Plain English Explanation
Option A is a lump sum contract where the Contractor prices a list of activities. The Activity Schedule breaks the contract price down into discrete work items — each activity has a price, and you are paid when you complete that activity. There is no interim payment based on quantity — you either complete the activity or you don't.
Option A places programme and productivity risk firmly on the Contractor. If you take longer to complete an activity than planned, you are paid the same amount regardless. Conversely, if you are efficient, your margin improves. The Client gets price certainty — the contract sum is defined by the Activity Schedule and only changes through compensation events.
Option A is commonly used on building contracts, fit-out projects, and civil works where the scope is well-defined and the Client wants to manage their budget predictably.
Key Takeaway
You only get paid when an activity is complete — price your Activity Schedule in small enough increments to maintain monthly cashflow without creating an unmanageable administration burden.
What This Means for Subcontractors
For subcontractors, Option A works similarly — you price your activities and get paid on completion of each one. Cashflow is critical: you must complete an activity before you are paid for it. Price your activities sensibly — activities that are too large will create cashflow gaps. Activities that are too granular will increase administration. The Activity Schedule is the basis for payment, so draft it carefully.
Common Risks & Disputes
- 1Activities priced too large, creating significant cashflow gaps before payment is triggered
- 2Activities that are partially complete at month end generating no payment entitlement
- 3Scope changes not being processed as CEs promptly, leading to the Activity Schedule becoming misaligned with the actual works
- 4Over-reliance on the lump sum price as 'fixed' — compensation events can and should be used where the scope changes
- 5Poorly defined Activity Schedule activities making it ambiguous when completion is achieved
Sources
Related Clauses
Priced contract with Bill of Quantities
Re-measurable alternative — better cashflow but less price certainty
Target contract with Activity Schedule
Target cost version of an Activity Schedule — shares cost risk
Target contract with Bill of Quantities
Target cost with BoQ — different interim valuation to Option C
Continue Learning
Category Overview
Back to Main Options (A–F)Adjacent Clauses
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