Return to the Building a Home Forum | Post a Follow-Up

 o
Fixed price contract and contingency

Posted by DoubleOhHoya (My Page) on
Sun, Apr 8, 12 at 2:57

Under a fixed price contract, is it typical for the builder to keep the contingency in the event it isn't used? Curious what the market is here?

Also, with allocation overages, are you charged a profit margin, or is this charged at cost?


Follow-Up Postings:

 o
RE: Fixed price contract and contingency

Increases and reductions to a Fixed Price are normally done by change orders and a Contingency would be part of the Owner's budget to cover unforeseen change orders.

However, sometimes a small (5%) contingency fund is included in a Fixed Price contract separate from the Fixed Price to pay for minor unforeseen emergencies or design shortfalls identified after construction begins. It is drawn down at the request of the Contractor and the approval of the Owner for small additional costs in order to avoid the disruption of a change order. It should not be used to pay for all or part of a change in scope of the work.

A Contingency is separate from the Fixed Price so if it is not used, it would simply not be billed to the Owner. It is essentially a limit to the amount of cost additions that can be approved by the Owner without a formal change order.

Requests to use the Contingency fund would be marked up the same as a change order.

Don't confuse this contingency with a contingency the contractor might add to his Fixed Price. Such an amount would only be identified in the contract of a Cost of the Work contract.


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Building a Home Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here