A fixed price can provide cost certainty when the scope, ground conditions and schedule are well defined. If those assumptions change, the arrangement can become risky for one party. Before signing, clients and contractors should agree which assumptions apply and how changes will be handled.
Three possible approaches
Fixed price with a clear scope
The price stays fixed while the scope and agreed conditions remain unchanged. Variations and additional work should be documented and handled under clear terms.
Price-adjustment clauses
The parties can agree adjustments for specific, defined cost changes. The clause should state its triggers, calculation method and required evidence.
Open-book, time-and-materials arrangements
For work that is difficult to estimate, transparent billing may be appropriate. It requires clear rates, supporting records, regular cost reports and, where suitable, a spending cap.
No percentage split fits every project
The right allocation depends on factors such as design maturity, ground conditions, material exposure and the likelihood of changes. There is no universal percentage split. The parties should identify the actual risks and have the terms reviewed by a qualified professional.
This article provides general information and is not legal advice.