Lump Sum vs. Cost-Plus Contracts

Posted to LinkedIn 9/22/25

Your Weekly BeastBit:

In construction, contracts are everything. But the type you choose can make or break your bottom line. Two of the most common: Lump Sum and Cost-Plus.

Lump Sum (Fixed Price):
✅ Predictable for the builder/owner — price is locked in.
✅ Contractor keeps savings if they’re efficient.
⚠️ But bids are often higher (built-in $ for contingencies), and change orders can get expensive.

Cost-Plus:
✅ Transparent — every cost is visible.
✅ Flexible — great for evolving projects.
⚠️ But the final price is unknown until the end, and it requires trust, detailed oversight and record-keeping.

Bottom line:
Use Lump Sum when the scope is clear and risks are minimal.
Use Cost-Plus when flexibility is needed and the design is evolving.

Either way, when estimating, be certain to add margin to both products you purchase for the job AND all associated labor.

👉 Choosing the right structure manages customer expectations, can protect your margins and strengthen builder relationships.

Want to understand which structure yields better margins for your projects? We can help!