In a recent conversation with an architect his first real question to me was the one every builder gets asked: are you still doing fixed price building contracts?
It’s one of the perennial arguments in this industry, and it usually gets fought out between builders and clients as though one format is right and the other is a trap. We stopped having that argument years ago.
Here’s how.
The Short Answer
We price every project the same way, whatever contract it ends up on. Then we present the client with two options: a fixed price building contract, with the risk margin we’ve added to lock that price in disclosed openly, or a cost plus building contract, where the books are open and the flexibility stays with you.
The client chooses. We’ve found that once people can see exactly what price certainty costs, almost no one chooses fixed price.
But the fact that we’re willing to fix it tells you something important: we back our numbers.
Why Fixed Price vs Cost Plus Became Such a Debate
Clients want certainty. Builders want protection from the unknowns that live inside every renovation, especially in older homes where you don’t know what’s behind the wall until it’s open.
A fixed price contract deals with that risk by pricing it in, whether or not the risk ever materialises.
A cost plus contract deals with it by charging you for what actually happens.
Neither is wrong. The problem is that most builders pick one format, defend it, and the conversation turns adversarial before a single price has been discussed.
The Project Should be Priced Once. Then Choose the Contract.
We do the pricing work once, properly, the same way every time. From there it’s your call.
If you want a fixed price, we’ll give you one. We’re upfront that it includes a risk margin, because locking in a price means we carry the unknowns, and carrying risk has a cost.
What you get in return is certainty. What you give up is flexibility, because every change from that point becomes a formal variation.
If you’d rather do cost plus, you pay what the job actually costs plus our disclosed margin. You keep the flexibility to make decisions along the way, and you don’t pay for risks that never eventuate.
What you give up is the guaranteed number.
There are genuine benefits and genuine drawbacks on both sides, and we lay them out plainly. Then the decision sits where it should: with the person paying for the project.
So Which Contract Do Clients Actually Choose?
When clients are shown both options side by side, with the risk margin visible, virtually no one chooses fixed price.
That surprised me at first, but it makes sense. Most people, when they can see what certainty costs, decide they’d rather keep the money and the flexibility.
And the offer itself does a job the fixed number never has to: it gives clients confidence that we’ve priced the project correctly, because we’re willing to stand behind it either way.
Before You Tender, Make Sure the Budget is Realistic
Contract format is only half the conversation. The other half is whether the budget is realistic in the first place.
If a client believes they’re building a one million dollar house and I think it’s a two million dollar house, there’s no point in tendering.
Someone will win that tender with a low number, the client will pull things out of the scope to make it fit, and then pull half of them back in during the build, which costs far more than if they’d faced the real number at the start.
So before we price anything, we look at the scope against the budget and tell you straight whether they line up. If you’ve chosen the stone and you love it, you’re going to install it.
Better to plan for that honestly than pretend otherwise through a tender.
Heading to Tender? Start With the Real Cost
If you’re an architect or a homeowner preparing to tender a project, the most useful thing we can do first is review the drawings and give you a straight view on what we think it will cost to build. If the budget is sensible for the scope, everyone’s time is well spent.
If it isn’t, you’ll know before you’ve burned a month on a tender that was never going to land.
Either way, you’ll get an honest answer, and if we don’t have capacity to take it on, we’ll tell you that upfront too.
Frequently Asked Questions
What is a risk margin on a fixed price contract?
It’s the allowance a builder adds to cover the unknowns they take on when they guarantee a price. If nothing goes wrong, the builder keeps it; if things do, it absorbs the cost.
On a fixed price contract with us, that margin is disclosed rather than buried in the number.
What is a cost plus contract?
You pay the actual, documented cost of the work plus an agreed builder’s margin. It offers more flexibility and you only pay for what actually happens, but the final figure isn’t locked in at the start.
Which contract is cheaper?
On the same scope, cost plus usually ends up cheaper because you’re not paying for risks that never eventuate.
Fixed price can be worth it if certainty matters more to you than the premium it costs. That’s exactly why we present both and let you decide.
Is cost plus better than fixed price for reovation?
Not necessarily. Cost plus can suit renovations where there are unknowns and the scope may change, while fixed price offers greater certainty at a premium—the right choice depends on your project and priorities.
Does offering both mean your pricing is less rigorous?
The opposite. We price the job the same way regardless of format, and we’re willing to fix that price if you want us to. You can’t responsibly offer a fixed price unless you’re confident in your numbers.
What if my budget doesn’t match my plans?
We’ll tell you early and plainly, before you spend money tendering. From there you can adjust the scope, adjust the budget, or get a quantity surveyor (QS) involved to price it independently. What we won’t do is tell you what you want to hear.
