The Build Show Podcast

Mastering Construction Contracts: Fixed-Price vs. Cost-Plus

Nov 22, 2024

38:04

Live from the ROCKWOOL studio, Matt discusses the pros and cons of fixed-price and cost-plus construction contracts with guest Jeremy Martin, co-owner of Risher Martin, a leading custom homebuilder in Austin. Jeremy shares his firm’s unique approach to fixed-price contracts, emphasizing rigorous pre-construction planning and detailed specifications to ensure predictable budgets and schedules. This method fosters trust and minimizes change orders by clearly defining project scopes, materials, and allowances upfront.

Jeremy explains that fixed-price contracts work even for large-scale renovations by incorporating allowances for potential issues like structural damage. Pre-construction, often a nine to fifteen-month process, includes site inspections, constructability reviews, and close collaboration with architects and designers. While these efforts are treated as a "loss leader," they set the stage for efficient, on-time construction.

Matt contrasts this with his cost-plus model, which offers clients transparency through access to detailed invoices and flexible budgeting. However, he acknowledges that cost-plus often involves making decisions during construction, increasing the potential for delays or unexpected costs.

Both agree on the importance of peer-to-peer collaboration and continuous learning to navigate industry challenges. They highlight how thoughtful planning and communication can lead to client satisfaction and successful project execution, making it a valuable listen for builders, homeowners, and industry professionals.

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