There are lots of builders who offer fixed pricing however this term is used very loosely nowadays in the construction industry and sometimes it can be very misleading.
Most builders do NOT actually provide you with a fixed price even though they tell you that they do.
The key, as I always say, is finding an honest builder with a great track record of providing fixed price tenders. Speak with their clients, read their social media and product reviews to gauge their behavior and attitude towards their clients.
Definition
A Fixed Price Tender is a tender with a calculated price that does not change. It takes into account all of your site, authority and any other costs to build your home. Essentially, you do not pay anymore money unless YOU, the client, make changes to your site, design or inclusions.
A Fixed Price Tender may have Provisional Allowances however the builder will be very transparent about these allowances. You have to understand though the differences between what is ok to be a provisional allowance and what is not ok…
A Locked Price Tender is NOT a Fixed Price Tender. For more information on this, please refer to this blog.
For example:
- Drop Edge Beam: NOT ok to be a provisional allowance
- Rock Excavation: ok to be a provisional allowance
- Piering: NOT ok to be a provisional allowance unless the engineers cannot determine the piering required of course
- Temporary Fencing: NOT ok to be a provisional allowance
- Onsite Detention System: ok to be a provisional allowance
Possibility vs. Probability
Can a builder absolutely, categorically, 100% fix your price? The short answer is NO. What if when your builder starts digging and he finds a volcano or some aboriginal bones or hits gold? What happens then? Who pays for the extra cost to address these issues? It is your (the client’s) land afterall.
The better question here is: what’s the likelihood that this will happen in your land? This rarely happens specially in most vacant blocks of land. So you are relatively safe.
I have personally sold 100’s of homes and the above has never happened to any of these builds. The worst case scenario was hitting rock so I dare say that you are mostly safe when building in the greater Sydney when it comes to finding any unforeseen problems.
The other aspect of it is that if you end up with a decent builder, they will assume a lot of risk for you site. Afterall, you are paying them margin so it’s the least they can do :).
What’s the point?
So if builders cannot fix the price, what’s the point of fixed pricing? Well builders conduct lots of reports and surveys to find out any potential issues with your land and account for them appropriately. The issues that they find (if any), they account and fix the price for them.
For example, when they conduct the soil testing and they find that your build needs 3 meters of piering, then they have to accommodate for 3 meters of piering. This way the builder fixes the cost of piering. If it turns out that the builder has to do 4 meters or 2 meters of piering, you (the client) do not pay any more or less.
Reputable builders conduct the required reports and surveys upfront so they can provide a fixed price tender and you do not have to pay more later. If the reports state that there is a volcano on the land, then they should flag that upfront and price the build of your home accordingly (I am being a little extreme with my volcano example). Your builder cannot claim ignorance and say that “we didn’t know” as they should have done their due diligence on your behalf.
It’s a little harder to provide absolute fixed pricing with knock down rebuilds as it’s not possible to find out what’s underneath the house before demolishing.
So it comes back to the same question: what’s the likelihood of hitting something that all the reports and surveys have not found?
How?
So how do I get a fixed price tender? For you to obtain a fixed price tender, you have to find a reputable and honest builder that can genuinely fix your build costs. There are lots of reports and surveys that they conduct upfront that should allow them to fix the price. These reports include but not limited to the following:
- Contour Survey
- Soil Test Report
- Section 149
- 88b instrument
- Site Assessment
- Compliance Checks
- Sewer Diagram
- Flood Report
- Bush Fire Report
- Acoustic Report
- Heritage Report
- Arborist Report
- any other report that is required
Conducting the required reports is not enough, the builder has to actually account for them in your tender. I have seen a lot of tenders where the builder has conducted the contour survey (for example) and has not accounted for any drop edge beams (assuming they are required).
They make a note that the tender is subject to the results of the contour surveys. You, as the client, assume that if the builder has obtained the surveys then surely they have accounted for it.
More often than not, builders don’t account for it upfront so they keep their pricing low to lure you in and then charge you later once you are committed.
Good reputable builders obtain and account for the results of all the reporting and provide you with fixed price tenders.
The Certainty
How do I make sure that my builder is giving me a fixed price tender? It’s really difficult to make sure that the builder provides you with a fixed price tender. So it will come down to finding the right builder who is honest and transparent. There is a lot of them out there but you have to search really well for them.
As I mentioned above, speak with their clients and read their online reviews for recurring patterns. Review their tender in details and don’t be afraid to ask the right questions.
If something does not add up, then raise it and have everything specified properly in the tender. You are paying them hundreds of thousands of dollars, so it’s only fair that you get what you want.
A Note
Most builders will account for 1 meter of piering although the reports state that they need 3 meters of piering. Then they put in their terms of conditions that any extra linear meters of piering will be charged at only 90 dollars a meter. What a load of crapp!!!
You, the builder, are the professional. I, as the client, am paying you margin to mitigate my risk and you are charging me margin to compensate for your risk. So how is it that I keep paying for extras along the way? I might as well hire a project manager at a much lower fee and pay for everything extra anyway!!!
Some builders do not account for spoil removal. They tell you that if any is required, we are happy for you to pay the supplier direct to remove your soil so you can save money. That’s just not true. You may be saving on their margins but nonetheless, you are still paying extra and it adds to your build cost.
There are some really good builders and they are worth every dollar you pay them. Even if you pay them a little more, it’s worth your peace of mind. Ultimately, builders will fix your price based on all the right reports that they conduct and obtain upfront. Do not settle for any less!
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