| Many home remodelers spend much of their time | | | | price contracts should define the appropriate degree |
| estimating and writing proposals. There are two main | | | | of performance flexibility. |
| types of contract agreement models, fixed price and | | | | 4. Homeowner faces less risk - Since a fixed price |
| cost plus. Many homeowners prefer the fixed price | | | | contract requires the homeowner to pay the |
| model which helps avoid the risk of having the price on | | | | contractor a specific and previously agreed price, the |
| the home remodeling project continue to rise as the | | | | homeowner faces fewer risks, including market-price |
| project progresses. | | | | risks. |
| The many benefits of having a fixed price contract | | | | 5. Better project planning and certainty - Unlike the |
| include: | | | | cost plus model, fixed price contracts generally result in |
| | | | definite and predictable project outcomes and timelines. |
| 1. Avoid the risks of an open-ended agreement - | | | | They also lead to better means of price, timing |
| When homeowners enter into an open ended | | | | controls, and central planning. As a result, the fixed |
| agreement with a contractor there is no telling what | | | | price model is widely used in government procurement |
| the end cost of the project might be. A fixed price | | | | because it provides more certainty regarding the final |
| contract with a good scope of work and defined set | | | | project cost. |
| of allowances helps to insure that everyone involved | | | | In conclusion: |
| has a good understanding of the costs. | | | | A non negotiable contract requires a contractor to |
| 2. Home remodeling costs stay within predetermined | | | | understand his costs and be good at controlling them. |
| allowances - When a client enters into a fixed | | | | While there are a few specific times where a cost |
| contract, provided they stay within the allowances | | | | plus model might be appropriate, such as when a |
| given, they know ahead of time what they will have | | | | certain aspect of a job cannot be quantified ahead of |
| spent when the contract is completed. A set price | | | | time, generally cost plus agreements create a strained |
| contract requires the contractor to understand his | | | | relationship between the homeowners and their |
| costs and be good at controlling them. | | | | contractor. Typically with cost plus contracts there is |
| 3. The contractor can focus on the results of the | | | | much time spent justifying receipts and hours spent. |
| home remodel - Set price contracts, also called | | | | With a fixed price agreement the contractor delivers |
| performance reimbursement contracts, are designed | | | | the product for the amount agreed upon and both |
| to be more focused on the results and project | | | | parties are happy. |
| objectives than on the methods of performance. Fixed | | | | |