Building Guide

Understanding Fixed-Price vs. Cost-Plus Contracts

Learn the differences between fixed-price and cost-plus building contracts, and why one might be better for your custom home project in Utah.

Two Common Contract Types

When building a custom home, the contract structure determines how costs are managed throughout the project. Understanding the difference between fixed-price and cost-plus contracts will help you choose the approach that gives you the most confidence and control.

Fixed-Price Contracts

With a fixed-price contract, you and your builder agree on a total cost before construction begins. This price covers everything outlined in the scope of work.

Advantages:

• You know exactly what your home will cost
• No surprise charges during construction
• Easier to budget and plan financing
• Builder is incentivized to manage costs efficiently

Considerations:

• Requires thorough planning and selections before starting
• Changes during construction are handled through formal change orders

Cost-Plus Contracts

With a cost-plus contract, you pay the actual cost of materials and labor plus a builder's fee (usually a percentage or flat fee).

Advantages:

• More flexibility to make changes during construction
• You can see exactly where every dollar goes

Considerations:

• Final cost is unknown until the home is complete
• Costs can escalate quickly with upgrades or changes
• Requires more oversight and involvement from the homeowner

Which Is Right for You?

If you value predictability and want to avoid financial surprises, a fixed-price contract is typically the better choice. It requires more upfront planning — completing your design and making all selections before breaking ground — but that diligence pays off with a smoother, more predictable building experience.

At Duke Building Co., we prefer fixed-price contracts because they align with our commitment to transparency. We believe you deserve to know what your home will cost before the first shovel hits the ground.