11. AAG CONSTRUCTIONS FIXED PRICE CONTRACTS A fixed price contract basically means that the payment amount does not depend on resources used or time expended. A fixed contract will give you an exact costing of the total build before the works begin. THE ADVANTAGES • The total cost of the build will be known to you from the outset. This will allow you to set your budget and stick to it without fear of blowing out. • The job is less likely to drag on as the builder will be highly motivated to finish on time to maximize his profit. Yes, this means you can tell your mother in law that Christmas IS at your house this year. THE DISADVANTAGES • A builders profit margin is higher to accommodate for unforeseen variables throughout the construction process. • If the fixed price has not been adequately determined by the builder, the quality of work can be affected by tradesman rushing to meet unrealistic timeframes (a panicked apprentice is not a pretty sight). • Variations to the contract can be an expensive exercise as the cost of each variation will incur the same builder’s markup common to a fixed price contract DECISION TIME Now that you know the basics and also the advantages and disadvantages of cost-plus and fixed price, it’s time to start thinking about what contract is going to work best for you. It is a good idea to talk to your builder about their experience of both contracts and what they feel most comfortable with. Some builders are more comfortable with one type of contract and it’s good to keep this in mind when deciding what will work best for you…what is it they say “happy wife, happy life?” (replace: wife w/ builder)
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