Why Is It Important to Get a Fixed Price Contract?

Building your dream home is an exciting undertaking and a journey you might only take once. For this reason, you want to make sure every aspect of your home goes to plan, and this all begins with your building contract.

In Queensland, all residential building works valued at $3,300 or more are required to have a written building contract. The type of contract you sign will depend on a few factors, including your builder, the type of project and any selections you’ve made prior to signing. At King Builders, we always try to use fixed price contracts as this is generally the best option for all parties involved. 

Fixed Price vs Cost-Plus

When it comes to residential building, there are two main types of contracts – fixed price and cost-plus. A fixed price contract is essentially a fixed lump sum that cannot be changed – it means that your payment amount does not depend on resources used or time expended. A fixed price contract will give you exact costing of the total build before the works begin.

In contrast, a cost-plus contract is where the final cost is not determined at the time of contract signing. It basically means that your builder will give you a reasonable estimate for the job plus an additional estimate to cover expenses that have not yet been determined. Naturally, a fixed price contract is preferable for clients as they know what they are up for from the very beginning. 

No Nasty Surprises

One of the best parts of a fixed price contract is that there are no sneaky costs or surprise extras involved. When you build with a cost-plus contract, the price can increase according to the actual cost of production or market fluctuations; a fixed price contract will protect you from these nasty surprises.

Prime Cost vs Provisional Sum Items

While a fixed price contract will give you a pretty accurate idea of what your project will cost to build, it may be necessary to include some prime cost and provisional sum items. To clarify, prime cost items are fixtures, fittings or selections, which haven’t been priced prior to the building contract being signed. This could be anything from tapware, to tiles and appliances. Prime cost estimates are usually included because the exact make or model has not yet been finalised. 

Similarly, provisional sum items are an estimate of the cost to carry out particular labour works, such as excavation. The idea behind this is that the builder doesn’t know what the results of an excavation (or other works) will be and what they might find until they actually begin, meaning it may end up more costly than first anticipated.

Ideally, you want to avoid prime cost and provisional sum items where possible by finalising as many details as you can before it comes to contract signing time. If your contract does include PC and PS items, make sure you seek advice before signing to determine whether these costs are reasonable and fair. 

Making Selections Before Construction

The best way to ensure your contract is as close as possible to the final cost of your project, is to make as many selections as you can before construction commences. This includes fixtures and fittings, as well as things like soil tests and site surveys. Remember that forearmed is forewarned! In addition to locking in your final cost early on, making all of your selections before construction is integral to the smooth running of a job.


To learn more about fixed price contracts or to find out how King Builders can create the custom home of your dreams, get in touch with our friendly team today.

To chat with us about building your dream home, get in touch with our team.