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Comparing Fixed Cost with Time and Materials

March 16, 2016

Comparing Fixed Cost with Time and Materials

When preparing to hire a Montreal general contractor to perform a residential or commercial construction or renovation and any of a number of different tasks, you will have to have an understanding of how you will be billed, in order to ensure that you choose the best option for you. Primarily, there are two ways that contractors will charge for their services — fixed cost or time and materials. It is important to be able to differentiate between the two to determine which one is most advantageous for you. Fixed Cost: some people like the fact that fixed cost contracts set a price in stone.

The price is basically determined by the services offered to meet the specific needs of the customer and typically large deposits are required at the beginning of the project. The cost is set based on the scope of what the customer is expecting, but it does not include any unforeseen expenses and changes, and the contract does not usually make set cost provisions for any additional costs. A fixed cost also limits the flexibility in making adjustments once the job has begun which can cause delays during the construction process. Any alterations that are requested or required, will change the price, and the additional cost can be exorbitant in some cases.

While a fixed price structure will not necessarily reduce cost-related risks, it will also constrict flexibility. For smaller type projects where a fixed cost structure is most advantageous is with an individual who is certain of what they want, and sure that they will not want to make any alterations once the contract has been signed. Time & Material: for larger projects while there is an added risk level involved with using this type of pricing structure, it does have several advantages that make it appealing. With a time and material contract, the client is billed weekly for time (man hours worked) and materials used and will benefit from the increase in flexibility. Any changes that you may request will simply incur the cost of labor and materials used, meaning that there will be no need to rehash the entire contract or create a new one for the extras.

The flexibility that is afforded through this pricing structure is significant. Anyone who is entering into a large project in which they expect that there will be a need to make changes and alterations to the original plans will be best served to enter into a time and materials contract with their general contractor. While any additional change will likely result in more billable hours, plus the cost of any additional material, there will be no need to worry about restructuring the contract. In certain situations, such as very small jobs, it may be okay to take the fixed cost approach, however, the larger the project or the more intricate the details, the more likely the time and material route will be the best option. The larger a job, the more flexibility you will need to get everything you want and need out of the project. 



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