Fixed Price Agreement

For private construction companies and service providers, a fixed-price contract approach can attract more private and professional customers. Clients generally prefer to know the cost of work in advance rather than accept the uncertainty of an hourly structure and billing for equipment costs. Companies sometimes limit fixed-price contracts to certain dollar thresholds, as the risks associated with approving certain prices and conditions for higher dollar projects are greater. Revised in February 2008, the Canadian Construction Documents Committee`s „Stipulated Price Contract“ (CCDC-2) provides for a landowner and builder to agree to have the work done at a fixed or flat price. [8] A fixed-price contract gives the buyer and seller a predictable scenario that provides stability for both during the term of the contract. A buyer may be concerned about the sudden increase in the cost of a good or service, which has a negative impact on their business plans. The seller may worry that the value of his good or service suddenly decreases, reducing his income with little or no warning. The pricing fully addresses these concerns. b) The contract should only be awarded after negotiating a settlement price as fair and appropriate as circumstances permit. A fixed price contract with economic adjustment can only be used if the contractor finds it necessary to protect the contractor and the government from significant changes in labour or equipment costs, or to provide for an adjustment in the contract price in the event of a change in the prices set by the contractor.

A buyer can also benefit from the predictability of a fixed-price contract, as any uncertainty about the final cost of the project, which exceeds initial estimates, moves entirely to the seller. So if you buy supplies or resources, you may prefer a fixed-price contract because it gives you a concrete budget to work with them, unlike a contract where costs can rise indefinitely over time. Fixed-price agreements generally have the following characteristics (not all features should be included in a fixed-price agreement): a fixed-price contract is a contract between a service provider and a customer that describes the services the contractor is willing to provide in exchange for a fixed or fixed price.