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 both cost-plus and 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 or project manager. Generally, this added fee is either a flat fee or a percentage of the total cost of your project. The final project cost is variable depending on what the contractor actually spends in materials and man hours.

Certain commercial construction projects can move at a quicker pace with the ability to flex financially and creates a scenario where the owner and/or contractor is able to get a “good deal” on a project, while paying only the cost of the actual materials and labor plus the set negotiated project management fee. If there are cost savings during construction, they are passed onto the owner in a cost-plus scenario.

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 solely 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, but at times can really slow projects down, especially in the event of supply chain issues. Money talks.

Our mission is to provide high quality construction services at fair, honest prices regardless of contract type. 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.