Fixed-bid vs. cost-plus: which contract structure actually protects you?

Every renovation contract in South Florida is one of three structures: fixed-bid, cost-plus, or time and materials (T&M). The structure you sign shapes every conversation you'll have with your contractor for the duration of the project. Choose deliberately.

Fixed-bid contracts

You and the contractor agree on a specific dollar amount for a specific scope of work, signed at contract. The contractor is responsible for delivering the scope within the price. If material costs run over, that's the contractor's problem. If a hidden condition emerges, that's the contractor's problem unless it's specifically excluded.

What protects you: pricing certainty. You know your total spend at signing. Change orders are formal, in writing, signed by you before any work happens.

What can go wrong: a contractor who bids too low to win the job, then either cuts corners on materials/finish, or invents change orders to recover margin, or walks off the job. This is why fixed-bid pricing depends heavily on who is bidding — a contractor with a track record has strong incentive to bid honestly because a walkoff destroys their reputation.

Cost-plus contracts

The contractor charges you the actual cost of materials + actual labor + a fixed percentage markup (typically 15–25%). Every receipt gets passed through. Every hour of labor is billed.

What protects you: transparency — you see every dollar. In theory, you're not paying "hidden margin" — you're paying cost + a disclosed markup.

What can go wrong: the incentive structure. The contractor makes more money if the project costs more. There's no financial reason to work fast, source materials aggressively, or refuse a scope creep. Cost-plus projects routinely run 25–40% over initial estimates, and the contractor is contractually entitled to every dollar.

Time and materials (T&M)

You pay for labor by the hour and materials at cost + markup. No initial estimate is binding. This is the structure to use for exploratory work — investigating a leak, opening walls to diagnose a structural issue — where the scope is genuinely unknown.

T&M is not the structure to use for a defined renovation. If a contractor proposes T&M for a kitchen remodel or an addition, they're either inexperienced in bidding this scope or transferring risk to you that they should absorb.

Why cost-plus is popular in South Florida (and why we don't offer it)

Cost-plus contracts have become common in high-end South Florida renovations, especially waterfront work. The pitch is: "the scope is complicated, materials pricing is volatile, we'll build to your quality standard without cutting corners."

Every one of those arguments is real. Waterfront work does involve unpredictable conditions. Imported stone pricing does swing. Fixed-bid contractors do sometimes cut corners.

The problem is that cost-plus removes the contractor's incentive to solve those problems for you. Every hour of "unpredictable condition" is a billable hour. Every markup on marked-up stone is more markup. The homeowner is asked to trust that the contractor will exercise restraint in their own compensation. Some contractors do. Some don't. You find out at project end.

What we do at Dellamano Construction Inc.

Every project we take runs on a fixed-bid written contract signed at contract. Not "estimate that we'll adjust." Not "allowance-based." Fixed price at signing, milestone-based payment schedule, written change orders required for any scope change.

Why we can do this on complex projects: because the coordination risk (which is where most cost overruns come from) is reduced by our license stack. The plumbing isn't "unpredictable" because the plumbing is on our own license. The electrical isn't "unpredictable" because the electrical is on our own license. What's left for real unpredictability — hidden structural conditions, actual material price swings on imported goods — is priced in as contingency, or explicitly excluded in the contract, before you sign.

How to read a fixed-bid proposal

The FAQ answer on inclusions vs. exclusions covers the exact structure to look for. Short version: every trade is named, every material spec is listed, exclusions are explicit, timeline is a specific window (not a range), and the payment schedule is milestone-based.

If a proposal calling itself "fixed-bid" doesn't have all five of those, it's not really fixed-bid. It's an estimate with a headline number.

Every Dellamano proposal comes with a sample fixed-bid contract structure attached so you can compare against any other bid you're considering. Request an estimate or call (561) 654-7243.