Fixed-price Vs Charge-up contracts – which is best suited to your project?
Typically, there are two types of building contract used in New Zealand – fixed-price contracts and charge-up (also known as cost-plus-margin contracts), though knowing which of these contracts to go with can seem daunting, with usually either being suitable options. As both come with their advantages and disadvantages, it’s important to understand these differences before […]
Typically, there are two types of building contract used in New Zealand – fixed-price contracts and charge-up (also known as cost-plus-margin contracts), though knowing which of these contracts to go with can seem daunting, with usually either being suitable options. As both come with their advantages and disadvantages, it’s important to understand these differences before you sign so you can decide which best suits your project, budget and preferences and to avoid any surprises down the track. At Cain Built Ltd. we’ll recommend which style of contract we believe will work best for you, answer any questions you may have and give you ample time to consider everything before making your decision.
So, what are the differences?
In a nutshell – we’ll give you a detailed quote, up front.
Best suited to: New Builds and those who know exactly what they want.
A fixed-price quote can offer a certain level of certainty at the outset of your build, so if you have a very specific budget, or if you need a figure to take to the bank for approval, this contract will likely best suit you.
The price shown on your contract will generally be what you end up paying. We say generally, as it’s important to note that these contracts can include exceptions and certain ‘tagged’ items in your build (common in renovations, but can arise in new builds as well) where a price cannot be confirmed until work begins, as often there are elements of the build that can’t be seen or are unknown prior – such as; variations to initial plans, issues found once work has begun (e.g. rotten timber, asbestos) excavation and earth moving surprises (e.g. unfavourable conditions or excessive ground water, contaminated soil, discovery of pipes not on the supplied plans, tree roots).
There is always the possibility of additional costs. With our fixed-price, we will give you a set price with a breakdown of materials, labour and subcontractors required, along with a detailed scope of the work, so you know exactly what is and isn’t included. Variations to the scope of works will either be quoted or billed out on a cost + margin basis. Additional to the cost of the work done there will be an administration fee to cover the time spent pricing and the additional administrative work resulting from the variation. Variations may also result in delays to the job schedule leading to additional costs to the builder not allowed for in the fixed price contract – to name a few; additional rubbish removals, extended hire of fencing, plant and even toilets may result from a variation of which the cost is passed to the client.
Cain Built work with a qualified Quantity Surveyor, so we can ensure your quote is as accurate as possible, based on the plans and information you provide us. As it can take anywhere from 30-60 hours to accurately price a large project, please be aware there is a cost involved with supplying you a fixed-price quote. This cost however is waived if you choose to use us as your builders.
We find this way of working delivers the best building experience as the job typically runs more smoothly – you know exactly what to expect from us from the get-go, so the potential for disputes or disappointment is considerably lower.
In a nutshell – we’ll give you an educated estimate of the project cost before you start. Generally, we will work off square meter rates for the type of project and previous experience. The figure given is more of an indication of cost than a fixed sum.
Best suited to: Renovations & those that want flexibility to make changes as the project progresses.
This type of contract includes the builder’s cost price of all materials and sub trades plus the builder’s margin, so we’ll only charge you for the hours of labour and materials used on the project as we go, as opposed to a pre-estimated set cost, though exceptions and ‘tagged’ items may still apply to this type of contract.
With charge-up contracts you have greater flexibility to make changes as the project progresses and reassurance of paying only for the labour and materials used as opposed to a generous assumption. If the project runs ahead of schedule you reap the benefits. It also means you’re not paying for contingencies made during pricing to allow for unknown issues which builders must do in fixed-price contracts.
Starting with only an estimate does means it’s harder to know what the exact final cost will be at the end, but we can arrange to have a high-level estimate produced by our Quantity Surveyor so you can see where the allocation of costs are and where money can be saved.
At the end of the day.
Our Cain Built team always aim to deliver on time and on budget, no matter the type of contract we have with you. We will organise everything from contractors through to the final inspection for you, so you don’t need to run around gathering further quotes for trades or worrying about orchestrating them all – you can leave all of that to us and it will all be outlined in your contract. Furthermore, both fixed-price and charge-up contracts allow you to take advantage of our industry discounts on materials and trades, so you get the best price possible.
We also understand your thoughts and ideas may change as you start to see your build take shape and that’s ok – you can still make changes to a fixed-price project as it progresses if need be. We will discuss your options with you at the time and what this will mean regarding your contract.