Difference between lump sum and measurement contracts
Under a lump sum contract, a single ‘lump sum’ price for all the works is agreed before the works begin. It is defined as a fixed price contract, where the contractors agree to execute the work for a stated total sum of money. Lump sum contracts are generally appropriate where the project is well defined when tenders are sought and significant changes to requirements are unlikely. This means that the contractor is able to accurately price the works they are being asked to carry out.
For more information see: Lump sum contract.
Measurement contracts (sometimes called ‘re-measurement’ or ‘measure and value’ contracts) are generally used in situations where the design (or type of works) can be described in reasonable detail, but the amount cannot. For example, excavation works where the quantity of excavation required is difficult to assess until after the works have begun. The contract sum for measurement contracts is not finalised until the project is complete. At this point it is assessed on based on re-measurement of the actual amount of work carried out.
For more information see: Measurement contract.
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