What is the difference between a fixed price and a cost plus contract?

In Ottawa construction projects, fixed price contracts give you a set total cost upfront, while cost plus contracts charge you for actual costs plus a contractor fee - each has distinct advantages depending on your project type and risk tolerance.

Fixed Price Contracts in Ottawa

With a fixed price contract, your 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 know exactly what you'll pay from day one. The contractor absorbs any cost overruns due to material price increases, labor issues, or timeline delays.

This works well for clearly defined projects where the scope is unlikely to change. Your contractor will typically build in a contingency buffer (often 10-20%) to protect against unexpected costs. In Ottawa's current market, fixed price contracts are common for standard renovations like kitchen updates, bathroom remodels, and basement finishing where the work is predictable.

Cost Plus Contracts in Ottawa

Cost plus contracts charge you for the actual project costs (materials, labor, permits, etc.) plus a predetermined contractor fee - either a fixed amount or percentage (typically 10-20%). If your contractor spends $30,000 on materials and labor for your Barrhaven kitchen renovation, and charges a 15% fee, you'd pay $34,500 total.

This approach provides complete transparency into where your money goes. You see every receipt, every permit fee paid to the City of Ottawa, every ESA inspection cost. It's particularly useful for complex projects where the scope might evolve, like heritage home renovations in the Glebe or custom additions where you might make changes during construction.

What to Watch For in Ottawa

For fixed price contracts, ensure your quote clearly defines what's included and excluded. Vague language like "complete bathroom renovation" isn't sufficient - you need specifics about fixtures, finishes, permit costs, and ESA electrical work. Get everything in writing and verify your contractor's WSIB clearance and insurance before signing.

With cost plus contracts, establish a "not-to-exceed" maximum to prevent runaway costs. Require detailed weekly cost reports and approval for any expenses over a certain threshold (often $500-1000). Verify that your contractor isn't marking up materials beyond reasonable handling fees.

Ottawa Permit and Regulatory Considerations

Both contract types must account for Ottawa's permit requirements and timelines. Building permits can take 15-25 business days for renovations, and ESA electrical permits add another inspection layer. Make sure your contract specifies who handles permit applications (call 613-580-2424 for City of Ottawa Building Services) and whether permit fees are included in fixed price contracts or passed through in cost plus arrangements.

For major projects requiring TSSA gas work or structural changes, cost plus contracts often work better because regulatory requirements can be unpredictable, especially in older Ottawa homes where existing conditions might require additional work to meet current Ontario Building Code standards.

The key is matching the contract type to your project complexity, risk tolerance, and need for cost certainty versus flexibility.