Contracts & ExecutionQuestion 819 of 1605
In a fixed-price (lump-sum) contract, the contractor generally:
a.Agrees to complete a defined scope of work for one set total price and bears the risk of cost overruns
b.Bills the owner for actual costs plus a fee with no ceiling
c.Charges a set rate for each unit of work installed
d.Bills hourly with no fixed total
Explanation
A fixed-price or lump-sum contract sets one total price for a defined scope of work. The contractor bears the risk that actual costs exceed the estimate but keeps the benefit if costs come in lower, giving the owner cost certainty. Cost-plus billing is actual costs plus a fee, unit-price bills per unit of quantity, and time-and-materials bills by hours and materials used; those are different structures with different risk allocations.
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Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)