Lump-Sum (Fixed-Price) Contract
You agree one fixed price for a defined scope. The contractor carries the risk of their own cost overruns — if materials or labour cost more than they estimated, that is their problem, not yours. This gives you budget certainty, which is why it is popular with homeowners.
The catch: it only works if the scope and specification are clearly defined up front. Any change you make later ("actually, use imported tiles") becomes a variation and a price negotiation. Lump-sum also tempts a squeezed contractor to cut corners on unseen work, so it pairs best with clear specifications and good supervision.
Item-Rate (BOQ / Measurement) Contract
Instead of one price, you agree unit rates for each item of work — so much per cubic metre of concrete, per square metre of plaster, per kilogram of steel — set out in a Bill of Quantities (BOQ). You then pay for the quantities actually executed and measured.
This is fair when final quantities are uncertain, and it is the default for many larger and government works. It needs disciplined measurement (a measurement book) and can cost more than expected if quantities balloon, but you never pay for work not done. Common in the trade; heavier on paperwork for a homeowner.
Cost-Plus Contract
You reimburse the contractor's actual costs (materials, labour) plus an agreed fee — either a fixed amount or a percentage. It offers full transparency into where money goes and flexibility to change things as you build, which suits bespoke or evolving projects.
The weakness is obvious: with a percentage fee, the contractor earns more the more it costs, so there is little incentive to save. Use it only with a contractor you trust, ideally with a "guaranteed maximum price" cap, and expect to actively track spending.
Labour-Only and Turnkey
In a labour-only contract you supply all materials and pay the contractor (or thekedar) for labour alone — maximum control over material quality and cost, in exchange for doing all the procurement yourself. In a labour-plus-material contract the contractor supplies both.
At the other extreme, a turnkey (or design-build) contract hands one party responsibility for everything — design, materials, construction — and delivers you a finished building to "turn the key". It is the most convenient and the least hands-on, but you rely heavily on that single party, so their track record and a tight specification matter most.
Frequently asked
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