What does a lump sum fixed price contract typically limit?

A lump sum fixed price contract is designed to define a set price for the completion of a project based on the agreed-upon scope of work. This type of contract typically limits the owner's construction costs to an agreed price, providing a clear financial framework. It means that the contractor must complete the project for the established price, regardless of any unforeseen expenses or changes that might occur during the construction process, unless changes to the scope are formally negotiated which can lead to price adjustments.

By agreeing to a lump sum, the owner benefits from predictability in budgeting and financial planning, knowing that the total cost will not exceed the agreed amount, barring changes in scope initiated by the owner themselves. The contract encourages the contractor to manage their own costs effectively, as they will bear any expenses above the agreed price.

In contrast, the other options address aspects that are not primarily affected by the nature of a lump sum fixed price contract. For instance, while it does not directly limit the owner's control over the project or the time taken for construction, these elements would be influenced more by the overall project management and contract terms rather than being a direct result of a lump sum price structure. Changes in project scope may also impact costs but are not a limitation imposed by the contract itself