If a general contractor accepts a stipulated-sum contract with an owner, what type of constraint has he agreed to?

When a general contractor accepts a stipulated-sum contract, they are entering into an agreement where the total cost of the project is predetermined. This means that the contractor is financially obligated to complete the work within the set budget specified in the contract. The financial constraint is significant, as it limits the contractor's ability to exceed the agreed-upon amount due to unexpected costs or changes in the scope of work.

This type of contract places the risk of cost overruns on the contractor, making it crucial for them to manage expenses meticulously throughout the project to ensure profitability. Unlike contracts that may have more flexibility in terms of time or resource allocation, a stipulated-sum contract strictly focuses on the financial aspects, compelling the contractor to be efficient and effective in both budgeting and project execution.