Before a single brick is laid, you will sign a contract that governs everything that follows — how much you pay, when you pay it, who absorbs the cost if ground conditions are worse than expected, and what happens when you change your mind about the kitchen.
Most homeowners don't read that contract carefully enough. Some don't know which type they've signed until something goes wrong.
Fixed price gives you certainty. Cost plus gives you transparency. Neither is universally better. Each suits a different type of project, a different stage of design, and a different level of risk. Understanding the difference before you sign is one of the most valuable things you can do for your build.
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What is a fixed price contract?
A fixed price contract — sometimes called a lump sum contract — sets a single agreed price for a defined scope of work before construction begins. The contractor delivers everything in the drawings and specification for that price. If their costs run over, that is their risk. If they come in under, that is their profit.
What is actually fixed is the scope. You are buying a precisely defined piece of work at a precisely defined price. Change the scope — add a window, move a wall, upgrade a material — and the price changes through a formal variation order. The base contract price does not move. The variation is added on top.
What is not fixed is anything not described in the drawings. Ground conditions worse than expected. A structural issue revealed during demolition. A planning condition requiring additional work. These are typically handled through provisional sums — allowances in the contract for items that cannot be priced precisely at signing. When the actual cost becomes known, it replaces the allowance, up or down.
In the UK, most fixed price residential new builds use the JCT Standard Building Contract or the JCT Minor Works Building Contract — the recognised industry standard for a lump sum arrangement where drawings are complete and the scope is well defined.
What is a cost plus contract?
A cost plus contract — also called prime cost or open-book — works differently. Instead of agreeing a price upfront, you agree to pay the contractor's actual costs: labour, materials, plant, subcontractors — plus an agreed fee. That fee is either a fixed management sum or a percentage of the total cost.
You see every invoice. You pay the real cost of every material and every trade. The contractor's profit is the agreed fee, not a margin built into a lump sum. What you gain is full visibility. What you give up is certainty over the final figure.
The trade-off is real. If ground conditions are difficult, if material prices move, if the programme extends, you carry that cost. The contractor's fee is fixed. The underlying costs are not.
In UK residential construction, cost plus arrangements typically use the JCT Prime Cost Building Contract — a recognised form designed specifically for this payment structure.
What is a cost plus contract?
A cost plus contract — also called prime cost or open-book — works differently. Instead of agreeing a price upfront, you agree to pay the contractor's actual costs: labour, materials, plant, subcontractors — plus an agreed fee. That fee is either a fixed management sum or a percentage of the total cost.
You see every invoice. You pay the real cost of every material and every trade. The contractor's profit is the agreed fee, not a margin built into a lump sum. What you gain is full visibility. What you give up is certainty over the final figure.
The trade-off is real. If ground conditions are difficult, if material prices move, if the programme extends, you carry that cost. The contractor's fee is fixed. The underlying costs are not.
In UK residential construction, cost plus arrangements typically use the JCT Prime Cost Building Contract — a recognised form designed specifically for this payment structure.
The honest comparison
Fixed price — where it works for you
Cost certainty before you commit. If you are financing the build with a mortgage or development finance, your lender will almost certainly require a fixed price contract. Lenders do not lend against an unknown final figure. Fixed price also suits homeowners who have a complete, resolved design and want to hold the contractor to a defined outcome.
Fixed price — where it works against you
A fixed price tendered against incomplete drawings is not truly a fixed price. It is an estimate wrapped in a legal document. The contractor must price risk they cannot fully quantify — which means building contingency into the lump sum to protect themselves. You pay that contingency whether the risk materialises or not. The earlier the design stage at which you go to fixed price tender, the more you are effectively paying for uncertainty you could have resolved first.
Cost plus — where it works for you
On genuinely uncertain projects — a renovation of an existing building, a site with unknown structural condition, ground that has not been investigated — cost plus means you pay the actual cost of dealing with what is found. If the unexpected does not happen, you pay less. There is no contingency premium buried in a lump sum for risks that never materialise.
Cost plus — where it works against you
It requires a contractor you trust completely and a rigorous reporting structure. Open-book accounting, regular cost reports, and a fee structure that does not incentivise prolonging the project are all essential. Without those disciplines, cost plus can drift. The contractor's fee is fixed, but there is no financial pressure on them to manage the underlying costs as tightly as they would under a lump sum arrangement.
Which suits a bespoke Cornwall new build?
This is the question that matters — and the honest answer is that it depends entirely on two things: how complete your design is, and how well understood your site is.
The case for fixed price
A fully detailed bespoke home on a site with known ground conditions, no unresolved AONB planning conditions, and a complete specification is an excellent candidate for a fixed price contract. The drawings are complete. The scope is defined. The contractor can price it accurately rather than estimating.
This is how most Warvena new build projects are structured. The pre-construction and PCSA phase does the work of resolving the design, understanding the ground, and locking in the specification — so that when the main contract is signed, the fixed price reflects a genuine scope, not a series of educated guesses.
The case for cost plus
Renovation of an existing Cornish building — particularly older stone, cob, or listed construction — is where cost plus often makes more sense. You do not know what is behind the plaster, what is under the floor, or what the structure will reveal until you open it up.
