Our goal as a design-build firm is to create value for our clients through outstanding service-delivery and building trusted relationships. One of the many ways we achieve our goal is how we structure our contracts. Our clients want to know what they’re paying for, and we are able to clearly spell that out by providing stipulated sum agreements.
What is a Stipulated Sum?
Also referred to as a lump sum contract, a stipulated sum requires a builder to agree to provide specified services for a fixed price based on labor and material costs. The builder is responsible for executing the job properly and will provide its own means and methods to complete the project. Specifically, we use stipulated sum agreements with our multifamily and commercial projects, and they allow us to better define the scope and schedule of projects.
“The Mosaic Construction way is to be a client-first company in which we anticipate needs and focus on relationship-building,” said Singer. “We’ve always led with this approach, and our clients understand the value of that.” – Ira Singer
Why We Use Stipulated Sums
Mosaic Construction uses stipulated sums so that our clients know what they’re getting, and we know exactly what we need to deliver. Our contracts are predictable and easy to manage and benefit our clients in the following ways:
No Hidden Fees
One of Mosaic Construction’s key differentiators is that we never stick our clients with hidden fees, compared to cost-plus-fixed-fee and other contracts. “Our fees are transparent compared to other contractors,” said Ira Singer, Principal of Mosaic Construction on the This is the Real Estate Investing for Cash Flow podcast. “We have no incentive to say, ‘Okay, it’s going to be this much money for cost.’ Stipulated sums are integral in forging trusted relationships with our clients.”
Our clients value the predictability of stipulated sum agreements, especially since they reduce risk and give them more confidence. With an agreed upon sum in place, our clients are not liable for any cost overruns. “We formulate construction based on our time and our investment to manage that project and steward it,” added Singer. “Whatever the cost of the project, our timeframe for completion and our fees will remain the same. In this respect, both parties are incentivized to stay on schedule and finish the job on time.”
We find that stipulated sum arrangements foster a greater degree of collaboration between Mosaic Construction and our clients. We are able to execute tight project management and more efficient communication to ensure that both parties are adhering to the scope of work. “The Mosaic Construction way is to be a client-first company in which we anticipate needs and focus on relationship-building,” said Singer. “We’ve always led with this approach, and our clients understand the value of that.”
The design-build methodology supports our goal because it allows us to streamline the construction process, which ultimately benefits our clients and our management team. “We view our projects as investments in our clients’ growth and development,” added Singer. “We never think in terms of being one and done; rather, we create an atmosphere where our clients can focus on business development, while we do the best work possible for them.”