When you start a renovation project, you are faced with two types of contracts. The “cost plus” and the fixed price contract. To help you understand the difference, here are the advantages and the disadvantages of both types of contracts.
The Cost plus contract
On a cost plus contract, the price is calculated on the actual cost of material and labor required for the renovation project.
The main advantage of this contract is flexibility. An adjustment is possible because the cost is not fixed so the client and the contractor can make some changes during the renovation. Although the contract is not fixed, the contractor should do all he can to realize the project on time.
The cost plus contract will be more interesting for people that want to prioritize project quality over budget. It is also a method that is appreciated by people who like to track expenses as the project progresses.
Fixed price contract
This means that the cost announced by the contractor at the beginning of the work is fixed. The contractor cannot spend more unless the scope of work changes. People who choose this option, do not want to make changes to keep the project to the initial cost.
The contractor should respect the number of hours worked on the project because if he does more, he could not invoice it to the client (contrary to the “cost-plus”). It also works the other way around, the client can’t ask for a lower price if the contractor finishes the renovation in a shorter time.
The advantage of this contract is that there is no impact on the prices.
The disadvantage is that the client does not have the flexibility to change his mind or make changes as easily as in the cost plus contract, without impacting the timeline and the costs before executing the tasks.
The fixed price contract is mostly chosen by clients who are careful with their budget.
To launch a project with this type of contract, it is imperative to make a quote. This contract has a reassuring side, because the price is fixed within a determined scope of work.
At ESPÉ, we offer our clients both solutions. This allows our clients to chose the best option for them. We encourage the fixed price contract because it minimizes the emotional impact of the financial stress and cares about their well-being during their project.
If you are interested in our methods, don’t hesitate to ask for a consultation for a future turnkey renovation project.