Fixed Price vs Cost Plus Contracts: Which Should You Sign in NSW?
Fixed price or cost plus: which should you sign?
A fixed price contract sets the total price for a defined scope before work starts, so the builder carries the risk of costs rising. A cost plus contract has no guaranteed final price: you pay the builder's actual costs plus a fee or margin, so you carry that risk. For a new home with complete plans, selections and a soil report, a fixed price gives you the most certainty.
- Fixed pricethe builder carries the cost risk
- Cost plusyou carry the cost risk
- 10%maximum deposit in NSW
- 10–15%contingency to hold back either way
A detailed fixed-price quote before you sign, with preliminaries itemised. NSW contractor licence 258735C.
By Keiron Moore, Director of CKS Projects, with 25+ years building on the South Coast. Updated October 2026.
Important Disclaimer:
“This article is general guidance, not an exact price guide, guaranteed returns, or a substitute for professional advice or a formal quote. Construction costs, rental yields, and capital growth examples reflect 2025 conditions and will vary with site constraints, design, materials, and market movements. Speak with a qualified financial adviser before making investment decisions. For accurate estimates and design recommendations for your site, contact CKS Projects. We’ll provide a comprehensive consultation and a formal quote tailored to your Wollongong build.”
Government charges are as published at the date shown and change over time.
Fixed price vs cost plus at a glance
| Fixed price | Cost plus | |
|---|---|---|
| The price | Agreed before work starts, for a defined scope | Not known until the work is finished |
| Who carries the risk of costs rising | The builder, except for approved variations and allowances | You |
| What you pay | The contract price, plus approved variations and any allowance adjustments | Verified costs of labour and materials, plus the builder's fee or margin |
| How you pay | Progress payments at agreed stages, matched to the work done | Payments as costs are incurred, supported by receipts or other verifying documents |
| Suits | New homes with complete drawings, selections and a soil report | Work whose nature stops the final cost being calculated in advance |
| Watch for | Large provisional sums and prime cost allowances | No ceiling on the final price; how the margin is calculated |
The NSW rules that protect you, whichever contract you sign
Written contract
Work over $5,000 including GST needs a written contract: a small-job contract up to $20,000 and a large-job contract above it.
Price on the first page
For work over $20,000 the contract price must be shown prominently on the first page, or the contract must carry a warning and an explanation if the price isn't known or may change.
Deposit capped at 10%
The maximum deposit you can be asked to pay is 10% of the contract price.
Insurance before any payment
On contracts over $20,000 the builder must give you a home building compensation certificate before asking for a deposit or any other payment.
Progress payments match the work
Contracts over $20,000 need a progress payment schedule. Payments must match the work carried out, and cost plus claims must be backed by receipts or other verifying documents.
No surprise price rises
On contracts over $20,000 the builder can't increase the price unless the contract contains a clause allowing it.
Sources: NSW Government, contracts for building work; NSW Fair Trading, guide to home building contracts; NSW Fair Trading, contract checklist.
What can still change on a fixed price contract
A fixed price is only as fixed as the scope and allowances behind it. Three things can move it after you sign:
Variations
Changes to the agreed work, whether you ask for them or site conditions require them. Each one should be documented and priced before the work proceeds.
Provisional sums
Allowances for work that can't be priced yet. On CKS Projects' figures, rock costs $150–$250 per cubic metre to remove and severe rock can add $30,000–$60,000, which is why a soil report before you sign matters.
Prime cost items
Allowances for items you haven't chosen. If the contract allows $18,000 for a kitchen and you choose one that costs $24,000, you pay the difference.
This is why two quotes for the same home can be far apart. In one CKS Projects example, an $850,000 quote needed another $65,000 to actually complete the project, once the items it left out were added. Compare quotes on what they include, not the headline number. Read more on fixed price quotes vs estimates.
When cost plus makes sense
NSW Fair Trading describes cost plus as a contract with no guaranteed final cost, often used where the nature of the project prevents the final cost from being calculated. The owner pays the builder's verified costs and fees at regular intervals.
