Fixed Price. Guaranteed. Here's What That Actually Means in Construction.

"Fixed price" is one of the most abused phrases in construction. Operators hear it, feel relieved, and sign a contract without understanding that the words on the page can mean almost anything — including almost nothing. Most fixed-price contracts are not actually fixed. They're a bid on a partial picture, with mechanisms built in to charge you more as the picture gets clearer. Understanding the difference before you sign is the difference between a project that finishes on budget and one that ends in a dispute.

Here's how it usually works. A contractor submits a bid based on a set of drawings. Those drawings were produced by an architect who was working from your program notes and a general sense of what you need, not a fully engineered, fully specified document ready for construction. There are things in your building that aren't shown in those drawings — or that are shown generically, without the specificity needed to actually price them. The contractor bids what's in the drawings. You assume the bid covers your building. These are not the same thing.

The gap between those two assumptions is called scope. And the mechanism for closing that gap after the contract is signed is called a change order. A change order is a written amendment that adds cost — sometimes legitimately, when you actually change what you asked for, and sometimes as a way for a contractor to recover margin on work they knew they'd have to do but didn't include in the bid. The change order process can turn a fixed-price contract into an open checkbook, because every time something in your building turns out to require more than the drawings specified, there's a line item waiting to be added. By the time the project is done, operators sometimes find that change orders have added ten, twenty, or thirty percent on top of the original number.

This isn't necessarily fraud. It's often just the predictable result of bidding from incomplete documents. An architect produces construction documents, but "complete" in the design sense and "complete" in the pricing sense are different thresholds. A genuinely fixed price requires that scope, specifications, and design be fully resolved before the number is locked — which means the architect and the contractor have to be working from the same complete picture before the contract is signed. When those two functions are separated, as they typically are in the traditional design-bid-build model, the handoff between them is where scope gaps are born.

A genuine guaranteed fixed-price contract requires a different front-end process. The design has to be complete enough that there's no ambiguity about what's being built. The specifications have to be detailed enough that material and system selections are already made, not placeholders. And the contractor has to have actually priced the complete scope — not assumed that missing details will come in at the low end. This takes more time before the contract is signed. It requires a builder who is willing to invest in the design process before money is committed. And it requires that the person holding the price be the same person responsible for the design, so there's no gap to exploit.

When you're evaluating a fixed-price proposal, ask: What's the basis of this price? What happens if the drawings change? What triggers a change order, and who decides? Is the architect working for me or for the contractor? If the person giving you a fixed price can't clearly explain what scope gaps look like in their contract and how they're handled, you don't have a fixed price. You have a starting number.

Primus structures its projects so that design and construction are under one roof and one contract, with a price that's locked after the design is complete — not before. That's what makes the number mean something. Find out what that looks like at primus-companies.com.