Construction Contract Methods of Compensation and Payment

Summary

Construction contractors are usually compensated through either a fixed-price (sometimes called a lump-sum price or stipulated sum) contract or a cost-reimbursable contract which typically caps the owner's liability at a guaranteed maximum price (GMP). This practice note explains the methods of compensation and payment terms used for fixed-price contracts and cost-reimbursable contacts with a GMP. Specifically, this note discusses: