In a lump sum contract where the owner and contractor have agreed to a fixed price, what happens if the contractor completes the project for less than the anticipated price?
A. The contractor will find ways to spend the money on the project to boost their payroll.
B. The contractor will return a portion of the additional money to the owner and architect.
C. The owner will identify building elements to upgrade and use the money on those.
D. The additional money goes in the contractor's pocket as profit.
Answer (2)
In a lump sum contract, if the contractor completes the project for less than anticipated, the extra funds typically become profit for the contractor. The owner does not generally receive any of this money back unless specified. This fixed-price structure incentivizes contractors to manage costs effectively. ;
In a lump sum contract, if the contractor completes the project for less than anticipated, the remaining funds usually go into the contractor's profit. This fixed-price structure encourages cost management by the contractor, as they benefit from any savings. Therefore, option D is the correct answer: "The additional money goes in the contractor's pocket as profit."
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