In residential construction, the industry standard has been to put the project out for competitive tender. Often seeking the lowest possible fixed price. But as most clients eventually discover, this model often leads to exactly what it incentivises: corners cut, a focus on short-term gains, and an adversarial process once the contract begins.
A Cost Plus contract, by contrast, is a more transparent and collaborative model. It allows the client to pay the actual cost of the works, plus a fixed fee or percentage for the contractor’s overheads and profit.
At Mallett, we’ve found that a Cost Plus contract can deliver far better outcomes, not just in terms of budget, but also in quality, collaboration, and overall client experience.
Why Fixed Price Often Fails
A traditional fixed-price tender usually forces contractors into submitting artificially low prices to secure the job. This approach might appear attractive, but it hides substantial risk. Ambiguities in drawings and specifications are often left unresolved during the tender process, only to resurface as costly variations once construction begins. Each change becomes a battleground – a negotiation over scope, cost, or responsibility – with the client caught in the middle.
Fixed price tendering also leaves contractors little choice but to protect their bottom line aggressively. This results in a “them and us” dynamic – builder vs architect vs client – where everyone is defending their own interests instead of working collaboratively towards a shared goal.
A Transparent and Collaborative Approach
With Cost Plus, the actual cost of the works is transparently tracked and agreed, with a fixed percentage fee applied for overheads and profit (OH&P). Rather than loading risk into the pricing or padding every line with hidden contingencies, cost plus gives you complete clarity over where your money is going and empowers you as the decision maker.
Typically, over 70% of the build cost can be fixed through specialist subcontractor quotes and supplier prices by the time a project starts. These are openly shared with the client and project team. The remainder – primarily site labour, materials and management – is forecasted, monitored weekly, and adjusted if necessary, with full transparency.
This gives clients far greater control. Want to change the floor finish or swap a supplier mid-way through? In a Cost Plus setup, we can pivot without punitive fees. Instead of hiding behind contract clauses, cost plus allows everyone to sit down and solve problems together.
Fewer Disputes, Faster Delivery
The collaborative spirit of a Cost Plus contract promotes trust and efficiency. Everyone is aligned. Rather than spending time preparing claims, contractors are focused on delivering. The open-book nature of the process speeds up decisions, encourages value engineering and cost saving, and keeps the focus where it should be – on delivering an efficient, high quality project.
We’ve seen this approach reduce stress, shorten programmes, and – ironically – lead to better budget control than fixed-price contracts ever could. Because when changes inevitably happen (and they do), Cost Plus means they’re handled openly and fairly.
A Smarter Way to Build
At Mallett, our build arm works almost exclusively under Cost Plus contracts. Whether it’s a Grade I listed renovation, a classic townhouse extension, or a new build, aligning the team behind a shared goal consistently delivers better outcomes — and avoids the conflict that too often defines traditional fixed-price contracts.
Our clients appreciate being part of the process. They know where their money is going and take comfort in the fact that we build their home in the same way we would build our own. That trust, transparency, and shared investment in the outcome are what lead to better buildings — and stronger relationships.
