Contract Sum
The total price agreed between a client and contractor in a construction or services contract, as stated in the signed contract documents. Variation orders and other adjustments may alter the amount ultimately paid.
A contract sum is the total price agreed between a client and a contractor for carrying out a defined scope of work, as set out in the signed contract documents. In construction, the figure appears in the formal instrument of agreement - such as a JCT or NEC contract - and forms the financial baseline for the entire project.
Despite sometimes being described as the "fixed price," the contract sum is rarely truly fixed. Most standard construction contracts allow the figure to be adjusted upward or downward through variation orders, provisional sum expenditure, and fluctuation clauses. What the contract sum establishes is a clear starting point - any departure from it requires formal written agreement between the parties before work proceeds.
How the Contract Sum Is Set
Before a contract sum can be agreed, the contractor must price the full scope of works. On traditional procurement routes, this is typically done by pricing a bill of quantities prepared by the client's quantity surveyor. On design and build contracts, the contractor prepares a contract sum analysis that breaks the total price down by trade or cost category. The figure is then checked, negotiated if necessary, and entered into the contract before work commences.
The contract sum should be treated as a controlled baseline. Any instruction that changes the scope - whether it adds, removes, or alters elements - should be issued as a formal variation order with the financial impact quantified before work starts. Allowing variations to accumulate without updating the contract sum creates disputes at the final account stage.
Why It Matters at Project Close
At the end of a project, the original contract sum becomes the reference against which the final account is calculated. The contract administrator or quantity surveyor works through every variation order, provisional sum instruction, and loss and expense claim to arrive at an adjusted figure. This adjusted contract sum determines the final certificate and the last payment to the contractor.
Contractors who track the difference between the original and adjusted contract sum throughout the project - not just at close - are better placed to manage cash flow and flag cost issues before they become disputes.
Contract sum vs. budget
The contract sum is a contractual obligation, not a project budget. The client may hold an internal budget that differs from the contract sum, and cost consultants often maintain their own cost plan alongside it. Only the figure in the signed contract documents is legally binding on both parties.
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