Utah General Contractors - Business and Law Practice Exam

In a lump sum estimate, what does the contractor agree to?

1. To complete the project for the final cost determined at completion

2. To perform at least one change order

3. To perform a prescribed project for a single amount

4. To minimize materials costs

The correct answer is: To perform a prescribed project for a single amount

In a lump sum estimate, the contractor agrees to perform a prescribed project for a single amount. This type of contract sets a fixed total price for the entire project, which means the contractor must complete all specified work for the agreed-upon sum. The benefit of a lump sum agreement is that it provides the owner with a clear understanding of project costs upfront, allowing for better budgeting and financial planning. Other options reflect different aspects of contract agreements but do not accurately describe the nature of a lump sum contract. For example, agreeing to minimize material costs does not align with the fixed pricing structure of a lump sum estimate. Similarly, a requirement to complete a change order does not define the essence of a lump sum contract, which is to maintain a predetermined price unless both parties agree to modifications. Finally, suggesting that the contractor would complete the project for a cost determined at completion does not apply to a lump sum contract since the price is set at the beginning, eliminating uncertainty about final costs.