What is a Fixed Point Contract?

When the time comes to sign a contract for your home improvement project, you will be presented with one of two types of contracts: a time and materials contract, or a fixed point—or fixed price—contract. A fixed price contract includes a detailed explanation of the costs for:

• Labor
• Building materials
• Refuse collection
• Details about the project, including completion and clean-up

Your fixed point contract should also go into detail about obtaining permits and any costs associated with them. The fixed point contract is usually the best option for your solar, HVAC, windows, or roofing project for many reasons—one of them being that it clearly lists everything your contractor will use for your project, as well as the timeline that they expect to finish in. Another reason the fixed price contract is recommended so often is because it leaves little doubt about what is expected from both the contractor and you, the homeowner.

Of course, things happens: weather delays renovation projects, the solar panel shipment is delayed, or you change your mind about what type of windows you want installed. A fixed point contract spells out what happens when the plan changes. It’s up to you and your contractor to agree upon what that plan is. While having all changes of scope written out and approved can be time-consuming, they ensure that everyone is on the same page and help prevent misunderstandings down the road.

If you are trying to decide which type of contract is best suited for you, read on for a list of pros and cons to signing a fixed point/fixed price contract.

Pros and Cons to Signing a Fixed Price Contract

Pros

• A fixed point contract not only lists the materials your contractor needs for this project, but it states who will purchase them: you or the contractor. Why does this matter? Because not only does it give you an idea of what materials cost, it demonstrates that your contractor understands exactly what it takes to complete your project.
• The fixed point contract is all inclusive and will detail everything from set-up and preparations to project completion and anything in between— the contract encompasses the entire scope of the project. You will know how long the project is expected to last, rates, materials, and methods of payment just by reading through the contract.
• There are no surprises when you sign a fixed price contract. You’re able to budget for the project and know exactly what will be involved.

Cons

• Your contractor may have agreements with hardware stores or the ability to buy in bulk, luxuries that may not be passed down to you if you choose to purchase materials yourself. Keep in mind that certain items may only be sold to contractors, especially when installing solar panels or solar water heaters. Some contractors pad their costs slightly and it is usually evident in the materials section.
• Since a fixed point contract details the entire project, it may be more difficult to make changes to the scope of the project midway. Depending upon the agreed upon process, a change in scope may require a contract revision to protect both you and your contractor, at the very least a written document outlining the change of scope.
• If the contractor finishes before the expected deadline, you don’t get money back since you’re not paying hourly, as you would if you signed a time and materials contract. However, this can be turned into a pro in the instance the project takes longer than expected. Fixed price contracts ensure you don’t pay more if the contractor exceeds the timeline.

Ready to start your home improvement project? We can connect you to local pros.

Find local HVAC pros