What is the difference between fixed price, cost plus and day rate building work?

A fixed price contract states a set price, although certain items such as prime cost items, provisional sums and variations can change the final amount. A cost plus contract pays the actual costs of the work plus an agreed amount for profit and overheads, so the final price is not known at signing. Day rate work charges for time on an agreed rate, plus materials if agreed, so the final price is also not known at signing. Several states regulate cost plus contracts for domestic building work. Consumer Affairs Victoria states a threshold above which cost plus contracts are permitted, Western Australia sets special rules for cost plus contracts, and South Australia's regulator publishes separate guidance on price increases in home building contracts. Check your state before agreeing to cost plus, and get a lawyer to review the contract.

In MyBuildHub: if you use cost plus, record the agreed margin and any cap in the contract, and compare invoices to your budget line as they arrive. For fixed price, track variations separately so you can see how the price has moved.

Check yourself: Consumer Affairs Victoria, WA Building Contracts Act notice, SA guide to price increases.

This is general information only. It is not legal advice, and MyBuildHub is not a law firm. Laws differ by state and change over time. Speak to a lawyer or your state regulator about your situation before you sign or act.