A fixed-price or stipulated-sum contract is an agreement with a predetermined value that doesn’t change throughout the project, regardless of the time spent on the job or materials purchased. Fixed-price contracts are among the simplest and most common of all construction contract forms.
They allow contractors freedom and flexibility, and they provide owners with a bit of certainty. The contractor predetermines how much the project will cost, builds in their profit and contingency, and works within the contract’s scope. The owner knows that the project won’t exceed a certain amount, unless there are design changes, changes in scope, or unforeseen conditions.