What type of contract involves the owner agreeing to pay a set amount to the contractor for specified services?

A fixed-price contract is an agreement in which the owner and contractor establish a specific price for a defined scope of work before the project begins. This type of contract is beneficial for project budgeting since the total cost is known upfront, and the contractor is incentivized to complete the project efficiently within the agreed-upon price. The contractor assumes more risk in this arrangement because any cost overruns during the project are absorbed by them, not the owner.

The other types of contracts mentioned differ significantly in structure. A cost-plus contract allows the contractor to be reimbursed for actual costs incurred plus an additional fee, creating less predictability for the owner regarding total costs. A time and material contract involves payment based on the time spent and materials used, which can lead to variable costs for the owner. A unit price contract sets prices based on specific units of work but does not guarantee a total project cost until the full scope is completed.