Cost Plus vs Fixed Price Contracts: What’s Best For Your Construction Business? (With Stephen Mallinger)

Fixed price contracts work great for cookie-cutter homes and simple builds. But unique architectural projects demand a different approach.

Award-winning builder Stephen Mellinger shares his proven “cost-plus strategy” that’s transformed his high-end residential construction business.

In this detailed episode of The Builders Ladder Podcast, Stephen reveals his exact approach to cost-plus contracts, including:

• The deposit approach that protects your final payment and maintains a positive cash flow in your building business
• A practical way to structure project management fees
• The powerful alternative to “variations” that maintains better client relationships
• A transparent invoicing system that builds trust while protecting margins

Stephen also shares critical insights on avoiding legal pitfalls, and why quantity surveyors are essential for million-dollar-plus projects.

Key moments:

00:02:15 – Types of projects best suited for cost-plus
00:04:35 – Handling admin and project management fees
00:07:55 – How to structure payment claims and frequency
00:13:35 – Managing deposits and final payments
00:15:35 – How to handle margin transparency
00:21:15 – Including contingencies in labour rates
00:31:15 – Avoiding legal pitfalls and misrepresentation
00:33:15 – The importance of quantity surveyor estimates

Whether you’re currently handling complex residential projects or considering your first cost-plus contract, this episode provides a useful roadmap for implementation.

Stephen even shares specific strategies for maintaining margins while building trust with premium clients.
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