When you sign to build a new home, the contract decides who carries the risk if costs go up. That's the real question behind fixed price vs cost plus. One puts most of the cost risk on the builder. The other puts almost all of it on you.
Most Queensland project homes are built on a fixed-price contract. Cost-plus contracts turn up more on custom homes, difficult sites and renovations. Here's how each one works, what Queensland law says about them, and what I'd check before signing either.
C4 - Asking the Right Questions Checklist
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Last updated 22 Oct 2026 · Revision 2 · Free updates for life
Checklist Type: Minor
Form Factor: Fillable, print-ready PDF (A4, 20 pages)
When to use: Choosing a builder (before you pay a deposit or sign)
70 questions and checks for every builder on your shortlist, from the licence search at your desk to a visit to one of their current sites. Compare like for like and choose your builder with confidence before you pay a deposit.
How a fixed-price contract works
The builder agrees to build your house, as drawn and specified, for a set price. If timber, labour or concrete costs rise during the build, that's normally the builder's problem, not yours.
Under Schedule 1B of the QBCC Act, a fixed contract price on a contract of $20,000 or more must be stated in a prominent position on the first page of the contract schedule. That's almost every new home.
"Fixed" doesn't mean the price can't move. It still changes through:
- Variations. Anything you change or add after signing.
- Prime cost (PC) items and provisional sums (PS). Allowances for things not yet chosen or not yet priceable, such as appliances or rock removal.
- A rise-and-fall or escalation clause, if the contract has one.
If the price can change under the contract, the Act requires a warning and a brief explanation on the first page of the schedule. Look for it before you sign.
How a cost-plus contract works
You pay the builder's actual costs (materials, labour, subcontractors) plus a margin or fee. The QBCC Act defines a cost-plus contract as one where the amount the builder will receive can't be accurately calculated when you sign, even if you ignore the PC items and provisional sums.
The contract must still state the method for calculating the price, including the builder's reasonable estimate. But an estimate is all it is.
Cost-plus can suit a complex custom home, an unusual site or a renovation full of unknowns, with a builder you know and trust. For most first-home buyers, it hands over the one thing a contract is supposed to give you: price certainty.
Fixed price vs cost plus: where the risk sits
Here's the honest comparison.
- Price certainty. Fixed price gives you a known number, adjusted for allowances and variations. Cost plus gives you an estimate.
- Who pays for mistakes and waste. On fixed price, rework and inefficiency come out of the builder's margin. On cost plus, they can end up on your invoice.
- Who pays for market movement. On fixed price, normal price rises are the builder's business risk. On cost plus, you pay them.
- Admin load. Fixed price means checking stages and variations. Cost plus means checking every invoice, timesheet and supplier docket.
- Builder's incentive. A fixed price rewards the builder for running the job efficiently. Cost plus doesn't, unless the contract adds a cap or target.
The QBCC's own guidance is blunt. It says it has received reports from many homeowners that final costs under cost-plus contracts were 50% to 100% higher than they expected.
The home warranty and finance catch
Two things catch people out with cost plus.
- Home warranty cover. The QBCC says protection for non-completion under the Queensland Home Warranty Scheme is not available on cost-plus or construction management contracts. If your builder fails mid-build, that's a big gap.
- Finance. Many lenders won't fund a cost-plus contract, or want extra controls if they do. Ask your lender before you go down this path, not after.
If you're being offered a cost-plus contract, talk to your lender and a building lawyer before you sign anything.
What can still blow out a fixed price
A fixed price is only as good as what's inside it. These are the gaps I see most often.
- Low allowances. A contract packed with thin PC items and provisional sums looks cheap and gets expensive. Add them all up. The bigger that number, the less "fixed" your price is.
- Site costs left provisional. Rock, extra piers and retaining are often priced as provisional sums. Push for fixed site costs once the soil test and survey are back.
- Escalation clauses. In Perera v Bold Properties (Qld) Pty Ltd [2023] QDC 99, the Queensland District Court found a clause letting the builder lift a fixed price to its "current base price" was void. If your contract has an escalation clause, get it explained before you sign.
- Variations without paperwork. Every change should be priced and signed before the work is done.
The Act helps here. The builder warrants that PC items and provisional sums were calculated with reasonable care and skill, using the information reasonably available at the time, including the site. More on provisional sums here.
If you do sign a cost-plus contract
Sometimes cost plus is the right tool. If you go that way, protect yourself.
- Get a detailed estimate broken down by trade or element, attached to the contract.
- Define "cost". What's included: site supervision, the builder's own staff, equipment hire, insurance? What's excluded?
- Fix the margin as a percentage or a lump-sum fee, in writing.
- Ask for a cap or target price, with the builder sharing any overrun.
- Require evidence with every claim: invoices, quotes and timesheets.
- Hold a bigger contingency. As a guide, not a rule, I'd plan on 15 to 20% on a cost-plus job.
- Consider a quantity surveyor to check claims as they come in.
The deposit cap still applies. On a contract of $20,000 or more, the builder generally can't ask for more than 5%, and for a cost-plus contract that's worked out on the estimated amount.
Fixed price or cost plus: questions to ask
Take these to every builder you're comparing. Our C4 Asking the Right Questions checklist has the full list for choosing a builder.
- Is this a fixed-price contract? Is there any clause that lets the price change?
- What is the total of all PC items and provisional sums?
- Which site costs are fixed and which are provisional?
- What margin do you add to PC and PS overruns and to variations? As a guide, about 10% on overruns and 2.5 to 5% on variations is typical.
- If cost plus: what's your estimate, what's your fee, and will you cap it?
Before you sign, read whether you can negotiate your contract. Most of your protection comes from special conditions you add up front.
The short version
For most new homes, a fixed-price contract is the safer choice, because the builder carries the cost risk and you get home warranty cover for non-completion. Cost plus can work for complex or uncertain jobs, but you carry the overruns and need tight controls. Either way, the allowances, the escalation clause and the variation terms decide what you really pay.
Whatever you're offered, check your own contract carefully and have a building lawyer review it before you sign.
FAQs
Is a fixed-price contract really fixed?
Not completely. The price can still change through variations, PC items, provisional sums and any escalation clause, which must be flagged on the first page of the schedule.
Do I get home warranty insurance on a cost-plus contract?
The QBCC says non-completion cover under the Queensland Home Warranty Scheme isn't available on cost-plus contracts. Check the current position with the QBCC before you sign.
Will my bank lend on a cost-plus contract?
Many lenders won't, or they add conditions. Ask your lender or broker before you commit to that contract type.
Which is cheaper, fixed price or cost plus?
Neither is automatically cheaper. A fixed price includes the builder's allowance for risk, while cost plus can come in lower or much higher depending on what happens on site.
