Commercial Construction: Cost Plus vs. Fixed Cost
There are several ways to go about commercial construction contracts and costs. Two of the most popular options are cost plus contracts and fixed cost construction contracts. At Burleson, we use fixed cost contracts to help protect your interests and help you effectively budget for your commercial construction project.
Fixed cost contracts are exactly what they sound like: we estimate how much the project will cost and provide a bid. If you accept, then we sign a contract that you will pay a certain amount for your project. After that, we get to work. It’s a fairly straightforward process for commercial construction projects..
Cost plus contracts, by contrast, means you pay the cost of construction (such as materials, labor, and overhead) plus a fee for the construction contractor. Generally, this added fee is either a flat fee or a percentage of the total cost of your project. This means that the project cost is variable depending on what the contractor actually spends in materials and man hours. There is no set price until the project is done.
The problem with cost plus construction is that there’s practically no ceiling for construction costs. You don’t really know how much you will pay for your commercial construction project until it’s complete. The contractor isn’t incentivized to keep costs within your budget, and sometimes it’s actually in their favor to drive the price up, such as if you’re going to pay them a certain percentage of the total project cost. Basically, there’s no reason for the contractor to bid accurately, as you must pay whatever the final project costs
However, with fixed cost construction contracts, you know exactly what your project will cost up-front. Fixed cost commercial construction takes the risk off you and puts it on the contractor. If your general contractor doesn’t estimate projects properly, then they end up paying the overage. You simply pay one lump sum for your project, even if the project goes over budget due to estimation errors. Simply put, fixed cost construction contracts are best if you have a budget you need to stick to.
Because of the risks involved with cost plus construction, we only offer fixed cost pricing for commercial construction projects. Our mission is to provide high quality construction services at fair, honest prices. We believe in achieving success with reliable service and open communication with our clients. We’re interested in long-term relationships with our clients, so you don’t need to worry about getting burned on the costs of your project.
We’ve been providing dependable commercial construction services since 2002. Our construction specialists offer years of experience, so you get peace of mind that your project is in good hands. We can handle everything from pre-construction budget estimates to providing post-construction documentation.
Contact us now to learn more and request a bid for your upcoming commercial construction project.