sources.
Winter gardens: A brief history and warm variations
Extending the season with glass in different forms and terms.
Restoring Great Yarmouth's Winter Gardens
Transforming one of the least sustainable constructions imaginable.
Construction Skills Mission Board launch sector drive
Newly formed government and industry collaboration set strategy for recruiting an additional 100,000 construction workers a year.
New Architects Code comes into effect in September 2025
ARB Architects Code of Conduct and Practice available with ongoing consultation regarding guidance.
Welsh Skills Body (Medr) launches ambitious plan
The new skills body brings together funding and regulation of tertiary education and research for the devolved nation.
Paul Gandy FCIOB announced as next CIOB President
Former Tilbury Douglas CEO takes helm.
UK Infrastructure: A 10 Year Strategy. In brief with reactions
With the National Infrastructure and Service Transformation Authority (NISTA).
Ebenezer Howard: inventor of the garden city. Book review.
The Grenfell Tower fire, eight years on
A time to pause and reflect as Dubai tower block fire reported just before anniversary.
Airtightness Topic Guide BSRIA TG 27/2025
Explaining the basics of airtightness, what it is, why it's important, when it's required and how it's carried out.
Construction contract awards hit lowest point of 2025
Plummeting for second consecutive month, intensifying concerns for housing and infrastructure goals.
Understanding Mental Health in the Built Environment 2025
Examining the state of mental health in construction, shedding light on levels of stress, anxiety and depression.
The benefits of engaging with insulation manufacturers
When considering ground floor constructions.
Lighting Industry endorses Blueprint for Electrification
The Lighting Industry Association fully supports the ECA Blueprint as a timely, urgent call to action.