Lump Sum Cash Contract

What is Included in 'Lump Sum'?

A simple matter that often causes confusion is exactly what is included in a lump-sum price.

Take a typical contract designed by the employer. The contractor is required under the contract to provide the works defined on the drawings and in the specification. In other words, the drawings show the extent and the configuration of the design. The specification describes the composition and quality of the work. Thus, it is clear that the lump-sum requires the contractor to provide whatever is included in the drawings and specification.

Confusion

Confusion often arises when introducing a bill of quantities into the mix. Such confusion is increased when engineers or other contract administrators try to insist something included in the bill of quantities is included in the lump-sum price. Particularly when it is not detailed in the drawings or specification. This may manifest itself in the engineer’s insistence that additional work is provided with no addition to the lump-sum price. Or, even that the lump sum price be reduced if work included in the bill of quantities is not required.

Consider that in many cases the party appointed to administer the contract by the employer is often the designer. Could the engineer have a vested interest in covering up design errors, omissions and inaccuracies in the bills of quantities? They may not wish to be the bearer of bad news of this nature to the employer.

The Contract Wins

The contract will always place the drawings and specification in a higher order of precedence than the bill of quantities. Therefore, these are the ruling documents in the case of any conflicts. Employers often try to have their cake and eat it. They may include a provision to the effect that if something is required by one document but not required by another, it shall be provided within the contract price.

However, this will not work when the contract also includes provisions to the effect that:

  • The bills of quantities are only an estimate.
  • They are provided only for the purposes of calculating monthly payments and for the evaluation of variations.
  • The bills of quantities may not be relied upon.
  • They should not be taken as being accurate.

In such cases, the employer or engineer cannot argue that such a provision may be used to define the lump-sum. Particularly when drawings and a specification exist that are accurate enough to be used to construct the project.

One-Way Traffic

It is not all one-way traffic however. If a contractor relies on the bill of quantities when pricing, they only have themselves to blame if it does not contain everything shown on the drawings and in the specification. Nor can the contractor complain if the quantities are under-measured. Furthermore, the contractor's tender will not be competitive if they price for work that is included in the bill of quantities but not in the drawings and specification.

Key Considerations:

The following questions may help you to ascertain the correct principles to apply to your project:

  1. If something is shown on the drawings and/or in the specification but not included in the bill of quantities, can the contractor claim additional payment? No. The drawings and specification define what is included in the contract price.
  2. If something is measured in the bill of quantities but not shown on the drawings and/or in the specification, can the employer make a deduction from the contract price? No. The drawings and specification define what is included in the contract price.
  3. If the bill of quantities contains lower quantities than those accurately ascertained from the drawings, can the contractor claim additional payment? No. The accurate quantities measured from drawings define what is included in the contract price.
  4. If the bill of quantities contains greater quantities than those accurately ascertained from the drawings, can the employer make a deduction from the contract price? No. The accurate quantities measured from drawings define what is included in the contract price.
  5. If a work item or items are to be omitted entirely and the bill of quantities include different quantities to those shown on the drawings, which should be used as the basis for the omission? The quantities shown on the drawings are deemed to be included in the contract price so, whether they are greater or less than those shown in the bill of quantities, these should be the omitted quantities.
  6. If the bill of quantities includes a higher or lower specification for a measured item to that included in the contract specification, which is included in the contract price? The quality or item included in the contract specification is deemed to have been included.

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