Pros and Cons of fixed price building contracts
+ Pros
- The main advantage of a fixed price building contract is that it provides certainty for both the builder and the client.
- The builder knows exactly how much they will be paid for the work, and the client knows how much the project will cost them.
- This makes the process of budgeting and planning a lot easier.
- Another benefit of a fixed price contract is that it can help to avoid disputes between the builder and the client.
- Since the price and scope of the project are clearly laid out at the start, there is less room for disagreements over changes or unexpected costs later on.
– Cons
- The main disadvantage of a fixed price building contract is that it can leave little room for flexibility.
- As the builder is not able to charge extra for any changes or unexpected costs, they may not be able to complete the project to the same standard as they would if they had the freedom to adjust the price.
- Another potential downside is that the builder and client may not have the same understanding of the scope of the project.
- If the builder undertakes additional tasks but is unable to charge extra for them, they may not be able to cover their costs.
- Overall, fixed price building contracts can be a useful tool for both builders and clients, but it is important to be aware of the potential drawbacks. It is essential that both parties are clear about the scope of the project and that the builder is given enough flexibility to complete the job to a high standard.
Potential changes to the current contract model
The fixed price building contract model has been used in the construction industry for many years, and while it has become the standard model for many projects, there is still and always potential for change in the future.
Technology, Risk Management & Sustainability
- As the construction industry continues to evolve and new technologies become available, it is likely that the fixed price building contract model will need to adapt in order to keep up with the changing landscape.
- One of the main areas of potential change is the use of technology. With the rise of the Internet of Things (IoT) and other digital technologies, it is likely that more and more construction projects will be managed using digital systems.
- This could mean that the traditional fixed price building contract model needs to be adapted to allow for the use of digital systems in order to better manage the project, as well as to ensure that the project is delivered on time and within budget.
- In addition to the use of technology, the fixed price building contract model could also be adapted to include elements of risk management.
- At present, the model is largely focused on ensuring that the builder delivers the project to the specified specifications, with little regard for any potential risks that may arise during the process.
- By introducing elements of risk management, the fixed price building contract model could be adapted to ensure that any potential risks are identified and managed in a timely manner, thus helping to reduce the likelihood of delays or cost overruns.
- Finally, the fixed price building contract model could also be adapted to include elements of sustainability.
As the construction industry continues to move towards more sustainable practices, it is likely that the fixed price building contract model will need to be adapted to ensure that it considers the use of green construction materials and techniques.
This could help to reduce the environmental impact of the project, as well as to ensure that the project is delivered in a cost-effective and sustainable manner. Overall, the fixed price building contract model has proven to be an effective way to manage construction projects.
However, as the industry continues to evolve, it is likely that the model will need to be adapted in order to keep up with the changing landscape.
By introducing elements such as the use of technology, risk management and sustainability, the fixed price building contract model could be adapted to ensure that projects are completed on time and within budget, whilst also helping to reduce the environmental impact of the project.
