Fixed Price Contracting: 4 Components That Decide Your Budget

About this episode

This episode discusses the components of fixed price contracting and its implications for construction budgeting.

Fixed Price Contracting: The Well-Marked Trail to Construction Certainty This is the fourth and final episode of the Contracting Methods series. If you've been following along since Episode 55, you now have a complete education in the two primary ways residential construction gets contracted—cost plus and fixed price. Today we're walking the fixed price path from proposal to punch list. Get Your Fixed Price Readiness Tool Today for Free What Fixed Price Actually Means Fixed price contracting means one number locked in exchange for a defined scope of work. The contractor carries the risk, you carry the certainty. You might see this called by three different names on proposals: fixed price, lump sum, or stipulated sum. All three mean the same thing. The contractor prices four buckets (labor, materials, subcontractors, equipment), applies their profit and overhead, and hands you back a single number. The principle: the price only changes if you change something. If the contractor underestimates framing labor, that's their problem. If lumber goes up under pure fixed price, that's their problem. If a subcontractor falls through, that's their problem. So long as you don't change plans…

People in this episode

Host: William W. Reid

Topics covered

• fixed price contracting
• construction budgeting
• contracting methods
• residential construction
• cost plus vs fixed price

Keywords

• fixed price
• contracting methods
• construction certainty
• budgeting
• residential construction

Mentioned in this episode

Books & works: Fixed Price Contracting: 4 Components That Decide Your Budget

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