The two main forms
The measured contract, where unit prices are firm and the final amount follows from the quantities actually executed.
The lump sum contract, where a global price covers the whole of the work described, whatever quantities are found.
In the first, the schedule serves both to tender and to account.
In the second, it serves to tender and to compare, but the final account no longer refers to it in the same way, covered in the article on final account and actual quantities.
| Form of contract | Who carries the quantity risk | What the description must allow |
|---|---|---|
| Measured contract | The client | Measuring the actual quantities |
| Lump sum contract | The contractor | Checking the extent of the work |
Who carries the quantity risk
This is the question the choice settles.
In a measured contract, the client carries the quantity risk. If actual quantities exceed those foreseen, the final amount rises.
In a lump sum contract, the contractor carries that risk, within the limits of what the lump sum covers.
That second limb calls for a decisive qualification: the lump sum covers only what was described. Work absent from the specification is not included in the lump sum, however technically obvious it may be.
The lump sum therefore does not transfer the description risk; it transfers the quantity risk. Confusing the two is the costliest error in this field.
The other forms available
Luxembourg usage recognises others worth citing. The terms used locally differ from neighbouring practice.
The reimbursable contract, also called open-book, where the contractor is reimbursed its evidenced expenditure plus a fee.
The daywork contract, where the work is paid for by time spent and resources deployed.
The mixed contract, combining several forms across trades or items.
These forms suit situations of high uncertainty, notably in refurbishment, where neither the quantities nor sometimes the extent of the works is known before opening up.
They do, however, require rigorous control, failing which the client loses command of the amount.
What the choice means for the specification
Three often neglected consequences.
The lump sum contract demands a fuller description, since anything not described falls outside the lump sum.
The measured contract demands more reliable quantities, since they underpin the comparison and part of the account.
Reimbursable and daywork contracts demand control arrangements, definition of admissible expenditure, evidence, any caps.
None of these three requirements can be improvised mid-tender.
How to choose
Four criteria, in this order.
How fully the project is defined. An incompletely defined project sits badly with a lump sum.
The nature of the works. Refurbishment carries uncertainties that new build does not.
The client's capacity to monitor. Measured and daywork contracts presuppose control of quantities or time.
Tolerance of overrun risk. The lump sum secures the amount; it does not secure the scope.
The third criterion is the most underestimated: a measured contract without the ability to verify quantities executed amounts to signing an open figure.
What must be written in the documents
Three elements, whatever the form adopted. They must appear in the contract in either case.
The form of contract, stated expressly in the particular contractual clauses.
The treatment of quantity variances, notably the thresholds beyond which renegotiation applies.
The regime for additional works, covered in the article on additional works.
What this means for a professional
Four rules.
State the form of contract expressly, rather than letting it be inferred from the schedule.
Match the level of description to the form adopted, the lump sum demanding more.
Recall that the lump sum covers only what is described, which shifts the demand onto design.
Check the capacity to monitor before adopting a form that presupposes it.
This article reflects contractual practice at the date of checking and serves professional orientation. It does not constitute legal advice.