Guide
Cost plus or fixed price
Two builders can run the same job, to the same drawings, with the same crew, and be in completely different businesses — because of one line in the contract. The difference isn't the money. It's who carries the risk of the estimate being wrong, and what that does to your paperwork.
The difference in one line
Fixed price: you name a number for a defined scope, and you live with it. If the framing takes three weeks instead of two, that's yours. Cost plus: the client pays what the job actually costs, plus your fee or percentage. If the framing takes three weeks, the client pays for three weeks.
Everything else — how a budget line reads, what your records have to prove, what a bad month feels like — comes out of that one line.
What a budget line means under each
Say framing was budgeted at $40,000 and you're at $46,000 with a week to go.
- Fixed price: you have lost six thousand dollars, and you will lose more. The line is a warning about your own money, and the only legitimate valve is a change order for work that genuinely isn't in the scope you priced.
- Cost plus: you have not lost anything, but you have a conversation to have, and it's better this week than at the end. The line is a warning about the client's confidence, which is the thing that actually ends cost-plus jobs badly.
Same number, same screen, two different problems. This is why a builder running both kinds of job at once has to know which one they're looking at before they read the line.
What each one demands of your records
Fixed price wants the scope documented. Your exposure is arguments about what was included. What saves you is a priced scope, change orders signed before the work, and a record of what was asked for and when. Your costs matter to you and to nobody else — the client never sees them — so the discipline is about the boundary of the job rather than the inside of it.
Cost plus wants every cost evidenced. Your exposure is the opposite: every hour and every supplier bill will be read by somebody who is paying for it. An hour that can't be traced to a person, a day and a piece of work is an hour you may not get paid for, and worse, it's the hour that makes the client doubt the other nine hundred. Cost plus is not a lighter contract. It's a heavier one, administratively, and builders get caught out by that far more often than by the pricing.
The number growing in front of the client
On a cost-plus job the client watches the total rise for the whole build. A job can finish at several times its first rough estimate with nobody having done anything wrong — scope grows, allowances land above their number, a site condition appears once the ground is open. That's the contract working as intended. What makes it survivable is that every increase was visible when it happened and traceable afterwards.
What makes it unsurvivable is a client discovering the growth at the end, in a total. Then every dollar is relitigated, including the honest ones, and the argument is about your integrity rather than about scope. Cost plus is a trust contract, and the paperwork is how the trust is kept.
Which to use
The honest rule is about what you can actually see when you price:
- Fixed price when the scope is genuinely defined — a new build to a complete set of drawings, a specified extension. You can price it, so carry the risk and take the upside when you beat it.
- Cost plus when you can't see the job yet — renovation work, anything where opening a wall might change the plan, anything where the client is still deciding. Naming a number for what you can't see isn't confidence, it's a donation.
- Say which it is, once, in writing. The worst version is a job that was quoted like a fixed price and run like a cost-plus one. That is the thing that ends up in a lawyer's office.
A middle path exists — a fixed price with named allowances for the parts nobody can see yet, reconciled at cost. It works when the allowances are honest numbers and everyone knows they're placeholders. It fails when an allowance was set low to win the job.
How Millo does it
Each job in Millo carries its own contract type — cost plus, fixed price, stipulated, time and material — and the four numbers on every job and every budget line are kept the same way under all of them: contract value, billed, not billed yet, left to bill. What changes is what you do about a line that's over, which is a decision for you rather than the software. Millo is job-costing software that runs on your own office computer, bought once.