In construction works, in accordance with the site list about
the application projects, the turnkey lump sum price contract is a
type of contract that is signed for the total price of the whole
work which is offered by the contractor.
In the lump sum price process, the total price is determined
from the beginning for the completion of the construction which is
the place of the contract, scope of the contract and time of the
work is specifically determined. This amount cannot be changed
during the time of the construction or after the completion. In
other words, the lump sum price includes the material, labor,
expenses and the profit of the contractor which means that the
construction is made for a determined fixed price. In the
Construction Management Literature there are some opinions about
the application of this method which states that this method is
better for the short term, well determined, small and small
budgeted constructions, but for the long term and large scale
projects it is not recommended. (Gilbreath, R. D., 1992,
Managing construction contracts operational controls for commercial
risks, second edition, John Wiley & Sons, INC, Canada –
Sorguç D., 1975, Laws and Contracts in Construction,
For the correct determination of the pricing and for a better
determination of method and the strategy by the contractor, all
specifications about the design must be done completely before the
construction tender; since all risks about the cost increase is
transferred to the contractor as a legal consequences of this
contract type. Employer is only responsible for the alteration
instructions of itself and additional works. (Gilbreath, R. D.,
1992). However in practice, the works which causes the cost
increase is a matter of debate whether it is an extra work or in
the scope of the contract. The Construction project constitutes
many uncertainties; completion of a project in as it is planned is
difficult. Especially in a large scale project, contractor
undertakes the risk of cost increase as a whole. Lump Sum Price is
a method that the balance and relations between parties can easily
The fact that all the risks are undertaken by the contractor
also may create risky situations for the employer. Situations can
occur as change of work later which are not indicated in the
contract or the amounts which are not determined properly can be
less than the application amount which causes extra costs. The risk
grows with the growth of the scale of the construction; in fact,
this cost becomes not an alteration but a more work than an actual
work which is stated in the offer (Gilbreath, R. D., 1992)
A mistake in the plan affects the cost. Lump Sum Price is the
hardest method for the alteration to be applied. (Hinze 1993,
Construction Contracts, Irwin McGraw-Hill)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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