Switched from fixed bid to cost-plus after a nightmare in Austin

I used to think fixed bids were the only way to protect yourself, but after 3 months of change orders on a house in Austin I flipped. The builder kept finding 'unforeseen conditions' and every one came with a new number. My buddy in San Antonio runs cost-plus with a not-to-exceed cap and showed me his actual breakdown, labor and materials at cost plus 12%. That transparency is what sold me, you see exactly where every dollar goes instead of guessing what the builder buried in the bid. Anyone else had better luck with one model over the other?

2 comments

2 Comments

river_scott26d ago

Did that Austin builder ever explain what the 'unforeseen conditions' actually were, or was it just a blank check every time? Man, I feel for you, that's the worst kind of stress. I've seen cost-plus go sideways too when the owner doesn't watch the invoices like a hawk, but at least you can call them out on the spot. The not-to-exceed cap your buddy runs sounds like the real safety net, cause otherwise that 12% markup can balloon into a nightmare of its own.

king.kevin25d ago

Did you catch that thread on the construction subreddit last week about cost-plus contracts? They were breaking down how some builders hide whole line items in that 12% markup, not just materials but also their own project management fees, which is basically double-dipping. That's exactly what makes the not-to-exceed cap so crucial, because without it, "unforeseen conditions" just becomes a code word for whatever they want to charge next. I read one case where a guy got hit with an extra $30k for "soil compaction issues" that nobody could prove actually existed. You're right that watching invoices helps, but if you're not a builder yourself, it's hard to spot the padding until it's way too late. The cap forces them to eat their own mistakes instead of handing you the bill.