If you do sign a cost plus contract:
- get the builder's estimate of the total cost in writing, and ask how often you'll get cost reports;
- make sure the contract explains exactly how the fee or margin is calculated;
- check every progress claim against its receipts or invoices;
- hold back a larger contingency than the 10–15% you would on a fixed price, because there is no ceiling.
Questions to ask before you sign any building contract
- Is the contract price on the first page, or is there a warning that it isn't known or may change?
- Which items are provisional sums or prime cost items, and how big are those allowances?
- Are the preliminaries itemised: site setup, scaffolding, fencing, supervision, connections, the Long Service Levy and insurance?
- Has a geotechnical report been done, and are the footings priced on it?
- How are variations priced and approved before the work goes ahead?
- Is the deposit 10% or less, and have I received the home building compensation certificate?
- Does the progress payment schedule match the stages of work?
How CKS Projects prices a build
Free discovery call
Talk through your land, ideas and budget with the builder, not a salesperson.
Design and selections
Your home is designed for your block, and finishes are chosen with specialist support before pricing.
Itemised preliminaries
Site setup, management, compliance and logistics costs are identified and priced before a contract is issued.
Fixed-price contract
You receive a detailed fixed-price quote before signing. Any variation is documented and priced before work proceeds.
Working out a budget first? See what a house costs to build in NSW and why a paid estimate is worth it. Ready to build? See custom home builders in Wollongong, new home building or a knockdown rebuild on your own land. Keeping the price down? Read the cheapest way to build a house in NSW.
Building contract FAQs
What is the difference between a fixed price and a cost plus contract?
Under a fixed price contract the builder agrees a total price for a defined scope of work, and the price changes only through agreed variations or the allowances written into the contract. Under a cost plus contract there is no guaranteed final price: you pay the builder's verified costs plus a fee or margin as the work is done.
Are cost plus contracts legal in NSW?
Yes. For work over $20,000 the contract must show the contract price prominently on the first page, or carry a warning and an explanation if the price is not known or may change. Progress payments under a cost plus contract must be supported by receipts or other verifying documents.
Is a fixed price contract really fixed?
The agreed scope is. The price can still move through variations you approve, and through provisional sums and prime cost items, which are allowances for work or items that weren't fully priced when you signed. The fewer allowances a contract carries, the more fixed the price really is.
Which is cheaper, fixed price or cost plus?
Neither is cheaper by default. A fixed price builds the builder's risk into the price, so you know your number up front. Cost plus passes the risk to you: it can come in lower if nothing goes wrong, and there is no ceiling if something does.
What is a provisional sum in a building contract?
An allowance for work the builder can't price exactly yet, such as rock excavation before the ground is opened up. If the work costs more than the allowance, you pay the difference, and the contract may add the builder's margin to it.
What is a prime cost item?
An allowance for an item you haven't chosen yet, such as appliances, tapware or a kitchen. If the kitchen allowance is $18,000 and the kitchen you choose costs $24,000, you pay the difference.
How much deposit can a builder ask for in NSW?
No more than 10% of the contract price. On contracts over $20,000 the builder must also give you a home building compensation certificate before asking for any deposit or payment.
When does a cost plus contract make sense?
When the nature of the work stops the final cost being calculated in advance, so the scope can't be defined well enough to fix a price. For a new home with complete drawings, selections and a soil report, a fixed price is usually achievable.
How do I keep variations down on a fixed price contract?
Finish your selections before you sign, get a geotechnical report ($1,500–$2,500) so the footings are priced on real ground conditions, and ask for preliminaries and allowances to be itemised. Then budget a 10–15% contingency for changes you choose to make.
Does CKS Projects build on a fixed price?
Yes. CKS Projects gives you a detailed fixed-price quote before any contract is signed, with preliminary costs itemised. Any variation is documented and priced before work proceeds.
Get a fixed price for your build
Tell us about your land and what you want to build. We'll talk it through for free, then give you a detailed fixed-price quote before you sign anything.
