The contractors may submit high tender in lumpsum contract

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In summary, the conversation discusses the concept of a lumpsum contract from the perspective of the contractor. This type of contract allows the contractor to include a buffer for uncertainties and potential additional costs in their tender. Two common reasons for these additional costs are unforeseen conditions and errors or omissions in the construction documents and specifications.
  • #1
shivajikobardan
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what does it mean really?
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none.
I don't understand what does this mean?

What does this mean? Please guide. I don't understand. In lump sum contract, once the contractor gives money it is all done isn't it. What does contractors submit high tender.
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  • #2
It means the contractors may ask for more than it will actually cost.

Think about a lumpsum contract from the side of the contractor. You try and estimate as best as you can what to will cost, but you have to prepare for uncertainties and don't want to end up losing money because the job actually costed more than planned. The contractors will thus tend to include a buffer for uncertainties in their tender.
 
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  • #3
“Unforeseen conditions” is one reason.
“Errors and omissions” in the construction documents and specifications is another reason.
 
  • #4
DrClaude said:
It means the contractors may ask for more than it will actually cost.

Think about a lumpsum contract from the side of the contractor. You try and estimate as best as you can what to will cost, but you have to prepare for uncertainties and don't want to end up losing money because the job actually costed more than planned. The contractors will thus tend to include a buffer for uncertainties in their tender.
makes sense. thank you.
 
  • #5
Lnewqban said:
“Unforeseen conditions” is one reason.
“Errors and omissions” in the construction documents and specifications is another reason.
Those are nothing to do with "the contractors may submit [a] high tender"; exposure to additional cost due to claims or variations are not addressed by that slide.
 

1. What is a lumpsum contract?

A lumpsum contract is a type of contract where the contractor agrees to complete a project for a fixed price, regardless of the actual costs incurred. This means that the contractor is responsible for managing all costs associated with the project and any additional costs will not be reimbursed by the client.

2. Why do contractors submit high tenders in lumpsum contracts?

Contractors may submit high tenders in lumpsum contracts because they want to ensure that they are able to cover all potential costs and still make a profit. This is especially common in projects with a high level of uncertainty or risk, where the contractor wants to protect themselves from potential losses.

3. How do clients ensure that they are not overpaying for a lumpsum contract?

Clients can ensure that they are not overpaying for a lumpsum contract by conducting a thorough cost analysis and comparing the tender with similar projects. They can also negotiate with the contractor to reduce the price or request a breakdown of costs to better understand the pricing.

4. What are the potential drawbacks of a lumpsum contract for the client?

The potential drawbacks of a lumpsum contract for the client include the risk of overpaying if the contractor has overestimated costs, lack of transparency in pricing, and potential disputes over additional costs not included in the contract. The client also has less control over the project's budget and may be limited in making changes or additions to the project scope.

5. How can contractors justify their high tenders in lumpsum contracts?

Contractors can justify their high tenders in lumpsum contracts by providing a detailed breakdown of costs and explaining the potential risks and uncertainties involved in the project. They may also highlight their expertise and experience in similar projects and the added value they can bring to the project. Ultimately, it is up to the client to determine if the tender is reasonable and if the contractor's justification is valid.

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