COST-PLUS vs LUMP-SUM

When you’re planning a custom home, one of the first questions you’ll face is: how will my builder charge for the project?  Two common approaches are lump sum (fixed price) and cost-plus (percentage fee). Both methods have pros and cons, but for luxury custom homes in Florida, the cost-plus approach often creates a better outcome for both the homeowner and the builder. 

LUMP SUM CONTRACT

With a lump sum (or fixed-price) contract, the builder gives you one number for the entire project. That price is meant to cover everything: labor, materials, overhead, and profit.

Pros for homeowners:

• Predictability: You know the number upfront.
• Simplicity: Easy to compare across multiple bids.

Cons for homeowners:

• Less flexibility: Any change or upgrade becomes a “change order,” often at a premium.
• Hidden padding: To protect themselves from risk, builders add contingency into the price, meaning you may be paying for costs that never materialize.
• Quality risk: If costs run higher than expected, some builders are tempted to cut corners to protect their margin.

COST-PLUS CONTRACT

In a cost-plus contract, the homeowner pays for the actual cost of labor, materials, and subcontractors, plus an agreed-upon builder’s fee (a percentage of those costs).

Pros for homeowners:

• Full transparency: You see exactly what things cost.
• Flexibility: You can make design or material changes without being trapped in inflated change order fees.
• Fair pricing: You’re paying what it actually costs, not a padded estimate.

Cons for homeowners:

• Less certainty: The final price depends on real costs.

WHY COST-PLUS WORKS BETTER FOR CUSTOM HOMES

Custom Homes Are Unpredictable  

Material costs and labor pricing fluctuate constantly. With a fixed-price contract, either: 

- The builder inflates the number to protect themselves, or 

- They lock in a number and then nickel-and-dime you with change orders when things shift. 

Cost-plus keeps everyone honest. If costs go down, you benefit. If they go up, you see why.

Encourages Collaboration, Not Conflict  

Lump sum contracts can create tension: every change feels like a fight over money. In cost-plus, the builder is incentivized to give you options and work with you, because their fee doesn’t depend on cutting corners.

Accurate Preliminary Budgeting

One hesitation many homeowners have with cost-plus is: “If the final number isn’t fixed, how do I plan ahead?”  This is where the right builder makes all the difference. At Deep Roots Construction, we provide a very accurate preliminary job budget from the start. Instead of low-balling numbers just to win the job (a common tactic with some builders), we build a realistic budget based on the level of custom home you’re envisioning, current market conditions, and the finishes you expect. That means you can plan ahead with confidence, knowing your budget is grounded in reality — not wishful thinking.

More Flexibility for Design Decisions

Luxury homes evolve during construction. Maybe you decide to upgrade windows, add a lanai, or install a smart home system. In a lump sum contract, that’s a change order at a marked-up price. In cost-plus, you simply approve the cost difference.

Transparency Builds Trust

When you can see exactly what your money is paying for, and how any changes you make affect the overall budget – there are no surprises. This level of openness helps homeowners feel confident their money is being spent wisely.

WHY IT'S IN EVERYONES BEST INTEREST

• For homeowners:  You get transparency, control, and flexibility without paying hidden contingency costs. You don’t feel like you are getting nickel-and-dimed with change orders every step of the way. 
• For builders:  We don’t have to guess future material prices or inflate numbers “just in case”.  We can focus on building the best home possible.
• For the relationship:  Cost-plus aligns everyone’s interests — you want quality and value, we want efficiency and happy clients.

FINAL THOUGHTS

When building a multi-million-dollar custom home, no one benefits from guesswork. Lump sum contracts may look appealing, but they often hide contingency costs and create tension during the build.

The cost-plus approach — paired with a realistic preliminary budget upfront — is more transparent, more flexible, and ultimately more fair. It allows both the homeowner and the builder to focus on what really matters: designing and building a home that exceeds expectations.

At Deep Roots Construction, we believe transparency and accuracy from the start build trust for the entire journey. Our preliminary budgets, paired with the cost-plus method, give our clients the best of both worlds: the ability to plan ahead, and the flexibility to adapt without fear of surprises.