Fixed Price Agreements

A Fixed Price Agreement is one where the price for the project is set at the contract signing.  For example, the builder will quote a price of $750,000 to build the home which includes his compensation.  The price of the home is based on the items described and represented in the plans and specifications. The price can be changed throughout the construction process by written change orders or allowance reconciliations.

The advantage of this form of contract is that generally all risk of cost increases, damage or loss is absorbed by the builder. The disadvantages are that the builder will increase his fee and include a substantial contingency line item to carry the risk of potential cost overruns. The final price of the home will typically be higher than other forms of agreements.

Generally, in a Fixed Price Agreement the homeowner will not have the opportunity to review individual bills, bids, estimates, etc. and the homeowner is limited in their selections.  Any changes will increase the cost of the home, above the fixed price at contract signing.

What we offer:

A hybrid of a Cost Plus Percentage Agreement and Fixed Price Agreement.  We call this our Cost Plus Fixed Compensation Agreement. In this scenario we establish a working construction estimate and fix our compensation based on our expected management time, overhead, and performance. Our compensation does not vary except through written change orders.  This scenario allows us and our homeowners to work together to control the costs and provides the proper incentives to do so.  We do not raise our compensation based on potential risk and we do not have incentives to increase the costs associated with the home.

Vs. Cost Plus Percentage Agreement