Managing Design under Lump-Sum Contract

Abstract

Managing design while under the constraints of a firm-price (lump-sum) contract with payment based on client-accepted deliverables provides the project manager a challenge that generally is not undertaken by the engineering profession. This paper defines the prerequisites for success with any design project. It amplifies management techniques that are required due to the nature of this contract type. Preestablishing a comprehensive list of deliverables that are time sensitive with a budget allocation that matches closely the anticipated expenditure curve is essential. Reaching mutual agreement between all participating parties, especially the client, on this deliverable list is a special challenge to a project manager's negotiation skills. Later in the paper, the writer uses a current project assignment as a testament to the identified prerequisites for success on a major tunnel project called the Point Loma Tunnel Outfall (PLTO). The lessons learned on this assignment can be applied to other contract forms. Regardless of contract type, having earned value assigned to the list of deliverables (a value expressed in either percentage, dollar, or hour) provides a measurement of contract scope. This technique provides better control of a project.