Louisiana Contractors License Practice Exam

Which payment method specifies total fees expected for a project?

1. Lump sum

2. Cost-plus

3. Unit price

4. All of the above

The correct answer is: All of the above

The payment method that specifies total fees expected for a project is the lump sum payment. This method entails a fixed total price for the entire project, providing clarity and certainty about the costs. Contractors and clients agree on a set amount before work begins, which includes all anticipated expenses. This allows both parties to have a clear understanding of financial obligations from the start. While the cost-plus payment method allows for reimbursement of actual costs plus a fee, it doesn’t provide a defined total fee upfront, which can lead to variable costs depending on how the project unfolds. The unit price method specifies payments based on the amount of work done (e.g., per square foot or per unit), which also does not guarantee a total fee until the project is completed and the scope is fully defined. Therefore, lump sum is the only proper answer when discussing a payment method that specifies total fees expected for a project. The statement that "all of the above" applies is inaccurate because only lump sum explicitly defines the total fees in advance.