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ContractsJuly 20265 min read
Fixed price contracts, and what "fixed" actually means
Most contract blowouts are not dishonesty. They are provisional sums that were never resolved before the contract was signed.
By [Name], Director
Most contract blowouts are not dishonesty. They are provisional sums that were never resolved before the contract was signed.
By [Name], Director
A fixed price contract fixes the price of the work described in the documents attached to it. That last clause does the heavy lifting. If the documents are thin, the price is a guess wearing a suit.
A provisional sum is an allowance for work that has not been fully scoped — site works, for example, before a soil test. A prime cost item is an allowance for a product not yet selected, like tapware or an oven. Both are legitimate tools. Both become a problem when a contract is loaded with them to make the headline number look competitive.
Count the provisional sums in a quote. That number tells you how much of the price is still unknown.
Variations are inevitable on renovations and rare on well-documented new builds. What matters is process: a written variation, signed before the work happens, showing both the cost and the effect on the program. If a builder is issuing variations verbally and invoicing later, that is the warning sign, not the variation itself.
A builder who answers those clearly is telling you how they run a job. That is more useful than the bottom line on page one.