Compare · Updated May 2026

Fixed Price vs Cost Plus Builder Contracts (2026 UK Guide)

UK extension builders quote in two fundamentally different ways: fixed price (you agree one number for the whole job) or cost plus (you pay materials + labour at cost + a margin, typically 12–20%). Fixed price gives you certainty but bakes in a 10–18% “risk premium” — the builder's protection against unknown ground conditions, material price moves, and scope creep. Cost plus is leaner and more transparent but transfers cost risk to you: budget overruns hit your wallet, not the builder's. This guide shows when each model wins, the contract clauses to insist on, and a real £68k Bristol extension priced both ways.

Both models priced 8 contract clauses JCT & bespoke compared
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Quick Answer

Fixed price vs cost plus — which is right for you?

  • Choose fixed price if you want budget certainty, the design and spec are fully resolved before signing, and you'd rather pay a 10–18% premium than face overrun risk.
  • Choose cost plus if you trust the builder, your spec will evolve (heritage, period property, design-led project), and you can absorb 10–25% overruns without it derailing the project.
  • Hybrid “target cost” models (most JCT IC 2016/24 contracts) split overrun pain and gain between you and the builder — typically the best middle ground above £80k project value.
Side by Side

Fixed Price vs Cost Plus — The Eight Differences That Matter

AreaFixed PriceCost Plus
Headline priceOne number, all-inEstimate + open book
Risk premium10–18% includedZero — paid only if needed
MarginHidden in priceStated openly (12–20%)
Spec changesVariation order + premiumJust buy the spec you want
Cash flowStage payments fixedMonthly actuals + margin
TransparencyLow (opaque mark-ups)High (receipts shared)
DisputesScope-creep argumentsMargin/markup audits
Best contract templateJCT MW 2016/24JCT IC 2016/24 + cost-reimbursable schedule
Worked Example

Real Project: Bristol Single-Storey Rear Extension Priced Both Ways

25m² single-storey rear extension, mid-range spec. Same builder, same brief, same March 2026 start. Here's how each contract played out.

Fixed Price quote

£78,400
One number, payable in 6 stages, no variation costs unless you change the spec.
  • Builder absorbed a £2,800 steel-price rise (good for owner)
  • Owner requested an island upgrade mid-build — £6,200 variation order
  • Final cost: £84,600 (variation only)

Cost Plus quote

~£68,000 + 15%
Estimated £68k actual cost, paid monthly against receipts, plus 15% builder margin on all spend.
  • Actual material cost ran £71,200 (£3,200 over due to steel rise)
  • Owner upgraded kitchen island mid-build at cost — no premium
  • Final cost: £86,900 (£75,500 actual × 1.15)

Verdict: Without the kitchen upgrade, cost plus would have come in at £82,000 — saving £2,600 vs fixed. With it, both landed within 3% of each other. The decision came down to risk appetite: fixed price felt safer; cost plus felt more honest.

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Frequently Asked

Common Questions

Almost always, by about 10–18% on the build-cost line. The builder bakes in contingency for ground conditions, weather, material price moves and minor scope drift. The premium is the price of certainty — think of it as a fully insured holiday vs paying for each thing as you go.
The contract. Insist on (a) open-book accounting with receipts, (b) trade discounts passed through, (c) labour rates capped at a stated £/day, (d) a stated maximum margin %, and (e) a not-to-exceed price ceiling agreed up front. The 5-step structure removes 80% of overspending risk.
A hybrid where you agree a target final cost. If actual cost comes in under target, both parties share the saving (typically 50/50). If it comes in over target, both share the pain. The structure aligns incentives and is the standard JCT IC 2016/24 approach for projects over £80k.
Cost plus, almost always. Heritage projects uncover surprises (rot, asbestos, structural defects) that fixed-price builders price in at the worst-case. Cost plus lets you only pay for what's actually needed — typically saving 10–20% on the total.
Fixed price. If the design is fully resolved, the builder can price it tightly and the certainty is worth the small premium. Avoid cost plus on tight-spec jobs — you pay margin on every variation without the upside.
Strongly recommended for projects over £50k. JCT Minor Works (MW) suits fixed-price residential extensions; JCT Intermediate (IC) suits target-cost or cost-plus. Templates cost £150–£300 and protect both sides on payment, defects, and disputes. Bespoke builder contracts often favour the builder — always ask a solicitor to review.
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