Remeasurement Contract vs Lump Sum (Fixed Price) vs Cost-Reimbursable: Choosing Your Risk

A remeasurement contract pays tendered rates for the quantities actually built, placing it between a lump sum, where the contractor carries the quantity risk, and a cost-reimbursable contract, where the employer pays cost plus a fee. Choosing between them is a risk decision, not a procurement formality, because it settles who pays when the ground, the design or the scope departs from the tender.

What is a remeasurement contract?

A remeasurement contract, sometimes called a remeasured or measurement contract, is one in which the tender quantities are estimates, the rates are agreed at tender, and the contract sum is recalculated by measuring the work as built. Remeasurement means the price is worked out twice: once at tender from the employer's estimates, and again on site from what was really built.

The engine is the Bill of Quantities. The employer's team measures the drawings and the contractor prices a rate against every line. Under Sub-Clause 14.1 of the 1999 FIDIC Red Book, the billed quantities are estimates, not the actual and correct quantities of the Works. The Bill is not a promise. It is a forecast, and the rates are what you are held to.

FIDIC's own contracts Q&A describes its Construction Contract, the Red Book for works designed by the employer, as a remeasurement contract, so a lump sum needs its payment provisions changed. The Red Book measurement rules sit in Clause 12 (Measurement and Evaluation in 1999, Measurement and Valuation in 2017).

Under Sub-Clause 12.1, the Engineer gives notice before measuring and the contractor attends or sends a qualified representative. In the 1999 edition, if the contractor stays away, the Engineer's measurement is accepted as accurate, and so are records left unchallenged for 14 days after the contractor is asked to examine them. Skip the measurement and the Engineer's number becomes your number.

Sub-Clause 12.2 measures the net actual quantity of each item of the Permanent Works, by the method of measurement stated in the Bill. Net is the word that costs money. Overbreak, wastage and most temporary works are not measured unless the contract or the method provides for them, so they belong inside the rate. Sub-Clause 12.3 then applies each rate to its agreed quantity.

Remeasurement vs lump sum vs cost-reimbursable at a glance

Read the table as a map of who pays when the project departs from the tender.

Remeasurement vs lump sum (fixed price): opposite bets on the same drawings

A lump sum contract, often called fixed price, is a bet that the scope is known. The price moves only through Variations and the adjustments the contract allows. If quantities exceed the contractor's own take-off, it absorbs the overrun. If they come in lower, it keeps the saving.

A remeasurement contract takes the opposite bet. The 1999 Red Book says a change in the quantity of an item does not necessarily constitute a Variation. It does not need to be one, because the measurement already pays for it. More concrete poured means more concrete paid for at the tendered rate.

Take an illustrative QAR 40 million road package billing 12,000 cubic metres of rock excavation at QAR 95 per cubic metre, with 15,000 actually dug. Under remeasurement, the extra 3,000 cubic metres are measured and paid at the billed rate, worth QAR 285,000, with no claim needed, unless the rate itself is re-fixed under Sub-Clause 12.3. Under a lump sum on the same drawings, that QAR 285,000 is the contractor's loss unless it falls within a Variation or an unforeseeable conditions clause.

Time travels separately. Sub-Clause 8.4 of the 1999 Red Book makes a substantial change in quantity a ground for extension of time, but only through the Sub-Clause 20.1 claims procedure and its 28-day notice. The measurement pays for the extra rock. It does not move the completion date.

At the far end of the fixed-price spectrum sits lump sum turnkey, or LSTK, where one contractor designs, procures, builds and commissions for one price. Under Sub-Clause 4.12 of the 1999 Silver Book, the contractor accepts total responsibility for having foreseen all difficulties and costs, and the price is not adjusted for unforeseen ones. Our explainer on LSTK contract meaning covers where that risk lands.

Where the contractor's risk sits under a remeasurement contract

Remeasurement narrows the contractor's risk without removing it. The contractor still owns the price risk inside every rate, so every extra unit measured at a rate cut to win the tender deepens the loss. Falling quantities hurt too, because a rate carrying fixed cost, such as mobilising a piling rig, only recovers it if the billed quantity is built. A rate can be correct on paper and still lose money on site. Where the Bill allows it, price one-off costs such as mobilisation as fixed items and keep only quantity-driven cost in the rates.

The Red Book's adjustment mechanism is the rate re-fixing test in Sub-Clause 12.3, and it cuts both ways. On a quantity change alone, a new rate is appropriate only when four conditions are met together. The measured quantity must differ from the Bill quantity by more than 10%, and that change multiplied by the rate must exceed 0.01% of the Accepted Contract Amount. The change must also directly alter the Cost per unit quantity by more than 1%, and the item must not be a fixed rate item. The word 'and' after the third condition matters: all four must be satisfied, not just one. FIDIC's own guidance confirms that the new rate can be lower as well as higher, so an Engineer can use the same test to cut a rate when the extra quantity spreads fixed cost and lowers the unit cost.

