Fixed price build contract not a fixed price

Has anyone else had the issue where a building company was advertising a fixed price contract but when you were ready to sign the contract you discover a clause that allows them to pass on any increases in costs if they can justify it?

Really annoyed about this as we may have wasted the last 3 months designing and getting plans drawn for nothing.

Thanks

gremball1, Aug 7, 5:12 am

There should be contingencies built in for any home owner initiated variations. It is very common for certain companies to try to charge extra for deeper enhanced foundations or clearing away trees or bushes that may interfere with the building or scaffold footprint.

corkranb, Aug 7, 7:35 am



Thanks corkranb. This is a separate clause to variations. We have no problem paying extra if we are the cause of the increase. This clause takes about if there are any increases in costs once the contract is signed then the builder will seek the owner's consent for passing on the cost but the owner is allowed to lawfully withhold or delay giving consent.

gremball1, Aug 7, 7:41 am

I went through a very similar situation. Ask them to clarify in writing by giving examples of what exactly would be classed as an increased cost and what would not. Then you can make an informed choice like maybe finding another building company.

kew, Aug 7, 11:38 am



Why should the builder not be able to claim increased costs? This clause refers to the likes of materials or fittings and fixtures increasing in price from the builders merchant. So if timber goes up in price due to the exchange rate or similar why should the builder have to suck it up?

underconstructy, Aug 7, 1:36 pm



You can try finding another company but you'll find its a standard clause in a Master Builders, Certified Builders, NZS3910 or NZIA construction contract.

underconstructy, Aug 7, 1:37 pm



Again why should a builder not be able to charge for increased scope of foundation work? If its not on the drawings or differs from the drawings its not included in the price.

underconstructy, Aug 7, 1:39 pm



Have you not heard of a "fixed price contract"?
In our case, the builder had sourced fixed prices from their suppliers and contractors. There were the usual time frame clauses, but all manageable so long and the contract commenced shortly after receiving the quote. You would have to be mad to sign up to a contract that is not fixed, unless of course that you had total control.

kew, Aug 7, 5:19 pm



Yip have heard of them. Heard of variations? Heard of exchange rates? Heard of cost fluctuations?
Some build take 12-18 month's is it reasonable for a merchant to hold a quote that long? What if you cladding is cedar? Thd cedar price fluctuates daily subject to exchange rates. No merchant will hold rates for 12 months.

underconstructy, Aug 7, 10:01 pm



Yes, entirely reasonable. The Principal wants the certainty of a fixed price and transfers the risk of price increases to the Builder. The Builder accepts that risk, but charges more for it.

pico42, Aug 7, 11:07 pm



Because they agreed to a fixed price contract.

pico42, Aug 7, 11:08 pm

underconstructy wrote:
Again why should a builder not be able to charge for increased scope of foundation work? If its not on the drawings or differs from the drawings its not included in the price.[/quote

if you quote a job that is the price unless the job changes in which case you need a vo to be agreed by both parties and signed off I bet if something happened and prices dropped you wouldn't pass the savings onto the client.

lee289, Aug 8, 6:44 am

[/quote]

You obviously have a limited knowlege of the building industry. Some houses can take a couple of years to build. Especialy complexed ones in places such as the Marlborough sounds that have boat access only.

survivalkiwi, Aug 8, 6:51 am



You hit the nail on the head there.

lee289, Aug 8, 7:32 am

[/quote]

Are you intentionally being a clown? In one statement you claim any builder who takes 12-18 month's to complete a build shouldn't be building. Then in the next breath you agree with the guy who says I have limited knowledge because I apparently don't know some builds can take several years.

Then to top it off you verbally insult me, way to go.

So enlighten me how long does it take?

underconstructy, Aug 8, 10:50 am



I'm actually very experienced. I was just using that time period as an example. I'm currently in the middle of an architectural home which is pushing 2 years.

underconstructy, Aug 8, 10:54 am

[/quote]

Tell us wise one then why does the bank finance cost plus builds?

underconstructy, Aug 8, 10:55 am



Really but yet you didn't know that the council requires a geo report for new builds hmmm.

lee289, Aug 8, 11:32 am



They don't. You may have to provide one in certain circumstance such as areas of known poor ground conditions or if requested by the council. The building code doesn't not mandate every single consent must have a Geotechnical report, it simply doesn't state that.

underconstructy, Aug 8, 11:58 am



A geotechnical report is required more often than not with any new build. For any developer not to include this would be remiss imo. All new builds should include contingencies/allow for variations for standard increases. Building materials etc increasing in prices are pretty common, and allowed for within the build price (or should be). The ONLY increase in price from a FIXED PRICE contract should be those outside the signed contract/scope of works (ie it's discovered foundations need to discovered after the fact, owner changes fixtures etc). No owner should rely on the Master Builders contract, but get a QS to review everything and have an agreed contract between the principal and contractor, including penalties for going over time.

hd07, Aug 8, 12:20 pm


I think you need to go back and reread the thread. I was taking a swing at the oremma who said that any builder who takes 12 to 18 months to do a job should not have one.

survivalkiwi, Sep 22, 3:32 am

Share this thread