Which carries more risk?

Fixed price moves cost risk to the builder (they price the unknown); cost-plus moves cost risk to the client (they pay for the unknown). GMP splits it.

Why does builder add 5–15% to fixed price?

Contingency for the unknown: unexpected ground conditions, supply price changes, undefined scope edges. Without this premium, builders would lose money on a portion of projects.

Can I switch from fixed to cost-plus mid-project?

Yes via contract variation, but rare. Usually after big unknowns are discovered post-start (e.g., foundations need underpinning).

Which does Builderr use?

Fixed price for defined scopes (default); cost-plus or GMP for genuinely undefined scopes like listed-building deep renovation. Always discussed at tender.

Quick Answer

Fixed Price vs Cost-Plus Construction Contracts in London: Pros and Cons

Fixed-price (lump sum) is the dominant London domestic contract type — builder commits to a price for a defined scope; client carries less cost risk but pays a contingency premium of 5–15% embedded in the quote. Cost-plus (open book) — client pays actual labour and materials plus a fixed percentage (10–25%) or fixed fee; suits scopes that genuinely cannot be defined upfront (heritage renovation, listed buildings) but client carries cost risk.

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Fixed price (lump sum)

Best for: scopes that can be fully defined at tender (extensions with planning approved, loft conversions, kitchen refits). Pros: budget certainty for client; clear payment schedule; supports JCT contract. Cons: builder embeds risk premium (5–15%); variations create cost arguments; pressure to value-engineer once price locked. Used on 80%+ of London domestic projects 2026.

Cost-plus / open book

Best for: scopes that genuinely cannot be defined (heritage renovation, listed buildings, structural-unknowns properties, deep retrofit). Builder shows actual labour timesheets and material invoices + agreed % markup or fixed fee. Pros: client only pays for actual work done; no risk premium; trust-based partnership. Cons: client carries cost overrun risk; demands disciplined budget management; requires high-trust relationship; less common in London 2026.

Hybrid: Guaranteed Maximum Price (GMP)

Compromise: builder works open-book but agrees a not-to-exceed cap. Suits projects with high scope uncertainty but client risk tolerance is bounded. Common on premium heritage projects (£500,000+ programmes).

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