Fixed Price Vs. Cost Plus

Most clients think they want a Fixed Price for a project—one number they expect  to pay to complete the project as agreed. The problem with this is Fixed Price on larger  projects like additions, renovations, and houses is rarely ever fixed. If a builder creates  a proposal using a fixed price, they hedge their bet by overbidding the costs to ensure  they don't lose money. Typically, we see a lot of allowances being used to help keep the  cost of the project down during the bidding process, which could later increase by 25  percent during the construction process. If used correctly, allowances are helpful but  ensure that the allowance is accurate within 10 percent of the actual expected cost.  Understand that even with a fixed price, if a builder discovers items outside the scope of  work, those items will need to be addressed through a change order. The moral of the  story is, there is no such thing as a fixed price anymore. Don't get sold a high price bid  in disguise. 

Cost Plus is the best of both worlds. Unfortunately, clients think this is a free pass  for a builder to charge whatever they want, but we all know it can't be true, or why would  it ever be used? Clients don't know how beneficial this contract is for the project's  quality, cost, and value because most have never hired someone this way. Most custom  homes are built using a cost-plus contract. Cost-Plus contracts guarantee the builder  will profit, and the client will not overpay for any part of their project. Both the builder  and the client share the risk and the reward of the project. Clients will review multiple  individual bids for each part of the project and choose which best fits their needs. Our  job is to help you navigate the proposals and the project from start to finish. This makes  us your GC and your project advisor. Cost-Plus contracts drive down the price of  construction and increase project transparency. Imagine how much better you would  feel if you knew exactly where your money was going? 

For most projects over $150,000 we use cost-plus contracts.