builders quotes

What's the story with builders' quotes?

Congratulations – you’ve decided to renovate! If it’s a decent-size job you’ll have plans drawn up, your DA approved and you’ll probably be getting a couple of builders quotes. Ideally, these will be builders that friends or colleagues or maybe your designer has recommended. As you’re navigating your way through this strange new world you’ll be coming across lots of new words and phrases that you may not of used before. Two that you’ll definitely be hearing are “fixed price” and “cost plus” and they’re to do with how the builder charges for his work.

 

So, what’s the difference?

 

Fixed price

If you are doing a new build and have a comprehensive scope of works (ie you’ve put plenty of detail in there and there’s very little room for (mis)interpretation), you might be considering asking for a fixed-price quote. This means that the builder looks at your plans, puts a cost against everything he can see there and gives you a quote for all the work that’s outlined in your scope of works. The price he gives you includes any profit that he will make on the job. In a perfect world, this means you know exactly how much your build is going to cost and that there will be no surprises.

In the real world, that may not actually be the case. A fixed price quote is only as good as your documentation and scope of works. Sometimes, lines on a drawing just don’t give enough detail for the builder’s quote and your vision to match up. Once the quote has been accepted by you, any changes to that are considered a variation. Some unscrupulous builders will go low on a quote to win a job and then try to make up the money by charging for lots of variations. This is not a pleasant experience for the home owner and before you accept a quote, you need to go over it with a fine tooth comb to make sure it aligns with your expectations. For example the builder might have allowed for a standard 20mm engineered stone benchtop in the kitchen, unless you tell him upfront that you want a 40mm benchtop, that will be charged as a variation.

 

Cost plus

Many builders prefer working on a cost-plus basis. This means that they look at your plans and scope of works and give their best estimate of what the work will cost. This estimate includes any profit they make from the job. The difference really comes in when it’s time to invoice as, rather than charging you a set price, they will charge for the actual time it took plus the materials that were used. This final number might be higher than their original estimate because they came across unforeseen issues or it could be lower than they thought because the carpenters were able to do it quickly. Either way, you’ll see exactly how long it took and what it cost.

Of course, there’s always room for abusing the system and some unscrupulous builders may drag their heels in order to charge more time. Hopefully you’ve engaged a builder who’s more focussed on doing a good job, in a timely fashion, for a fair price.

 

Both options are totally legit and the option you choose depends on how final your plans and drawings are as well as the builder you decide to use – some simply won’t do fixed price jobs because if they are unforeseen problems, the builder will end up paying for them and not make any profit on the job. Which is not a great scenario for a business person, as I’m sure you can understand.

Was your building job fixed price or cost plus? Which option would you prefer if you were doing a renovation?

10 Comments

  • Nicole @ The Builder's Wife

    Just about all our jobs are fixed price, this has been our undoing a few times when unexpected issues came about and cost us money. We have in recent times set allowances for major items like electrical, which is much like cost plus. This combination of both in the one seems to be working well for us. Great informative post Alix!

    • alix@thebuilderette.com

      Thanks for sharing your approach Nicole – always good to hear how other people are doing it. I think realistic allowances are a good way to go. Glad you enjoyed the post.

  • Bec Senyard

    I don’t think I’ve ever worked on a commercial job or residential where there hasn’t been a variation because something has been missed or something needs to be fixed after demolition. It pays to find a builder who communicates well and isn’t out to charge a fortune. Great post and thank you for linking up this week.

    • alix@thebuilderette.com

      Yep, there always seems to be a variation of one kind or another no matter how well you’ve planned things. And yes – communication and being reasonable (both sides) is key to working it out and moving forward. Thanks!

  • Kirsten and co.

    We haven’t built or renovated for a couple of years but this is a very informative summary. There’s always so much to think about when undertaking a new build!

  • Janet aka Middle Aged Mama

    It’s so long ago (over 20 years) that I really don’t remember! It sounds like we went for fixed price – certain things were included in the price but if we wanted a more luxurious version eg tiles, tapware, we had to pay extra.

    • alix@thebuilderette.com

      Hi Janet. Builders usually make allowances for things like that – they’ll allocate say $1000 for a toilet and if you find one you like for that price that’s great, if you want a more expensive one you make up the extra. It’s a pretty fair way of doing things. Are you still in the same house? Cheers.

  • Tracey - The Tradies Wife

    Great post! We historically tend to lean towards fixed price contracts. Having said that though, we have spent the last 18 months on cost plus. This has given the owner scope to make decisions as he goes and add or delete things without a long list of variations.

    • alix@thebuilderette.com

      Thanks Tracey – yes we do both and happy to do fixed price when people are on top of their plans and scope of works. It’s when people keep wandering around and just pointing at things (I want that wall out, new doors there and can you just do a deck) that we recommend cost-plus. So that, like you said, they can make decisions as they go. Cheers, alix

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