LS

Definition

A single line-item value in an estimate representing an allowance rather than a defined, measurable quantity.

Purpose

A lump sum represents a fixed amount of money allocated for a specific part of a project, simplifying budgeting and financial planning. It is often used when precise quantities cannot be determined or when a contractor provides a comprehensive price for a portion of work.

Examples of Use

• Construction estimates: Allocating a lump sum for site preparation or landscaping.
• Contract negotiations: Agreeing on a lump sum for the complete installation of a HVAC system.
• Project management: Setting a lump sum for contingency or unforeseen expenses.

Related Terms

• Unit Price Contract: A contract where payment is based on actual quantities of work performed at agreed-upon unit rates.
• Cost Plus Contract: A contract where the contractor is paid for all project costs plus a percentage or fixed fee as profit.
• Fixed-Price Contract: Another term for a lump sum contract, where the contractor agrees to a set price for the work.

Notes

• Lump sum allocations should be carefully estimated to cover all expected costs and potential contingencies.
• Clear definitions and scope of work are crucial to avoid disputes and ensure that all parties understand what the lump sum covers.
• Changes in project scope may require renegotiation of lump sum amounts.