Fixed-Price Contract

A fixed-price contract (also called a lump-sum contract) is an agreement where you and your contractor agree on a total price for the entire project before work begins. The contractor commits to completing all the work described in the scope of work for that price, regardless of how long it takes or what challenges arise.

How it works

The contractor reviews your project requirements, estimates their costs (labour, materials, subcontractors, overheads), adds their profit margin, and presents you with a single price. If the job takes longer than expected or materials cost more than they estimated, the contractor absorbs the difference — not you.

Advantages for homeowners

• Budget certainty — you know the total cost before you commit
• Risk transfer — the contractor bears the risk of cost overruns
• Easy to compare — you can compare quotations from different contractors on a like-for-like basis
• Fewer surprises — the final bill should match the agreed price

When the price can change

A fixed-price contract is only as good as the scope of work it’s based on. The price can change if:

• You request additional work via a change order
• Hidden problems are discovered that weren’t visible during the quoting stage (e.g., structural issues behind walls)
• You change material specifications after the contract is signed

This is why a detailed, clear scope of work is essential before agreeing to a fixed price — the more precise the scope, the more reliable the price.

Fixed-price vs. cost-plus

A fixed-price contract is the opposite of a cost-plus contract, where you pay actual costs plus a percentage markup. Fixed-price contracts are generally preferred by homeowners because they offer more cost certainty, while cost-plus contracts are more common on projects where the full scope isn’t known upfront.