Lump Sum Construction Contracts UK: Fixed Price Guide

What this document is

A lump sum contract, sometimes called a fixed-price or stipulated-sum contract, is an agreement where the contractor commits to completing a defined scope of work for a single agreed price. Unlike cost-plus or remeasurement contracts, the price does not move up and down with actual expenditure.

The contractor takes on the job of estimating labour, materials, plant, overheads and profit, and wraps it all into one number. In the UK, lump sum arrangements are often used on projects where the design is reasonably complete before work starts, because the contractor needs a clear picture of what is being built to price it properly.

Standard form contracts such as the JCT suite and, in some cases, NEC options, include lump sum structures. The price can still change, but usually only through defined mechanisms like variation clauses, relevant events, or compensation events, rather than through open-ended reconciliation of actual costs. That structure is what gives the client budget certainty and puts cost management firmly on the contractor's shoulders.

How to use this document

1. Define the scope of work properly. Before any price is agreed, both parties need a clear, detailed description of what is being built, to what specification, and to what standard. Drawings, specifications, and schedules of work should be referenced in the contract. A vague scope is the single biggest cause of disputes on lump sum jobs.
2. Agree the contract sum and payment schedule. The total price should be set out in writing, along with how and when it will be paid. Most UK construction contracts use interim payments tied to progress or valuation dates, with a final payment on practical completion and a release of retention after the defects period. The Construction Act sets minimum payment rules that apply to most construction contracts.
3. Set out the variation and change control process. Even on a fixed price, clients often want changes once work begins. The contract should explain how variations are instructed, how they are priced, and how they affect the programme. Without a clear process, every change becomes an argument about money and time.
4. Deal with risk, delay and extensions of time. The contract should identify which risks sit with the contractor, which sit with the client, and what triggers an extension of time or additional payment. Ground conditions, delays caused by the client, and statutory changes are common flashpoints. A good contract spells these out rather than leaving them to chance.
5. Plan for completion, defects and dispute resolution. Cover practical completion, the defects liability period, retention, and how disputes will be handled. Most UK construction contracts provide for adjudication under the Construction Act, which gives a quick decision during the works. Getting these final clauses right matters as much as the price itself.

Common questions