Private contract: inviting, negotiating, signing a lump sum

No text imposes on a private client any advertising, number of candidates or ban on negotiation. They may approach a single contractor or several, discuss prices, change the file after a first submission and ask for tenders again. This is the major difference from a public contract, where negotiating prices after opening is prohibited outside a negotiated procedure.

The downside of this freedom is the loss of comparability. A negotiation conducted separately with each contractor, on different bases, produces prices that can no longer be compared: one has removed an item, another has changed a brand, the third has extended the timescale. The client thinks they are choosing the cheapest; they are often choosing the least complete. What makes two tenders comparable is covered in the article on what makes bids comparable.

The architect has a defined role here. The grand-ducal regulation of 17 June 1992 on the professional ethics of architects and consulting engineers provides that they assist the client (maître de l'ouvrage) in choosing the parties involved "with a view to carrying out the project under the best conditions of price and quality" (art. 13, unofficial translation, as are the other quotations in this article). Their independence from contractors is guaranteed by the incompatibility of their profession with that of contractor (art. 4 and 5). The decision and the signature remain the client's.

A private tender is prepared like a public one, without the formalities. A single file issued to all contractors (drawings, description, bill of quantities or the price breakdown expected), a common submission date, and contractual conditions announced from the outset: form of price, revision clause or fixed price, payment schedule, timescale.

Asking for a price breakdown is the best investment in the tender. An overall price with no detail makes it impossible to compare tenders item by item, or to price a later change up or down. A breakdown by trade or by item gives the client the basis for any later discussion.

The procurement route is decided before inviting tenders. A general contractor coordinating all trades and separate trade contractors call for neither the same file nor the same supervision; the effect of this choice on the budget is covered in the article general contractor or separate trade packages.

Negotiating usefully means negotiating content as much as price. Clarifying a poorly understood item, removing or deferring an option, accepting an alternative proposed by the contractor, adjusting a timescale that drives up the tender: these levers last. A discount obtained without any change in content often shifts onto the quality of workmanship or into requests for extras.

Any change to the file arising from negotiation is issued to all contractors still in the running. If one contractor's alternative is adopted as the basis, the others must be able to price the same thing. Otherwise the second submission is not comparable with the first, and the final choice rests on different tenders.

Every version is recorded. A table of successive tenders (date, file version, total price, items changed) avoids confusion and serves as proof, at signature, of what is included in the price accepted.

The Luxembourg Civil Code leaves the choice open. The contractor may supply only their labour or the materials as well (art. 1787). For work in several parts or by measurement, checking may be done in parts, and it is deemed done for the parts paid for if the client pays in proportion to the work completed (art. 1791). The lump-sum contract, for its part, is governed by article 1793.

Overall price or prices applied to quantities: each allocates risk differently. Under a lump sum, the contractor bears the risk on the quantities in the agreed plan; under a measured contract, the client pays for the quantities actually carried out. The choice between the two is covered in the article on measured and lump-sum contracts; what follows covers only the conditions for a lump sum that genuinely protects the budget.

Article 1793 of the Civil Code sets the framework. Where an architect or contractor has undertaken to construct a building for a lump sum, on the basis of a plan settled and agreed with the landowner, they may not claim any price increase, either on the ground of increased labour or material costs, or on the ground of changes or additions made to that plan, "if those changes or additions have not been authorised in writing, and the price agreed with the owner".

The protection presupposes a plan that is "settled and agreed". Incomplete drawings at signature, choices put off until later (finishes, equipment, options), a description that leaves items "to be defined": each of these gaps will become a change, and any change authorised in writing with an agreed price is a legitimate extra (supplément). The lump sum does not transfer to the contractor the risk of an incomplete description; it fixes the price of what is described.

Three checks before signing. Are the drawings and description annexed to the contract the ones on which the price was submitted? Are the open items listed, with a reserve amount or an agreed unit price? Are the options adopted during negotiation incorporated into the signed file?

The client keeps an exit, at a cost. Article 1794 allows the client to terminate the lump-sum contract at will, even after work has started, by compensating the contractor for all their expenses, all their work and everything they could have earned. It is an option to be costed, not a saving. At the date of checking, no text reforming these articles had been identified.

The change procedure. Every change is the subject of a written, numbered request, a price up or down submitted by the contractor, and then the client's written authorisation covering both the change and its price, before execution. This is the practical application of the two conditions in article 1793, set out in the article on extras in a private lump-sum contract.

The price clause. Under a lump sum, article 1793 rules out an increase in labour or material costs justifying an extra on its own. If the parties want a revisable price, it has to be written in: formula, indices, base date. Otherwise the price is fixed for what the plan describes.

The payment schedule. Instalments are tied to verifiable stages of progress, not to a calendar; the balance is linked to handover (réception). An instalment paid before the corresponding work is a cash-flow risk for the client.

The link with the architect. A significant change to the brief decided during design or construction must, on the architect's side, be the subject of an additional agreement (convention additionnelle) stating its financial impact (regulation of 17 June 1992, art. 9). The same change therefore leaves two records: the authorisation and the price on the contractor's side, the additional agreement on the architect's side.

For a home, the VAT-inclusive budget also depends on a tax step to be taken before the works. The applicable VAT rate is subject to prior approval (agrément); the conditions and the rate are covered in the article on housing VAT. The contract must state clearly whether prices exclude or include VAT, and on what rate assumption.