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Fixed-Price vs. Mutable Cost Contracts: Do You Know What Your Getting?

Do you know the difference between a mutable-cost contract and a fixed-price contract? You may have heard the story, or unfortunately experienced it yourself. It goes like this....

A quote is provided for a scope of work by your contractor. The price looks pretty good, but it seems a little vague, general and short for the scope of the project. For a garage it might state inclusions as Concrete, Framing, Roofing, Siding, Electrical, Garage Door. Great! You think it looks pretty good and sounds like what you're looking for...

....And it comes in a nice round number: $25,000

Not so fast...You may be falling for a mutable-cost build.

Simply put, a mutable-cost contract is is a type of agreement that allows a contactor to come in with a low initial bid for your project. Once the bid has been accepted and the contractor starts the project, all of the sudden the extra costs start to add up and your forced to pay in order to keep the build going. The agreement as a whole is treated as an allowance, with any cost overruns passed onto you, the client. And with a low-ball bid, you can expect there to be A LOT.

"Material prices were more than we expected....."

" X and Y wasn't included in the original [vague] quote....."

....and so on.....

Your $25,000 garage build is now $35,000 and 8 weeks delayed. Or not finished at all.

And good luck finding another contractor to pick up someone else's mess.

These contractors also tend to have poor quality, as they look to keep their costs as low as possible to try and stay under their underbid, hiring cheap and inexperienced labour.

A mutable-cost agreement effectively places all price risk on the client and removes incentive for the contractor to provide an honest and wholesome quote upfront.

A fixed-price contract protects the client against unexpected costs and places the risk on the contractor. Quotes are well detailed with inclusions and exclusions, as well as assumptions about the knowns and possible unknowns.

If there may be extra costs due to uncertainty, this is stated upfront so their may be some contingency allocated.

Unless there is a change in the scope of work, a fixed-price contract is exactly that, a fixed-price. You know what your getting with no surprises.

This is what we offer at Hammerhead Construction for all of our standard spec built garages.

Detailed Quote. Fixed Price. Full Transparency. No Surprises. Period.

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