Lump sum, cost-plus or unit price: what the contract type means for your records
The owner's cost consultant returns your first cost-plus billing with 23 time records flagged: no cost code, no signature, or hours that do not match the daily report. Your superintendent keeps time the way he has for fifteen years, on lump-sum jobs.
The contract type decides which records the owner pays against. A lump sum is paid by progress against an agreed price, so your records prove progress and changes; cost-plus pays your actual costs plus a fee, so every time record and invoice is billing backup; unit price pays measured quantities at agreed rates, so the measurements are the invoice. Habits carried from one kind of job to another are where money leaks.
Canada's industry-standard forms describe stipulated price as one fixed price, cost-plus as actual costs plus a percentage or fixed fee, and unit price as each rate multiplied by the actual, measured quantity.
What each basis needs
- Find the basis for each part of the work; contracts can mix them. US federal rules, for example, let a fixed-price construction contract combine lump-sum and unit-price pricing.
- Lump sum: prove progress and changes against each line of the schedule of values, with quantities and photos. Under the US federal clause for fixed-price construction, progress payments are made at least monthly on approved estimates of work accomplished.
- Cost-plus: treat every record as an invoice: time records coded and signed daily, invoices matched to delivery tickets, excluded costs kept apart. On US federal contracts, the contracting officer may disallow a claimed cost that is inadequately supported.
- Unit price: measure together, as the contract says, tracking quantities against the estimate. A US federal clause allows a demanded adjustment for cost changes attributable solely to quantity variation above 115 or below 85 per cent of the estimate.
- Tell the site team on one page what to record each day.
Common mistakes
- Keeping cost-plus time the way you kept lump-sum time.
- Showing the owner unit-price quantities for the first time at month-end.
- Billing your own rework at cost without checking the contract.
- Neglecting lump-sum records, though changes and claims depend on them.
Action list
Check a week of your records
- Name the payment basis of each part of the contract
- Check five time records: coded, signed and matching the daily report
- Match two invoices to their delivery tickets
- Compare measured with estimated quantities
- Ask accounting which costs the contract excludes
Check your understanding
On a new cost-plus job, a superintendent still fills in the week's time sheets from memory on Friday, as on his lump-sum jobs. Why is that now a problem?
Show the answer
Sources
- CCDC 2 – 2020 Stipulated Price Contract (public description)
- CCDC 3 – 2016 Cost Plus Contract (public description)
- CCDC 4 – 2023 Unit Price Contract (public description)
- FAR 36.207, Pricing fixed-price construction contracts
- FAR 52.232-5, Payments under Fixed-Price Construction Contracts
- FAR 31.201-2, Determining allowability (paragraph d)
- FAR 52.211-18, Variation in Estimated Quantity
