What Is Contract Sum in Construction

When it comes to construction projects, one of the key terms that you`re likely to come across is the “contract sum”. But what exactly does this mean, and why is it so important?

In short, the contract sum refers to the agreed-upon total cost of a construction project. This includes all of the costs associated with the project, such as materials, labor, and any additional expenses like permits or fees.

When a construction contract is drawn up, the contract sum is one of the key components that is agreed upon by both parties. This sum is typically paid out in installments throughout the project, with each payment corresponding to a specific phase or milestone.

So why is the contract sum so important? For one thing, it helps to ensure that both the client and the contractor are on the same page when it comes to the scope of the project and the costs involved. By agreeing on a specific contract sum, both parties can work together to ensure that the project stays within budget and that there are no surprises when it comes to payment.

In addition, the contract sum can also be used to help calculate other important aspects of the project, such as insurance coverage and bonding requirements. This is because the contract sum provides a clear picture of the overall size and scope of the project, which can help to determine the level of coverage needed.

Finally, the contract sum can also be a key factor in determining the success of a construction project. If the project is completed within budget and on time, this can lead to increased customer satisfaction and repeat business. Conversely, if the project goes over budget or experiences delays, this can lead to dissatisfied customers and potential legal issues.

Overall, the contract sum is a key concept in construction projects that is essential for ensuring that all parties involved are on the same page when it comes to the costs and scope of the project. By understanding what the contract sum is and why it matters, you can help to ensure that your next construction project is a success.