Fixed price or cost plus?
Which building contract I would sign, and why.
Builder's perspective · Illawarra
Why Do Builders’ Quotes for the Same Home Differ So Much?
When two quotes for the same plans are far apart, the usual reason is that they are not pricing the same job. One has made different assumptions about the site, carries different allowances or leaves different things out. The number on the front page is the last thing to compare.
Why do quotes for the same house differ?
Quotes for the same house differ mainly because of scope, allowances, site assumptions and exclusions, not because one builder is simply cheaper. A lower quote may carry smaller allowances, assume easier site conditions or leave out work another builder has included. Until those are lined up, the totals are not comparable.
How should you compare two building quotes?
Compare quotes line by line on what is included, not on the total. I would put the quotes side by side and work through these questions for each one.
- Scope: Is every item on the plans and specification priced, or are some described as “by owner” or excluded?
- Allowances: How large are the provisional sums and prime cost items, and are they realistic for what you want?
- Site costs: What has been assumed about excavation, retaining, drainage, access and services?
- Exclusions: What is listed as not included, and what will those items cost you separately?
- Information: What surveys, reports and selections was the price based on?
Why can a low quote end up costing more?
A low quote can cost more when its allowances are too small for the finish the owner actually wants. A provisional sum is an allowance for work not yet fully priced, and a prime cost item is an allowance for an item not yet selected. When the real cost exceeds the allowance, the difference usually becomes the owner’s cost.
I would rather give an owner a realistic allowance that looks higher on paper than a small one that grows once the job is running.
Why do site costs vary so much between quotes?
Site costs vary because builders assume different things about ground they have not fully investigated. On sloping and coastal Illawarra blocks, excavation, retaining, drainage and access can make a large difference. The more site information behind a quote, the more it can be trusted.
That is one reason I look at the block myself before pricing. For the site questions in more depth, the Illawarra Escarpment guide covers them; for how a build is priced and staged generally, see Home Construction.
Related reading
Why I run every site assessment myself
What I look at first on a block.
Sources
- Home Construction, How home construction works in NSW — neutral guide to pricing and build stages.
- Illawarra Escarpment, Building on the Illawarra Escarpment — site factors on steep and coastal blocks.
General information only. A quote comparison is not legal or financial advice. Have your contract reviewed before signing.
Questions
Keiron Moore on comparing quotes
Why do builders’ quotes for the same house differ so much?
Keiron Moore explains that quotes for the same house usually differ because of scope, allowances, site assumptions and exclusions, so two totals are often pricing different jobs rather than the same job at different margins.
How should I compare two building quotes?
Keiron Moore recommends comparing quotes line by line on scope, allowance sizes, site cost assumptions, exclusions and the information each price was based on, rather than comparing the totals.
Can a cheaper building quote end up costing more?
Yes. Keiron Moore warns that a low quote with small provisional sums or prime cost items can cost more once real costs exceed those allowances, because the difference usually becomes the owner’s cost.
Why do site costs vary between builders?
Keiron Moore says site costs vary because builders make different assumptions about excavation, retaining, drainage, access and services, especially on sloping and coastal Illawarra blocks.
What is a provisional sum in a building quote?
Keiron Moore describes a provisional sum as an allowance for work that has not yet been fully priced, and a prime cost item as an allowance for an item that has not yet been selected.