What is a time and materials contract versus a fixed price contract?

In Ottawa construction projects, you'll encounter two main contract types: fixed price (also called lump sum) contracts where you pay one agreed amount regardless of actual time spent, and time and materials (T&M) contracts where you pay for actual hours worked plus materials at cost.

Fixed Price Contracts

With a fixed price contract, your Ottawa contractor provides one total price for the complete project - whether it's a $25,000 bathroom renovation in Kanata or a $150,000 secondary suite addition in Orleans. You pay this amount regardless of whether the job takes 3 weeks or 6 weeks to complete.

The contractor absorbs the risk if the project runs over their estimated time or if material costs increase unexpectedly. This gives you budget certainty upfront, which is why most Ottawa homeowners prefer fixed price contracts for defined projects like kitchen renovations or deck installations.

However, fixed price contracts require very detailed specifications. Any changes or additions will result in change orders with additional costs. Make sure your contract clearly states what's included and excluded, and that your contractor has proper WSIB clearance and insurance before signing.

Time and Materials Contracts

Time and materials contracts charge you for actual hours worked (typically $50-150 per hour depending on the trade) plus materials at cost, often with a markup of 10-20%. These are common for renovation projects in older Ottawa homes where you might discover hidden issues - like knob-and-tube wiring in Glebe homes or foundation problems in Westboro properties.

T&M contracts work well when the project scope is uncertain or when you're doing exploratory work. For example, if you're renovating a century home in the ByWard Market and won't know the full extent of electrical upgrades needed until walls are opened up.

Protecting Yourself in Ottawa

For either contract type, verify your contractor through ESA's contractor lookup at esasafe.com if electrical work is involved, or check TSSA certification for gas work. Always confirm current WSIB clearance and liability insurance.

Under Ontario's Construction Lien Act, you can hold back 10% of payments for 60 days after substantial completion to protect against liens. This applies regardless of contract type.

For T&M contracts specifically, insist on daily time sheets, require approval for purchases over a certain amount (typically $500), and set a "not-to-exceed" amount to cap your exposure.

When to Use Each Type

Choose fixed price for well-defined projects like standard bathroom renovations or deck construction. The City of Ottawa's building permit application process works well with fixed price contracts since you'll have detailed plans.

Consider T&M for renovation projects in older Ottawa homes, emergency repairs, or when you're unsure of existing conditions. Just ensure you have a detailed scope of work and clear hourly rates in writing.

For any contract over $50,000 in Ontario, you have additional consumer protection rights, including a right to cancel within 10 days of signing.