There are two main approaches when it comes to bidding a contract: Cost-Plus and Fixed Price. Each have pro’s and con’s for both the customer and the builder. Cost plus means that the builder or contractor gives the customer an “estimate” of what he believes the project should cost. The customer is then billed based on the contractor’s cost plus an agreed upon profit. Included in the cost is a project management fee to compensate for the builder’s overhead. Cost plus tends to work best for a client who isn’t overly concerned with adhering to a strict budget and who wants to make decisions at their leisure throughout the process. There is complete transparency in invoicing and some believe it prevents the builder from using less superior products and trades, however we tend to believe that all competent builders use products and trades that they know they can stand behind and that won’t cost thousands of dollars in warranty calls.

A fixed price contract is a final set price to build a complete home as agreed upon in the scope of work. The price is fixed regardless of the cost of productivity. Fixed price contracts are a good way to get piece of mind on your actual cost of construction. Keep in mind that if the scope of work changes, or if there is an unforeseen situation, the contractor will provide a written change order outlining the new scope of work and new associated costs for approval prior to starting any new work. A fixed price is a fully defined scope of work with one bottom line price where the client knows exactly what the project will cost before the project begins.