Construction Contracts · Miami
Cost-plus vs lump sum: how custom home contracts work
The real question isn't "what's your percentage" — it's how you'll be charged and whether your builder's incentives point the same way yours do. Here's how the two contract structures we use actually work.
Start here: on a ground-up home or a large-scale remodel, the contract structure shapes everything — transparency, who carries risk, and whether the person building your home is rewarded for spending more or for building it well. There are two structures worth understanding: cost-plus with a fixed management fee, and lump sum. Neither is billed hourly, and the right one depends on how complete your design is.
Featured structure
Cost-plus with a fixed management fee
In a cost-plus contract, the actual cost of the work is open-book: you see the real subcontractor bids, supplier invoices, and labor — nothing marked up in the dark. On top of those documented costs sits the builder's fee.
How the fee is set is the part that matters. If that fee is a percentage of cost, the math quietly works against you — every dollar the project grows, the builder earns more, so there's no incentive to hold costs down. We use a fixed management fee instead. The fee is agreed up front for the scope and doesn't rise as costs rise, which means we're paid to manage the build well, not to let it balloon. Your incentives and ours point the same direction.
That management fee covers something specific: a dedicated field supervisor on your site. On a custom home that runs 6–18 months, full-time on-site supervision is what keeps the schedule honest and the quality consistent — catching the framing detail, the waterproofing lap, the rough-in conflict while they're still cheap to fix. It's the difference between a project that's managed and one that's merely visited.
Cost-plus fits builds where the design is still evolving, selections aren't fully locked, or you want to see exactly where every dollar goes. It trades a fixed final number for transparency and flexibility.
The alternative
Lump sum (fixed price)
In a lump-sum contract, you agree to a single fixed price for a fully-specified scope. The builder carries the risk of cost overruns within that scope, and you get cost certainty — one number, known before the first shovel.
The trade-off is flexibility. A lump sum is priced against a complete set of drawings and locked selections; changing your mind mid-build means change orders, because the fixed price was built on the original scope. Lump sum is the right choice when the design is fully resolved, the finishes are chosen, and you value a known number over the freedom to adjust as you go.
Side by side
Cost-plus vs lump sum
Common questions
Custom home contracts & fees — FAQ
How much do general contractors charge in Florida?
What is a cost-plus contract in construction?
Is cost-plus or lump sum better for a custom home?
What is a GMP (guaranteed maximum price)?
How do custom home builders charge for a project?
Which structure fits your build
Choosing between them
If your design is still taking shape and you value seeing where every dollar goes, cost-plus with a fixed management fee gives you transparency, flexibility, and a builder whose fee doesn't grow with the bill. If your drawings are complete and your selections are locked, lump sum gives you a known number and puts overrun risk on the builder. Many of our clients start cost-plus during design and move toward a capped structure as the scope firms up.
The best way to decide is to review your drawings together and match the structure to where your project actually is. That's how our ground-up new construction engagements begin.
Let's structure your build the right way
Bring us your plans and vision. We'll review the scope and recommend the contract structure that fits — then price to it, honestly.