Fixed-Price vs Cost-Plus-Fee — LA Construction Contract Guide
LA remodel contracts come in two flavors. Fixed-price caps the GC's price; cost-plus-fee passes actual costs through with a markup. Here's when each serves the homeowner.
| Attribute | Fixed-Price Contract | Cost-Plus-Fee Contract |
|---|---|---|
| Price certainty | High — single fixed number | Lower — actual cost + markup |
| GC's risk | GC absorbs overruns (bids higher to cover) | Homeowner absorbs overruns |
| Transparency | Bid number is bottom line | All invoices passed through with markup |
| Best for | Well-defined scope with good plans | Complex, unknown-conditions work |
| Change-order dynamics | Every change requires written change order | Changes absorb into actual costs automatically |
| CA B&P Code 7159.5 | Max 10% of contract or $1,000 down — whichever less | Same rule applies |
Takeaway
For well-defined scopes (kitchen, bath, addition with full plans), fixed-price protects homeowners. For open-ended restorations (historic, foundation, fire rebuild with unknowns), cost-plus-fee with a stated fee cap often saves money.
Talk it through with Baily
Not sure which side fits your project? Ask Baily — we'll walk through the tradeoffs for your specific situation.
Fixed-Price vs Cost-Plus-Fee
Who is Baily?
Baily is named after Francis Baily — an English stockbroker who retired at 51, became an astronomer, and in 1836 described something on the edge of a solar eclipse that nobody had properly articulated before: a string of bright beads of sunlight breaking through the valleys along the moon's rim.
He wasn't the first to see them. Edmond Halley saw them in 1715 and barely noticed. Baily's contribution was clarity — describing exactly what was happening, in plain language, so vividly that the whole field of astronomy paid attention. The phenomenon is still called Baily's beads.
That's what we wanted our AI to do. Every inbound call and text has signal in it — a homeowner's real question, a timeline, a budget, a hesitation that means “yes but.” Baily listens to every one, 24/7, and finds the beads of light.
Baily was a businessman before he was a scientist. That's our vibe too.