The short answer: a fixed-price contract gives you one contract sum for the whole build, with the builder carrying the cost risk if construction costs rise. A cost-plus contract bills you actual invoices plus a margin (typically 15–20%) with no ceiling unless one is negotiated. Fixed-price is the safer option for most NSW custom homes — but only if the site is fully investigated and selections are specified before signing.
After the high-profile builder collapses of the past few years, the first question we hear from new clients isn't about plans or finishes. It's "is your price actually fixed?"
That's the right question to be asking. So let's walk through what fixed-price and cost-plus contracts really mean in NSW, and where the wriggle-room hides.
Fixed-price: a single number, with caveats
A fixed-price contract gives you one contract sum for the whole build. The builder carries the risk if costs go up. On paper, this is the safer option for a homeowner — and for most custom builds, it is.
The caveat is what sits inside that number. Two terms to know:
- Provisional Sums (PS): an allowance for work the builder can't fully quantify yet — often site costs, drainage, or landscaping. If the actual cost exceeds the allowance, you pay the difference.
- Prime Cost (PC) items: a budgeted figure for specific products you haven't picked yet — tapware, tiles, the cooktop. Choose something pricier and your contract sum moves.
A "fixed price" with twenty open PS/PC lines isn't really fixed. A genuine fixed price has the site fully investigated, soil classified, and selections specified before you sign. That's the version we write.
Cost-plus: the builder works to your invoices
Cost-plus contracts charge you actuals plus a margin (typically 15–20%). You see every supplier invoice. The upside is transparency and flexibility for projects where the scope genuinely can't be locked down — heritage rebuilds, complex renovations.
The downside is open-ended exposure. There's no ceiling unless you negotiate one, and your budget moves with material prices, trade rates, and design changes.
What's actually mandatory in NSW
For any residential contract over $20,000, your builder must hold Home Building Compensation (HBC) insurance — six years' cover for structural defects, two for non-structural. That's the floor, not the ceiling. Anything beyond that — say, our 7-year structural warranty — is the builder choosing to back their own work for longer.
How to read a contract before you sign
Three things we'd flag if you're comparing quotes:
- Count the PS and PC items. Fewer is better. Ask why each one is open.
- Confirm the site has been classified to AS 2870 (M, H1, H2, etc.) before the contract sum is calculated. Hills District clay can swing slab costs by tens of thousands.
- Read the variation clause. Some contracts let the builder pass through "unforeseen" costs on terms you didn't intend to agree to.
A good builder will walk you through the contract line by line. If anyone resists that, take it as data.
If you're at the contract-comparison stage and want a second pair of eyes, get in touch. We're happy to talk through what we'd build into a Macan fixed price.
