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 (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 entire 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 longer than expected or materials cost more than anticipated. The contractor absorbs these risks, which is why they typically build in a buffer for unexpected costs.

This approach works well for well-defined projects where the scope is clear. If you're renovating a standard bathroom or finishing a basement with known dimensions and specifications, a fixed-price contract protects you from cost overruns. However, contractors may quote higher to protect themselves from unknowns, especially in Ottawa's older neighborhoods like the Glebe or Westboro where surprises behind walls are common.

Time and Materials Contracts

Time and materials contracts charge you for actual labor hours (typically $50-$120 per hour in Ottawa depending on the trade) plus materials at cost, usually with a markup of 10-20%. You might also see a management fee of 10-15% of total costs. This approach is common for renovation work where the full scope isn't clear until walls are opened up.

T&M contracts are often used for projects in Ottawa's heritage areas like New Edinburgh or Sandy Hill, where contractors can't predict what they'll find behind century-old walls. They're also common for insurance restoration work or when homeowners want flexibility to make changes during construction.

What to Watch For

With fixed-price contracts, be wary of contractors who quote significantly lower than others - they may plan to hit you with change orders later. Ensure your contract clearly defines what's included and has a detailed scope of work. The Ontario Construction Lien Act requires you to hold back 10% of payments for 60 days after completion, regardless of contract type.

For T&M contracts, insist on detailed daily reports showing hours worked and materials purchased. Set a "not-to-exceed" amount to cap your exposure. Require receipts for all materials and verify hourly rates for different trades. Some unscrupulous contractors inflate hours or material costs, so maintain oversight throughout the project.

Protecting Yourself in Ottawa

Regardless of contract type, verify your contractor through ESA (for electrical work) at esasafe.com, check TSSA certification for gas work, and confirm WSIB clearance. The City of Ottawa Building Code Services (613-580-2424) can verify if proper permits are pulled. Never pay large amounts upfront - Ontario's Consumer Protection Act limits deposits to 10% or $100, whichever is less, for contracts under $50.

Both contract types have their place in Ottawa construction. Choose based on your project's complexity, your risk tolerance, and how well-defined the scope is before work begins.