Which type of contract involves a predetermined price for completing a project, assuming all risks by the contractor?

A contract that involves a predetermined price for completing a project while assuming all risks by the contractor is commonly known as a Lump Sum Contract. This type of agreement specifies a total price for all the work required on a project. The contractor is responsible for managing costs and risks associated with the project completion within that fixed price.

In a Lump Sum Contract, once the price is agreed upon, it does not change unless the scope of the work is modified through change orders. This means that if unexpected costs arise during the project, the contractor cannot claim additional payment beyond the agreed amount unless the modifications are formally recognized and priced. This placement of risk on the contractor incentivizes efficient project management and cost control, as the contractor aims to complete the project under budget while adhering to the outlined specifications.

Understanding this concept is crucial for both contractors and clients, as it defines the relationship and expectations regarding financial risk and project delivery.