Fixed Price or Cost Plus - which contract is right for you?
- Ash
- Jul 11
- 2 min read
What’s the Difference?
When it comes to choosing your builder, one of the big decisions you'll need to make is what type of contract suits you best: fixed price or cost plus?
If you're scratching your head about which is the better fit, here's a simple breakdown of each – pros, cons, and all.

Cost Plus Contracts
What is it: This means you pay for the actual materials and labour costs plus a builder’s margin. In Australia, that margin typically ranges from 15% to 25%, depending on your location and the size of the job.
Who it suits: Cost plus contracts can be a good option for larger or more complex projects where the full scope of work isn’t entirely clear at the beginning.
What to expect: Your builder should provide detailed, itemised invoices showing exactly what you’re paying for, including how the margin is applied. At the outset, you’ll receive an estimate (not a fixed quote) based on the information available at that time.
PROS:
Can actually save you money – since builders don’t have to pad the price with contingency costs for unknowns
You’ll see exactly what you’re paying for, line by line
Offers flexibility with materials and finishes as the job evolves
Ideal for unique or custom jobs that are tricky to quote upfront
CONS:
Can feel more stressful not knowing your final cost
You’ll need to keep a contingency buffer (we suggest 10–20%) in your budget
Some banks may not approve a construction loan under a cost plus contract
Fixed Price Contracts
What is it: Just like it sounds – your builder provides a fixed lump-sum price based on your plans, selections, and the agreed scope of work.
Who it suits: This is a great option for straightforward jobs with a clear scope and predictable costs. The builder’s fee is already built into the total, and any changes along the way must be approved by both parties via a formal variation to the contract.
What to expect: You’ll pay a deposit (capped at 10% under Australian law), and make sure you have a signed contract and a valid Home Warranty Insurance certificate before any payment is made.
PROS:
You’ll know the full cost from the beginning, making it easier to budget
Payments are broken into clear, staged invoices (e.g. after framing, roofing, etc.)
CONS:
The initial quote may be higher to account for potential risk, delays, or price rises
Less flexibility once work begins – your choices need to be locked in early

So… Which One Is Right for You?
There’s no one-size-fits-all answer – it really depends on your project, your personality, and your budget. If you value total clarity and need to know your costs upfront, a fixed price contract might give you peace of mind. If you're building something a bit more bespoke and want the freedom to tweak things along the way, cost plus could be the better fit – just make sure you have a clear understanding with your builder and keep track of spending as you go.
Either way, the most important thing is that you feel confident in your builder and the process – transparent communication and a good working relationship will always be more valuable than the contract type alone.
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