What is a fixed-price contract in construction?
Two pricing models are used In construction contracting. One is the time and materials (T&M) model and the other is the firm fixed price (FFP) model. As the American economy has changed, so has the common means of project pricing in construction. The more common T&M pricing is being replaced by FFP pricing to control spending and budgetary compliance. The impact on the construction industry has been substantial.DefinitionA firm fixed price contract sets a specific price for the completion of the project. The amount agreed to for the specifications listed in the contract is all that is required to be paid by the customer to the contractor. The contractor is locked into only the specifications for the cost, and the customer is locked in to the price listed for the work specified. This is different from a T&M contract in which the price quote is simply an estimate and overages may occur and need to be paid by the customer. A T&M agreement for construction can be a budget-killer and accoun