A fixed price on an unknown structure requires the contractor to price risk they cannot quantify. That means either a significant contingency in the lump sum — which you pay whether the risk materialises or not — or a contractor who underprices to win the job and then manages variations aggressively once on site. Neither outcome serves you well.
Coastal sites with uncertain ground conditions — made ground, high water tables, shallow granite bedrock, unstable clifftop soils — can carry the same dynamic. When the ground investigation has not been completed before tender, a fixed price is not truly fixed.
The Warvena position: we use fixed price contracts when the design is complete and the unknowns are managed. We discuss cost plus honestly when a client is renovating an existing building or working on a site with genuine uncertainty that has not been resolved before tender. The contract type should follow the project conditions — not a preference.
→ Internal link: Pre-Construction & Early Contractor Involvement → /blog/pre-construction-cornwall → Internal link: PCSA agreements explained → /blog/pcsa-agreement-cornwall → Internal link: How long does a bespoke build take in Cornwall? → /blog/how-long-to-build-a-house-cornwall
Three things to resolve before you sign either contract
How complete is your design?
A fixed price contract tendered against concept design is not the same as one tendered against fully detailed technical drawings. The earlier the design stage, the more the contractor must estimate rather than price — and the more contingency gets built into the lump sum. If your design is not complete, either wait until it is before going to tender, or use a pre-construction agreement to develop the design and cost plan together before committing to a contract type.
What do you know about the ground?
Ground conditions are the single most unpredictable cost element on a Cornish new build. Granite bedrock at shallow depth, made ground, coastal erosion zones and high water tables all affect foundation cost significantly. A ground investigation before tender is the information that makes a fixed price contract genuinely fixed. Without it, either the contractor prices a risk premium or manages it through variations after signing.
How will you handle changes?
Every building contract has a mechanism for dealing with scope changes. Under fixed price, every change after signing triggers a formal variation order — a documented, priced, agreed amendment. If you know you will want to make decisions or evolve the design during the build, a fixed price contract will make that process slower and more expensive than you expect. If design evolution is likely, cost plus may serve you better.
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Frequently asked questions
What is the difference between a fixed price and cost plus contract?
A fixed price contract sets a single agreed sum for a defined scope of work. The contractor completes everything in the specification for that price — cost overruns are their risk, savings are their profit. A cost plus contract has you paying the contractor's actual costs plus an agreed fee. You see every invoice and pay the real cost of every item, but the final total is not known until the project completes.
Which contract type is better for a new build in Cornwall?
For a bespoke new build with a complete design, resolved specification and understood ground conditions, a fixed price contract typically serves the client best — it provides cost certainty and clear accountability. For a complex renovation of an existing Cornish building, or a site with genuinely uncertain ground, cost plus is often more honest and more cost-effective. It does not require the contractor to price risks they cannot quantify, so you do not pay a contingency premium for uncertainty that never materialises.
Can a fixed price contract change after signing?
Yes — through variation orders. Any change to the scope or specification after the contract is signed is formally valued, agreed and added to or deducted from the contract sum. Most fixed price contracts also contain provisional sums — allowances for items that cannot be precisely priced at signing. These are replaced by actual costs once known. Understanding the provisional sums in your contract before signing is as important as understanding the lump sum itself.
What does open-book mean in construction?
Open-book means the contractor shares their actual cost records with the client — every invoice, every labour timesheet, every subcontractor quote. It is the operating principle behind a well-run cost plus contract. On a cost plus project, Warvena provide regular cost reports showing actual expenditure against the agreed budget, so the client always knows precisely where the project stands financially.
Does a fixed price contract protect me from all cost overruns?
No. A fixed price contract protects you from cost overruns caused by the contractor's own efficiency, labour cost movements and material price changes within their agreed scope. It does not protect you from overruns caused by changes you make to the scope, ground conditions worse than assumed, or provisional sum items that cost more than allowed. Understanding what is inside and outside the fixed price — before signing — is essential.
When would Warvena recommend cost plus over fixed price?
When the project involves an existing building whose structure and condition are not fully known before work begins. When a site has not had a ground investigation and the foundation strategy is genuinely uncertain. And when a client wants to make design decisions during the build — cost plus accommodates that flexibility without the variation order process that fixed price requires. For standard new build projects with complete designs and known ground, fixed price is almost always the right structure.
What is a JCT contract and do I need one?
JCT stands for Joint Contracts Tribunal — the body that produces the UK's standard-form construction contracts, used on the majority of residential and commercial construction projects in the UK. For any bespoke new build or significant renovation, a JCT contract is the appropriate legal framework. It sets out payment terms, programme obligations, variation procedures, defects liability, and dispute resolution in a balanced, industry-recognised form. Signing a bespoke or informal contract without JCT structure leaves both parties with significantly less clarity and protection.
THINKING ABOUT A HIGH-PERFORMANCE BUILD IN CORNWALL?
Warvena Construction are TrustMark registered builders based in Redruth, Cornwall. Listed on the Passivhaus Trust directory and members of the AECB, we work across Cornwall with private clients, architects, and developers on bespoke new builds, Passive House projects, coastal renovations, and commercial construction.