What a fixed price actually fixes
A lump sum is not a promise that nothing can ever change. It is a promise about who carries the risk when it does — and the difference between two quotes is usually in what each one left out.
What a lump sum actually is
A lump sum contract sets one inclusive figure for a defined scope of work, agreed before construction starts. If the builder has under-estimated the labour, the framing or the time, that is the builder’s problem, not yours. That is the whole point of it, and it is why a lump sum takes longer to prepare than a ballpark.
The alternative is cost plus, where you pay the actual cost of the work plus a margin. Cost plus is honest and it suits jobs where the scope genuinely cannot be known up front — heritage work, some renovations. It is a poor fit for a new home, because you carry every overrun.
The two things that sit outside the number
Almost every fixed price contains allowances rather than final costs for some items. There are two kinds and they are worth learning to spot.
- Provisional sums are allowances for work whose extent is not yet known. Excavation is the classic one: nobody knows what is under the topsoil until the machine is on site. The contract carries an estimate; the final figure is the actual cost.
- Prime cost items are allowances for things not yet chosen. Tapware, appliances, tiles, the front door. The contract carries a per-item budget; if you choose something dearer, you pay the difference.
Neither is a trick. Both become one when the allowances are set low to make a quote look competitive. Ask for both lists in writing, and ask what each allowance would actually buy.
Variations
A variation is work you ask for that was not in the signed scope. Moving a wall after the frame is up, adding a power point, changing a window size. Variations are normal — people see the space and want to adjust it — but they should arrive as a written price you approve before the work happens, not as a line on an invoice afterwards.
The question to ask a builder is not “will there be variations?” There will be. It is “how will I hear about one, and when?”
How to compare two quotes
Two fixed prices for the same house can differ by a great deal and both can be honest. The difference is usually scope, not margin.
- Are site costs in, or provisional? Excavation, retaining, rock, piering.
- Are the allowances the same? Compare the prime cost schedules item by item.
- Is landscaping, driveway, fencing, letterbox and clothesline in or out?
- Does one include a full set of engineering and the other assume you supply it?
- What is the insurance position, and is the Home Building Compensation Fund cover included in the price?
A quote that is twenty per cent lower is almost always twenty per cent less house. Find the missing scope before you decide it is a bargain.
What we do
Birch prices on a lump sum. The figure is prepared before construction starts and it is the figure you plan around. Where an allowance is genuinely unavoidable it appears as one, is explained, and is set at a number that will actually buy the thing — not at a number that makes the total look good.