In a lump sum contract, cost overruns due to unforeseen site conditions are borne by:
Choose the correct answer
The client — all risks lie with the owner
The contractor — who quoted a fixed price for the entire scope
Shared equally between client and contractor
Covered by the contingency fund maintained by the government
Correct Answer
B. The contractor — who quoted a fixed price for the entire scope
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In a lump sum/fixed-price contract, the contractor bears cost overrun risk as they have quoted one total price. This contrasts with item-rate contracts where payment adjusts to actual quantities. Contractors factor site risks into their lump sum quote.
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