Cost Plus vs Fixed Price Contract Calculator
See what the builder keeps and what the client pays under each contract as actual cost moves from -15% to +30%.
Bid: $1,150,000.00
The most the client pays under cost plus.
Fixed price
- Builder profit
- $50,000.00
- Client's final price
- $1,150,000.00
Cost plus
- Builder profit
- $110,000.00
- Client's final price
- $1,210,000.00
Fixed-price profit reaches $0 when actual cost runs 15% over the estimate. Past that point, each extra dollar of cost comes out of the builder's margin.
Builder profit vs cost overrun
Assumptions
The model assumes the fee is your profit, overhead is inside the estimate, the scope does not change, and the client pays in full.
Use it when you choose the contract type for a new home. Updated October 2026. Results are estimates, not financial, legal, lending, or tax advice. See all free contractor tools.
How each contract shifts risk
A cost plus vs fixed price contract decides who pays when actual cost differs from the estimate. The estimate is the same under both. Only the party who pays the difference changes.
Fixed price: the builder carries the risk
The client agrees to one price before the build starts. If costs come in under the estimate, the builder keeps the savings. If costs run over, the builder pays for the overrun from the markup. Once the overrun is larger than the markup, the home loses money.
Cost plus: the client carries the risk
The client pays actual cost plus a fee. A percentage fee grows with cost, so the builder's profit rises when costs rise. A fixed fee stays the same, so profit holds steady while the client pays every overrun. The client sees the costs and decides on changes with the facts.
When each contract fits
When fixed price fits
Use fixed price when the plans and selections are complete, the scope is repeatable, and you have priced it recently. Your markup must cover your margin and a contingency for what the drawings do not show.
When cost plus fits
Use cost plus for custom homes where selections are open, the site has unknowns, or the client wants to make changes during the build. It works best when you can show every cost with its receipt and Scope of Work on a cost-plus invoice. Buildplus cost-plus software turns project expenses into those invoices and applies your fee.
How a GMP changes cost plus
A guaranteed maximum price makes cost plus act like fixed price above the cap. Below the cap, the client pays actual cost plus the fee. Above it, the client price stops and the builder's profit falls with each extra dollar. Enter a GMP in the calculator to see the cost-plus line bend down where the cap starts. Set the cap with enough room for your fee and a contingency.
The formulas, with the example home
| 1 | Actual costEstimate × (1 + 10% overrun) | $1,000,000.00 × 1.1 =$1,100,000.00 |
|---|---|---|
| 2 | Fixed-price profitBid at a 15% markup − actual cost | $1,150,000.00 − $1,100,000.00 =$50,000.00 |
| 3 | Cost-plus profitActual cost × 10% fee, capped by any GMP | $1,100,000.00 × 10% =$110,000.00 |
Common mistakes
- Bidding fixed price on open selections. Each allowance the client upgrades comes out of your markup unless you write a change order.
- Setting a markup that covers profit but no contingency. With a 10% markup and no contingency, any overrun past 10% is a loss.
- Running cost plus without proof of cost. The client pays actual cost, so each bill needs its receipt and Scope of Work, or the fee is in dispute.
- Setting a GMP at the estimate plus the fee. The first dollar of overrun then comes out of your fee.
Before Buildplus I would have to send my subcontractors multiple payments spread out over a couple of days to avoid hitting electronic transfer limits.
Now I can send one payment and be done. That convenience combined with the fact that payments are automatically tracked back to the right subcontract makes Buildplus a very elegant solution.
Cliff Kahan
Property Projects LLCFAQs
What is the difference between a cost plus and fixed price contract?
Under a fixed price contract, the client pays one agreed price and the builder keeps or loses the difference between that price and actual cost. Under a cost plus contract, the client (also called the owner) pays actual cost plus a fee, as a percentage or a fixed amount, so the client takes the cost risk.
At what cost overrun does a fixed price job lose money?
A fixed price job breaks even when actual cost runs over the estimate by the same percentage as the markup. A 15% markup reaches $0 profit at a 15% overrun. Any overrun past that point is a loss.
What is a guaranteed maximum price (GMP)?
A GMP is a cap on a cost plus contract. The client pays actual cost plus the fee until the total reaches the cap. Above the cap, the builder pays the extra cost. A GMP gives the client a known limit and gives the builder fixed-price risk at the top of the range.
Is a percentage fee or a fixed fee better for cost plus?
A percentage fee pays the builder more when the scope grows, which suits jobs with open selections. A fixed fee removes the question of whether the builder gains from higher costs, which some clients prefer. Many builders use a fixed fee with change orders for added scope.
Can one home use both cost plus and fixed price?
Yes. Many builders fix the price of defined scopes, such as a subcontracted roof, and bill the open scopes at cost plus a fee. Buildplus puts cost-plus and fixed-price progress lines on one invoice, drawn from the budget.
What is Buildplus?
Buildplus is the payments, expenses and invoicing platform built for contractors running cost-plus jobs. Every payment, swipe and reimbursable expense stays tied to the project it belongs to.
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