Resource
Executive Summary
Provision of Engineering Services on a Lump Sum Basis: Current Practices, Opportunities & Challenges
As engineering firms and public agencies confront rising administrative costs, workforce pressures, and rapid advances in productivity-enhancing technologies like generative AI, traditional time-based compensation models are increasingly misaligned with how professional services are delivered. This 2024 research by the ACEC Research Institute, conducted with Virginia Tech, examines the use of lump sum (fixed-price) contracts for engineering and design services in the U.S. transportation sector, identifying opportunities, limitations, and best practices for effective implementation.
Based on interviews with state departments of transportation (DOTs), federal agencies, transit authorities, and consulting engineering firms, the research reveals how lump sum contracting can reduce administrative burden, improve cost predictability, and better align compensation with outcomes when scopes of work are clearly defined.
Why This Research Matters
Traditional cost-plus pricing models often prioritize hours billed over value delivered, creating inefficiencies for both agencies and firms.
Lump sum contracts focus attention on deliverables and outcomes, shifting emphasis from invoice auditing to quality and accountability.
As digital tools such as BIM, generative design, and AI-assisted workflows reshape engineering productivity, compensation structures that reward value and efficiency are becoming increasingly important.
Key Findings
Use of lump sum contracting varies significantly, with adoption ranging from less than 10% to over 80% of professional services contracts among client organizations.
Clear scope definition, including explicit assumptions and exclusions, is the most critical success factor for effective lump sum implementation.
Lump sum contracts reduce administrative overhead and reallocate effort toward innovation, project outcomes and stakeholder satisfaction.
Engineering firms report greater flexibility in staffing and technology deployment under lump sum arrangements.
Federal agencies such as the U.S. Army Corps of Engineers have long used lump sum contracting, demonstrating its viability at scale.
Implications for the Industry
This research helps transportation agencies and public authorities evaluate when and how to adopt lump sum contracting as part of their procurement strategies. Engineering firms can use these insights to refine pricing models, support innovation, and strengthen client relationships. Policymakers and procurement leaders should consider enhancing guidance and training on alternative compensation structures that reward value, efficiency, and technology-enabled performance.
Methodology
The study included semi-structured interviews with 14 client organizations (including nine state DOTs, three federal agencies, and two transit authorities) and nine engineering firms of varied size and geography. Interviews conducted in 2024 were qualitatively analyzed to identify common practices, success factors, and areas for improvement.