Fixed-Price 

vs. 

Cost-Plus 

Contracts: 

What 

Surrey 

Custom 

Home 

Clients 

Need 

to 

Know 

Most homeowners come into a contract conversation with a preference already formed. Fixed-price sounds safe. Cost-plus sounds flexible. Both instincts are understandable, but neither tells the full story when you're planning a custom home in Surrey, South Surrey, or Langley.

The contract type you sign determines who absorbs risk when costs shift — and that decision deserves more than a paragraph in a builder's sales pitch.

How Fixed-Price Contracts Actually Work in BC

A fixed-price contract sets a defined scope and a defined number. Your builder takes on the risk that their costs come in as estimated. You take on the risk that the scope description actually covers what you want to build.

That second risk is where most surprises occur. Fixed-price contracts almost always include an allowance schedule — line items for finishes, fixtures, appliances, and materials where the actual selections haven't been made yet. A nominally fixed price with undervalued allowances offers limited protection in practice. If the flooring allowance assumes a builder-grade finish and your selections run custom, the gap arrives as a change order.

Walk through every allowance line before signing. Ask what the builder's assumption was and whether it reflects the finish level you actually intend. The contract type alone does not protect your budget — the quality of the scope document does.

What Cost-Plus Exposes You To — and What It Doesn't

A cost-plus contract means you pay actual costs as they occur, plus a builder fee. Your builder carries less financial risk. You carry more.

The trade-off is that the final number is unknown at the start. That uncertainty has practical consequences — mortgage draw schedules assume predictable milestone payments, and a variable cost base can create friction with lenders. You also need to track invoices and markups carefully as the project progresses.

That said, cost-plus can suit complex projects well. If the scope involves significant unknowns — a difficult site, a heritage-era structure, a design that's still evolving — cost-plus may produce a more honest starting number than a fixed price built on assumptions. A fixed-price quote on an incompletely defined scope is a number, not a commitment.

One more thing worth knowing: BC courts have re-characterized written fixed-price contracts as cost-plus arrangements when the parties behaved differently on site — even when the signed document said otherwise. Your documentation practices throughout the build matter as much as the contract you signed at the start.

The Step Code Layer Most Contracts Don't Address

The BC Energy Step Code adds a compliance layer most contract conversations skip. A mid-construction blower-door airtightness test is now required before insulation inspection on new Part 9 residential builds. If the home fails that test, remediation work kicks in mid-build. Under cost-plus, that remediation cost lands on you. Under a fixed-price contract with a builder who priced Step Code compliance properly, it lands on the builder.

The requirements differ by municipality — Surrey and Langley are not at the same step level, which changes how much energy-compliance risk is embedded in your contract. Ask your builder which step applies to your lot and who carries the test-failure risk. Most homeowners don't find this out until it's too late to negotiate.

How Change Orders Behave Differently Under Each Structure

Change orders are where most Surrey and South Surrey custom builds go over budget — regardless of contract type.

Under fixed-price, changes to scope trigger a formal change order process: the builder prices the addition or deletion, you approve it, and the contract price adjusts. BC courts have upheld clauses requiring owners to pay a portion of deleted scope items — removing something from the build mid-project can still cost you money.

Under cost-plus, scope changes are absorbed into the running cost tally. There's no separate change order price to approve. That feels flexible, but it removes the friction that forces you to evaluate whether a change is worth its cost.

For projects in Morgan Creek, Grandview Heights, or Elgin where design evolves during the build, change-order discipline matters more than contract structure. The best fixed-price contracts include detailed allowances with defined upgrade processes. The best cost-plus contracts use a CCDC-3 standard form with required escalation notice when costs will exceed estimates.

Understanding the BC Builders Lien Act Holdback

Regardless of contract type, BC law requires you to hold back a portion of each progress payment to your general contractor throughout the build. The holdback protects subtrades and suppliers from non-payment and creates a fund available for lien claims.

Under fixed-price, the holdback amount is relatively predictable. Under cost-plus, costs accumulate as the project progresses, so the holdback pool grows alongside them — a cash-flow dimension that surprises homeowners who didn't plan for it. Confirm with your lawyer that you understand the release timeline before your first payment is made.

The Licence Question That Comes Before Contract Type

Before the contract type matters, the builder's licence status matters more. Under the BC Homeowner Protection Act, any builder constructing a new home in BC must hold a residential builder licence and arrange mandatory third-party home warranty insurance — the 2-5-10 coverage administered through BC Housing. Verify your builder's licence at bchousing.org before any contract discussion. It takes two minutes.

Which Structure Fits Your Build

• Well-defined scope, complete drawings, selections mostly made: fixed-price gives you cost certainty worth having.
• Complex site, evolving design, or significant unknowns: cost-plus with a CCDC-3 form and escalation-notice requirements is often more honest.
• Either way: the scope document, the allowance schedule, and the change-order process determine your real protection — not the label on the contract.

At Square One Construction we work under both structures, and we'll tell you in the first conversation which one fits your project — and why. If you're weighing a custom build in Surrey, South Surrey, or Langley, bring us your lot and your plans and we'll walk through it.