In a cost-plus model, production expenses pass directly to the client with a pre-negotiated markup to cover the contractor’s overhead. Clients receive regular itemized reports and a copy of every receipt. By its very nature, a cost-plus model requires full disclosure, fosters communication, and documents all activity. If a project comes in under budget, the client retains any savings. Conversely, the contractor is protected if costs slightly exceed the estimate.

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A fixed price model involves a bottom-line sales price. The actual cost to the builder is not disclosed to the client, nor is the true mark-up and resulting profit. Bids from multiple contractors provide a general price range for comparison, but objective evaluation is often difficult because of different approaches in estimating costs. The client either accepts the bid or declines. If under budget, the contractor retains the savings. If over budget, the contractor will find savings within the project or absorb the loss (i.e., less profit).

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With a cost-plus estimate our clients receive a detailed estimate, the same as they would with a fixed price estimate.