Fixed-Price vs Cost-Plus Building Contracts
The two main ways a Northern Rivers builder prices a job — fixed-price and cost-plus — what each means for your budget and risk, and which suits which project.
Before a build starts, you and your builder agree how the job will be priced — and the two main approaches, fixed-price and cost-plus, split the risk very differently. Understanding them helps you read a contract with confidence. This guide explains both, in plain terms.
It is general guidance, not legal or contract advice. When you are ready, we are clear up front about how we price your job and why.
Fixed-price contracts
In a fixed-price (or lump-sum) contract, the builder commits to a set price for a defined scope. You know the number up front, and the builder carries the risk if costs run over — provided the scope does not change. The trade-off is that the scope has to be well-defined to be priced fairly, and genuine unknowns (what is inside an old wall, for example) are handled through clearly-stated provisional sums or variations. We work on fixed-price contracts wherever the scope allows, with itemised pricing so you can see what each part costs.
Cost-plus contracts
In a cost-plus contract, you pay the actual cost of materials and labour plus an agreed builder's margin. It suits jobs where the scope genuinely cannot be pinned down up front — complex renovations of older homes, or work whose extent only becomes clear once it is opened up. The upside is fairness and transparency; the trade-off is less certainty on the final figure. The honest approach is to use it only where a fixed price would otherwise be padded with guesswork, and to keep the costs open and visible.
Questions
- Which is better, fixed-price or cost-plus?
- Neither is universally better — it depends on how well the scope can be defined. A well-defined new build or renovation suits fixed-price, giving you a known number; a job full of genuine unknowns may be fairer on cost-plus than as a padded fixed price. We recommend the approach that fits your project and explain why.
- How are unknowns handled in a fixed-price contract?
- Through provisional sums and variations. Where something cannot be known until work starts — like the condition inside an existing wall — a transparent provisional sum is set so you see exactly what any additional work would cost before it proceeds, rather than it being hidden in the headline price.