Explaining Fixed Price Contracts

Explaining Fixed Price Contracts

Price is always a big factor when building a house.

Understandably, a buyer may be concerned about the cost of the build escalating in a later stage or when something unpredictable happens.

Therefore the most significant advantage of a fixed price model is that it allows the homeowner to know in advance what the house will cost.

This type of contract gives both the home buyer and the builder a predictable scenario, offering stability for both during the length of the contract.

We ask Stroud Homes Canberra builder, Vj Tran, what you as a home buyer need to know about Fixed Price Contract.

Can you explain the basics of a fixed price contract?

At Stroud Homes Canberra, we work with you through our Preliminary Process to, ultimately, provide you with a fixed-price contract – a Black & White Quote that you can take to your broker/bank. This way you know the real cost to build the house you want, not just the base price.

After all the plans have been approved by you, we provide you with a draft copy of the contract for your review and approval, followed by the actual contract ready for signing by both parties.

Can you explain what the Preliminary Process and Preliminary Testing includes prior to signing the fixed price contract?

The Preliminary Process is completed before signing a contract. Its purpose is to uncover all of the details required for Stroud Homes Canberra to accurately quote a build on your land, specific to all characteristics of the land and its local Council or Estate requirements.

The Preliminary Agreement is a non-contractual agreement that allows us to engage in the necessary services to get to that fixed quote, including soil test, site contour survey, engineering and energy report, and the architectural design/drawings.

Are you up front with all fees and charges and are the PC & PSUM in your quote comparable with all quotes received?

We are all about being transparent and upfront as possible.

Our quotes include specified costs when possible and where there are unknowns at the drafting of the contract, we include an estimate for a Provisional Sum (PSUM) & Prime Cost allowances  (PC) if final specification, products or designs have not been finalised.

A PC allowance is an allowance for the supply cost for the product in the quote, and a PSUM allowance is the supply & install cost of the product/services for the item where the cost is not yet known or cannot be determined (e.g. because selection will occur at a later stage) until certain works have taken place.

This PSUM & PC allowance is an estimate for the associated item as a guide to assist with project budgeting & finances.

If there will be any additional expenses, what may these include?

In some cases, during excavation there may be the chance of ‘hitting rock’. While the soil test provides a good indication/assessment, it does not cover testing of an entire block and there is a small chance of soil variation on the one block.

This is something to keep in mind and can be factored in as a PS allowance.


Does a fixed price contract allow for variations to the building work during the construction process?

Fixed-priced contracts can certainly allow for variations.

However, ideally, we aim to sort out as much as possible at contract stage hence our preliminary agreement process at the start to avoid variations during construction stage, which you can imagine can become a costly exercise and create delays for both parties.

Am I locked into anything when signing a Preliminary Agreement?

The answer is simply ‘No’. Our Preliminary Agreement is non-contractual and you can choose to end the agreement at any stage.

100% Real Price

With Stroud Homes’ Fixed Price Contracts there are no hidden fees, no inflated prices and no gimmicky promotions – just 100% real pricing that everyone can understand.

More about 100% Real Prices
Your Local Builders
Jou   Jong
Jou Jong

Ask VJ about our fixed price contracts