What is a key feature of lump-sum contracts?

A key feature of lump-sum contracts is that a total price is agreed upon before work begins. This means that the contractor and the client establish a fixed amount for the entire project upfront, which includes all labor, materials, and overhead costs. This type of contract provides predictability for both parties: the client knows the maximum amount they will pay, while the contractor has the incentive to complete the work efficiently to maximize their profit margin.

In contrast, the other options present different characteristics not typical of lump-sum contracts. For example, payments based on project milestones are more aligned with progress payments in time and materials contracts, where payment may vary depending on the completion of specific stages. The idea of unlimited work hours doesn't apply in a lump-sum framework because the agreement is for a set price; any extra work may require additional negotiations for compensation. Finally, while competitive bidding can be a component of many contract types, a lump-sum contract doesn't inherently require multiple bids to finalize; it can be established with a single accepted proposal.