Start with the payment basis
The payment mechanism and the delivery model answer different questions. One explains how work is valued; the other allocates design and delivery responsibilities.
Lump sum
An agreed price covers a defined scope, subject to the contract’s adjustments. It generally needs a sufficiently clear design and specification.
Remeasurement
Payment is based on measured quantities and agreed rates. Quantity changes can affect the final amount.
Cost-plus
The employer reimburses allowable costs and an agreed fee. Cost definitions, supporting records and expenditure controls need particular attention.
Target cost
A target is agreed, with savings or overruns allocated under the contract’s sharing rules. The target is not automatically a fixed-price guarantee.
Questions to take into your project
Before choosing: assess design maturity, quantity uncertainty, risk allocation and the team’s capacity to manage records.
Further reading
- World Bank — Standard Bidding Documents for Small Works
- AIA — Cost-Plus Construction Contracts
- NEC — Target Cost and Risk Sharing
An introductory overview. Project decisions depend on the agreed contract, facility conditions and applicable requirements.