Worries about costs and want to know exactly what your development project is going to cost you from the start? We work with fixed-price contracts, delivering your development for a set amount, regardless of the cost to ourselves. If you want the certainty of paying a fair price and no more, using a fixed price contract in construction projects is the way to go.
What is a fixed unit price contract?
As the name suggests, a fixed price contract is one where the client pays a pre-agreed amount for the entire project. The project will be delivered for that amount, regardless of any additional challenges, set-backs or expense which the development entails. Any additional money required above that paid as the set price will need to be found by the contractor. In the event that the project comes in under budget, the contractor will keep any cash which remains after construction from the fixed price.
Types of fixed-price contracts
Firm fixed-price contract (FFP)
This is a lump sum contract, as described above: the client pays a sum and the contractor delivers the development in return.
Cost reimbursable contract
Unlike the firm-fixed-price contract, there is no onus on the contractor to deliver the project, regardless of the cost to them. The actual price it cost to build the development is paid as one amount, with the contractor’s fee (profit) paid as a separate amount. These types of contract can be used when developments are high risk, or where the exact scope of what’s going to be needed is difficult to establish when the pricing is completed.
Time and materials contract
In this type of contract, the client pays for the materials used in the development. They also pay for contractor services on an hourly basis.
Fixed price with incentive fee (FPIF)
An upper (ceiling) price is fixed, which is the maximum price the client will pay. A target price, which is somewhat lower than the ceiling price, is agreed. If the development is completed for the target price, both developer and client share a percentage of the unspent sum (the difference between the ceiling price and the eventual total price of the development.
Advantages of fixed-price contracts
The benefits of fixed-price contracts depend on the scope of the work, and a number of other variables. We will always aim to enter into the contract that’s best suited for the job.