What is the most common form of reimbursement in construction contracts?

Lump sum is the most common form of reimbursement in construction contracts because it provides a clear and fixed price for the overall project from the outset. This arrangement is advantageous for both clients and contractors. For clients, it allows for better budgeting since the total cost is agreed upon before work begins, minimizing the risk of cost overruns. Contractors benefit as well, as they can manage their resources and costs effectively against the fixed amount they have contracted for.

This method simplifies the contracting process and reduces the need for ongoing negotiations regarding costs during the project's execution. Having a predetermined price promotes accountability and efficiency, as contractors are motivated to complete the work within the budget. Additionally, lump sum contracts are straightforward and often easier to understand for all parties involved, which is particularly important in the construction industry where many stakeholders are engaged. This makes it a preferred choice for many construction projects.