Fixed price contracts… Friend or Foe?
Covid… That awful word no one wants to hear. But it is everywhere and affecting everything from the obvious, health to health in our pockets.
Materials, imported and local are all on the rise, which is taking a bit of a hit on your profit margins. So how do you protect yourself with a Fixed Price contract?
Simple, kind of. I mean, you may have to have the awkward conversation about cost with the client but in these times, I think most people would be pretty understanding. It’s all about your tags. Tagging out any material price increases so when or IF it happens, a variation can be raised and the client conversation isn’t so… Awkward! It’s already been laid out in the open.
“on the nose”
One builder we’ve recently spoken to claimed that between the time they signed a fixed price contract with the homeowner and when they actually started the build, the overall cost had risen by 12%. A cost that you cannot just take “on the nose”, It pays to protect yourself from the start.
Another way to do this is to get a QS to price the job for you. They know all the ins and outs of the industry, they know what tags to apply so you don’t forget. 12% of most builds are going to be quite a lot more than a QS fee.
deterred from offering fixed prices
A recent publication on MSN stated “House builders are being deterred from offering fixed prices on jobs by escalating prices and critical shortages of materials” So, what does that mean for you? A loss on new builds booked in because mortgages are being declined? What’s the way around this? Clarity in your contracts. Tags and then more tags!
“Yea, Yea” QS this, QS that. Self-promotion and all that. As that might be, we are actually here to help builders be successful, you are our client to look after and you need to look after yours. Avoid those conversations, contract clauses and nail it from the start.