Bidding and Contracts

Fixed-price contracts are dependent on unambiguous specifications to ensure contract compliance. If there is any wiggle room in the language that describes what work is to be done, you may find yourself getting less than what you thought you paid for. You don't want to pay for a Lexus and get a Hyundai! It is time-consuming and costly to develop iron-clad specifications for all the work-items to be completed in a building project. The architect must strike a balance by writing ÒspecsÓ that are complete, without creating a huge volume that may be ignored by the contractor while costing the client a lot in design fees. Cost-plus contracts may also require accurate specifications, but they do not need to be as detailed, because they can be easily added to or amended during the building process.

Besides the cost of developing specifications, there is the issue of enforcing them. On large buildings, a "clerk of the works" spends all day making sure that the work is being done correctly. On residential work, this is impractical, so most work is completed without any oversight. If the painter says s/he put the paint on correctly, can you prove otherwise? While this may be an issue with cost-plus, the incentive to work faster and perhaps sacrifice quality is inherent in fixed-price.

In fact, most fixed-price project disagreements center on whether or not the contractor complied with the specifications. Owners may find that the simple appeal of fixed-price - a set price for a set piece of work - becomes more complicated as disputes arise.