The 0.01% threshold is low, only QAR 4,000 on the QAR 40 million package. The 1% cost test is where re-rating arguments are usually lost, because the contractor must show from its own build-up how the unit cost moved. That is a records problem, not a contract problem, and the same discipline decides valuing variations under FIDIC.

What is a cost-reimbursable contract?

A cost-reimbursable contract pays the contractor its actual cost plus an agreed fee, so the employer carries almost all of the cost and quantity risk. NEC4 publishes it as Option E of the Engineering and Construction Contract, which its publisher describes as ideal where the scope cannot be properly defined at the outset, such as urgent or emergency works. None of FIDIC's main Red, Yellow or Silver Books works this way, although its Short Form, the Green Book, lets the parties choose a cost-plus valuation.

The fee is the contractor's margin. Cost that cannot be proved is not paid. NEC4 calls it Disallowed Cost. Under this model, the timesheets, supplier invoices and plant returns are the bill.

Because the employer funds an open commitment, many employers prefer a middle route: a target cost that shares the overrun, as in NEC4 Options C and D, or a guaranteed maximum price that caps it.

Which pricing model fits which project

The question is not which model is cheapest but which risk the project can actually price, and that depends on how complete the design is at signing. Where the design is complete and stable, a lump sum rewards accurate pricing and a tight change process, which is why handling variations on lump sum and LSTK contracts decides the margin.

Where the scope is defined but the quantities are not, remeasurement is the honest answer. Earthworks, piling driven to a set, road schemes with uncertain utility diversions and marine works all hide quantities that only the site will reveal. Pricing them as a lump sum forces a contingency the employer will reject or a gamble nobody can win. Where the scope cannot be defined at all, cost-reimbursable is usually the only workable model.

Choosing the FIDIC book is choosing the pricing model. But real contracts are rarely pure, so read the pricing schedule, not the contract title, to see which risk you carry. Our guide to FIDIC and NEC contract forms maps the full suite.

What goes wrong after the contract is signed

The problem is rarely the choice of model. It is the administration that follows it. Lump sum contractors absorb scope creep because instructions never become Variations. Remeasurement contractors leave money in missed joint measurements and unchallenged records. Cost-reimbursable contractors lose cost and fee because their records fail the audit.

Under remeasurement, the measurement is the payment. Each month's interim payment certificate values the work executed, which on a measured contract means quantity multiplied by rate. A missed measurement is not a paperwork gap. It is unbilled revenue.

We review hundreds of interim valuations and final accounts across the GCC every year, and measured contracts follow a familiar pattern. The contractor's quantity surveyor is busy pricing variations while the Engineer's team quietly builds the measurement record, so by the final account the Engineer's quantities are the only ones anybody signed.

At CALIM, we run the measurement side of the contract for contractors: joint measurement attendance, records kept to the stated method of measurement, Sub-Clause 12.3 re-rating submissions and the final account measure. Our quantity surveying services exist for exactly this work.

Frequently Asked Questions

What is a remeasurement contract?

A remeasurement contract is a construction contract in which the contractor prices rates against estimated quantities in a Bill of Quantities, and the final price is calculated by measuring the work actually carried out and applying those rates. The employer carries the quantity risk and the contractor carries the rate risk. Under the FIDIC Red Book, Sub-Clause 12.3 allows a new rate when a quantity change is large enough to distort the unit cost.

What is the difference between a remeasurement contract and a lump sum contract?

The difference is who carries the quantity risk. Under a lump sum, the contractor agrees one price for a defined scope and absorbs any gap between its take-off and the quantities built, unless a Variation changes the scope. Under a remeasurement contract, the rates are fixed but the quantities are not, so the employer pays for the work as measured. A lump sum buys price certainty. Remeasurement buys a price that follows reality.

Who carries the quantity risk in a remeasurement contract?

The employer carries the quantity risk in a remeasurement contract. If the Bill of Quantities underestimates an item, the employer pays for the extra quantity at the tendered rate. The contractor carries the rate risk, so a rate priced too low loses more with every extra unit. Under the FIDIC Red Book, a large quantity change can justify a new rate under Sub-Clause 12.3, but only if all four of its conditions are met.

What is a cost reimbursable contract?

A cost reimbursable contract pays the contractor the actual costs it incurs plus an agreed fee. The employer carries most of the cost and quantity risk, so the model suits work whose scope cannot be defined at the start, such as emergency, investigative or early works. NEC4 publishes it as Option E of its Engineering and Construction Contract. The contractor's main exposure is proof, because cost that cannot be substantiated from timesheets, invoices and records is not reimbursed.

Can a lump sum contract be remeasured?

Not as a whole, unless the contract says so. A lump sum price covers the defined scope and moves only through Variations and the adjustments the contract allows. Many lump sum contracts carve out specific items for remeasurement, typically provisional quantities for ground-related work such as rock excavation or piling. If the employer issued a Bill of Quantities with the tender, check whether it is a contract document or only a pricing aid, because that affects whether its errors can be corrected.

The pricing model you sign is the risk you carry.

Note: This is general information on remeasurement, lump sum and cost-reimbursable pricing under the unamended FIDIC and NEC forms, not legal advice, and your particular conditions and governing law can change the position.