Building Contracts: Fixed Price or Cost Plus?

 

The contractual agreement between a builder and client can have a great impact on the success of the project. There are two general categories of contractual agreements for residential homebuilding and remodeling. One is the Fixed Price contract and the other is the Cost Plus (sometimes known as Time and Materials).

The Fixed Price contract is the easiest to understand and is usually the most straightforward i.e., I will build this house (deck, kitchen remodel, etc.) for X amount of dollars. The cost will only change if additions or modifications are made to the agreed upon scope of work. Also there are usually allowances in Fixed Price contracts for certain items that can raise the price if the allowance is exceeded. In theory, this type of contract usually limits the financial exposure of the client.

Attic Insulation

During a recent structural repair, caused by the record snows of 2010-11, we had an opportunity to not only upgrade the roof framing but also the attic insulation as well. This house was built in the early 1980’s and the roof system is a combination of open beam ceiling and attic.  The attic had two layers of R-19 fiberglass batts laid on the attic floor with many gaps and missing pieces. Some of the attic knee walls were not insulated and many of the ones that were, rodents had removed much of the insulation. Another issue needing attention was the numerous old recessed lighting fixtures that were not designed to have insulation near the fixture. These old fixtures essentially created uninsulated holes in the ceiling that allowed warm air to easily escape.