Stipulated Price – a fixed price on a defined project

After the designs are 100% complete contractors bid on constructing

Stipulated Price is a more traditional approach to building sometimes referred to as “Lump Sum Tender”. It’s very linear and each phase of design and construction is completed independently and in order. Architects and consultants are hired directly by the client.

The owner first plans and develops programming for the building and then hires a prime consultant to lead the design of the building. The prime consultant develops working drawings and specifications for all design components of the building, including architectural, structural, mechanical and electrical requirements.

Only when the design documents are 100% developed by the design team will the owner begin to look for a building contractor.

Through a competitive bidding process a general contractor agrees to build the predesigned building that has a defined project scope for a stipulated fixed price.

But the real difference with this way of building is that the general contractor does not have any input into the design. They are only bidding on a plan and a design that is already fully developed.

In fact there is little collaboration with this way of building. Design and construction teams don’t often work together and sometimes find themselves in adversarial roles with opposing interests. A designer may want to design a showpiece building whereas a construction team may be concerned with issues of maintaining the fixed cost, constructability methods or guaranteed schedule.

The real problem is that because the construction advice is left out of the design phase the owner ends up relying on architectural and engineering consultants to provide practical construction, budgeting and scheduling advice. This isn’t always the best idea because these professionals may not have the hands on construction experience to provide this type of advice.

The result is often costly changes to the project during the construction phase because the original plans or specifications may be incorrect or incomplete. Sometimes the very scope of the project may have to change, after tendering is complete, causing cost and scheduling problems.

These changes often affect the entire program’s budget and schedule goals.

We believe the best way to approach this way of building is to be flexible and combine a Stipulated Price delivery method with other more collaborative ways of building to create a Hybrid Contract. 

But when a Hybrid Contract isn’t an option and we agree to a Stipulated Fixed Price we understand the importance of protecting the best interests of the client and we know that to ensure a positive long-term relationship, we must always maintain high project quality and work as collaboratively as possible within this framework.