--- title: Understanding Fixed Price vs Cost Plus Projects description: Explore the differences between Fixed Price and Cost Plus projects to determine which structure is best for you within Ressio --- [Skip to content](https://help.ressiosoftware.com/understanding-fixed-price-vs-cost-plus-contracts#main-content) English Show submenu for translations [Contact us](https://help.ressiosoftware.com/kb-tickets/new?hsLang=en) ![Untitled design (22)](https://43531900.fs1.hubspotusercontent-na1.net/hub/43531900/hubfs/Untitled%20design%20(22).png?width=75&height=75&name=Untitled%20design%20(22).png) Open main navigation Close main navigation - English Show submenu for translations - [Contact us](https://help.ressiosoftware.com/kb-tickets/new) - [Go to ressiosoftware.com](https://www.ressiosoftware.com/) [Go to ressiosoftware.com](https://www.ressiosoftware.com/) Hello. How can we help? - There are no suggestions because the search field is empty. 1. [Ressio Knowledge Base](https://help.ressiosoftware.com/?hsLang=en) 2. [FAQs](https://help.ressiosoftware.com/faqs?hsLang=en) 3. [Estimate](https://help.ressiosoftware.com/faqs?hsLang=en#estimate) # Understanding Fixed Price vs Cost Plus Projects ## Explore the differences between Fixed Price and Cost Plus projects to determine which structure is best for you within Ressio When planning a residential construction project—whether it’s a custom home, major renovation, or home addition—choosing the right type of contract is crucial for both budgeting and project management. The two most common contract types are **Fixed Price** and **Cost Plus**. Here's a breakdown of how they differ and what each means for homeowners. --- ### 🔒 Fixed Price Contracts (Lump Sum) A **Fixed Price** contract outlines a single, agreed-upon total price for the entire scope of work. This price is determined before construction begins and is based on detailed project plans and specifications. #### Key Features: 💰 **Set Budget:** The total project cost is agreed upon up front. 📊 **Predictability:** Ideal for homeowners who want cost certainty. ⚠️ **Limited Flexibility:** Changes to scope (change orders) will likely increase the overall cost. 🧱 **Contractor Responsibility:** The contractor absorbs cost overruns unless they result from homeowner changes or unforeseen conditions. #### Pros: - Easier to budget and finance. - Less risk of cost escalation. - Encourages efficient project management by the builder. #### Cons: - Less flexibility to make changes mid-project. - May include a built-in contingency to protect the contractor, increasing the initial price. - Requires very detailed plans and selections before construction begins. --- ### 🧾 Cost Plus Contracts (Time and Materials, Open Book) A **Cost Plus** contract bills the homeowner for the actual cost of labor, materials, and subcontractors, plus a fixed fee or percentage for the contractor’s profit and overhead. #### Key Features: 🔍 **Transparent Billing:** Homeowners can see what everything actually costs. 🔄 **Flexibility:** Easier to make changes or adjustments during the project. ⚖️ **Shared Risk:** Homeowners assume more risk for cost overruns or inefficiencies. #### Pros: - Greater flexibility to adjust scope, materials, or finishes. - Ideal for projects where final details may evolve during construction. - Can be more cost-effective in projects with many unknowns. #### Cons: - Less budget certainty. - Requires careful oversight of expenses and documentation. - Can lead to higher total cost if not managed closely. --- ### Which One Is Right for You? | Criteria | Fixed Price | Cost Plus | | --- | --- | --- | | Budget Certainty | ✅ High | ⚠️ Variable | | Flexibility | ⚠️ Limited | ✅ High | | Transparency | ⚠️ Limited | ✅ High | | Best For | Projects with well-defined scope and selections | Projects with evolving scope or design |   --- ### How does this work in Ressio? In Ressio projects are set as either **Fixed Price **or **Cost Plus** when they are created.  Note: You can adjust the cost structure of a project after creation but its recommended that you only do that **prior **to sending a **proposal or invoice **to your client Tip: If you want to be able to sync your project **Fixed Price or Cost Plus** to **Quickbooks Online **you will need to select the cost code budget organization as well. The primary effect cost structure has on a project is how invoicing occurs: #### Cost Plus - By Amount: Manually create line items and $ values to invoice the client - From Actuals **(CP Only): **Create invoices from outstanding bills and expenses including time - From Changes: Invoice directly from changes to the original estimate (Change Orders and Selections) #### Fixed Price - By Amount: Manually create line items and $ values to invoice the client - From Changes: Invoice directly from changes to the original estimate (Change Orders and Selections) - By Percent (Progress Invoice) **(FP ONLY):** Invoice a % of the total client price of one or multiple cost lines When setting up a Fixed Price project other decisions need to be made about allowances and selection markup. **[Setting up Fixed Price Projects in Ressio](https://help.ressiosoftware.com/setting-up-fixed-price-projects?hsLang=en)** --- ### Final Thoughts Both contract types have their place in residential construction. If you have a clear vision, detailed plans, and want cost predictability, a **Fixed Price** contract may be the best fit. If your project is more complex, custom, or evolving, a **Cost Plus** contract can offer the flexibility you need—but with more active involvement in cost tracking. 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