Why Fixed-Price Contracts are Rare (and How to Control Budget)

Technical due diligence for a Taormina luxury property

Key Takeaways

👉 Design uncertainty and hidden conditions.
👉 Shared risk and clear clauses.
👉 Detailed specs.

When it comes to Why Fixed-Price Contracts are Rare (and How to Control Budget), the point is not theoretical: technical and operational choices change cost and timing.

1. Why fixed price is rare

Historic projects reveal hidden conditions once works start. Incomplete information makes true fixed pricing risky. Structural and MEP surprises are common. Contractors price in large contingencies. This makes fixed price uncompetitive. The issue is technical uncertainty.

2. Managing the risk

Define inclusions and exclusions in detail. Detailed specs reduce grey areas. Variations need clear valuation rules. Continuous site control limits budget drift. Good supervision reduces disputes. Risk must be managed, not denied.

💡 Pro Tip: Agree on a signed unit price list; it is the best shield against surprise extras.

3. Alternative contract tools

Unit-price contracts often work better than fixed sums. You pay for verified quantities. Time penalties can protect schedule without fixed-price rigidity. A contingency allowance is unavoidable. This protects quality and timing. Transparency is the real protection.