Fixed price, guide price or time and materials: what building risk are you accepting?

1. Read the price alongside the entire assignment

Ask the contractor in writing which model is offered and for what work. A “total price” heading may be followed by exceptions leaving major parts open. Put drawings, specification and pricing schedules together. Do not assume everything shown on a separate sketch is supplied if the accepted quotation describes something different.

Make three cost columns: included, excluded and still to choose. Record the responsible party per item, such as demolition, disposal, substrate, permit application and finish. This is not a list shifting every conceivable risk, but a tool linking price and performance. Without boundaries, quotations are difficult to compare.

2. Understand what a fixed price establishes

A fixed price generally clarifies agreed performance and total remuneration. It does not mean later client changes are free. The price belongs to a defined assignment. If that changes, record work and amount again before execution. A fixed price without clear scope offers only apparent certainty.

ConsuWijzer also discusses specific fixed-price increase situations, such as incorrect information or a court decision on exceptional costs. Have these exceptions assessed instead of promising that a fixed price never changes in any circumstances. Ask beforehand what the contractor inspects independently and what information you must supply.

3. Distinguish a guide price from a firm ceiling

A guide price is an estimate. The ten-percent threshold and timely warning of a further overrun matter to legal assessment. ConsuWijzer explains that a warning must leave room for choices. You should therefore not learn only on the final invoice that the budget had long been unachievable.

For a real maximum, have an explicit agreement suited to the work. A maximum and ordinary guide price are not automatically identical. Describe how approaching the limit is reported, who may approve changes and what happens if you refuse. Request concrete cost information to decide whether to reduce or simplify work.

4. Make time-and-materials pricing verifiable beforehand

You pay for hours worked and materials used. Agree rates, mark-ups, travel costs and time records in advance. Ask when progress accounts arrive and which tasks different workers perform. An attractive hourly rate says little about the total if required time and additional charges remain unclear.

Record timely discussion of budget departures and information accompanying invoices. Check whether a budget is only an estimate or an agreed limit too. Do not automatically sign a time sheet as though also approving all quality and prices; clarify what signing confirms. Keep reports during performance rather than waiting until the end.

5. Specify provisional sums and selections

According to ACM’s checklist, provisional sums estimate unsettled items, such as tiles selected later. A fixed price with many such sums may therefore still yield a variable final outcome. Ask what quantity, quality and work each includes and how final settlement works. The label alone does not explain calculation of differences.

Plan choices so the contractor can confirm price differences before ordering. Also record whether installation costs change with another material. A lower purchase price does not automatically reduce labour costs. This avoids thinking you remain in budget when a harder product requires extra processing. Use the same assumptions when comparing other quotations.

6. Record changes and warnings

Agree a simple decision route: change description, price consequence, planning and approval before work continues. Record who can decide for you if several residents or clients are involved. Otherwise a question on site may later be interpreted as an instruction. Keep the entire response, not an isolated message saying “agreed”.

Periodically check price records against actual orders. Incorrect assumptions are cheaper and clearer to resolve before material is installed. If views differ, request an itemised explanation. The separate extra-work guide addresses disputing an invoice; here the aim is an understandable, verifiable agreement arranged beforehand.

7. Fictional example: fixed price with flooring left open

Suppose an extension quotation gives a fixed total plus a provisional flooring sum. The client later chooses a pattern needing more cutting. They expect only the material difference, while the contractor charges extra installation too. The original quotation does not specify what the sum covers.

Useful preparation asks about material, quantity, installation method and calculation before confirming selection. This fictional example does not decide who pays the difference. It shows that a fixed-price heading and an open item can conceal different pricing arrangements in the same project.

8. Checklist for reviewing your pricing model

If uncertain, seek assessment before signing or an expensive change. Bring the entire quotation, including small print and technical schedules. Ask the lawyer to check more than the sum, especially the links between price, performance, exceptions and authorised approval.

• Written description of fixed price, guide price or time-and-materials charging.
• Work, materials, quantities and excluded items.
• Rates, mark-ups, provisional sums and actual-cost settlement arrangements.
• Warning points, cost reporting and any genuine ceiling.
• Change procedure, planning and who may approve.