Contracts & ExecutionQuestion 215 of 1605
Which contract type generally gives the owner the LEAST cost certainty at the time of signing?
a.Fixed-price (lump sum) contract
b.Guaranteed maximum price contract
c.Stipulated lump-sum contract
d.Cost-plus-percentage contract
Explanation
Under cost-plus-percentage, the final price is unknown until the work is done because it depends on actual costs. Fixed-price and GMP contracts give the owner far more cost certainty up front.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)