The contract you sign with your builder decides two things that matter to every family: who pays when a cost goes up, and what you get to see along the way. Before you build a new home or a multiplex in Vancouver, give the contract type the same care you give the floor plan.
In this post we walk you through the three contract types that BC Housing names in its hiring guide: fixed price, cost plus, and construction manager. For each one, we explain how the builder is paid, who carries the risk of a cost overrun, and what you see as the owner. Then we cover allowances, change orders and contingency, which work differently under each type, and when each type fits. If you are still choosing a builder, start with our guide on the questions to ask a builder and how to check the answers. This post covers the next step: the contract.
BC Housing's guide says homebuilding contracts are "typically" fixed price contracts, cost plus contracts or construction manager contracts, and that your contract should say clearly which type it is. The type changes three things:
- How the builder is paid. One agreed sum, actual costs plus a fee, or a fee for managing the trades.
- Who carries the cost risk. When lumber, a trade or a hidden problem in the ground costs more than planned, the contract decides whose money pays for it.
- What you see. Some contracts give you one price. Others send you the invoices behind every cost.
Canada also has standard contract forms for each of these types. The Canadian Construction Documents Committee (CCDC), a national committee of industry groups, publishes CCDC 2 for a fixed price, CCDC 3 for cost plus, and CCDC 5A and 5B for construction management. Their full text is sold, but the CCDC's public pages describe each form in a few lines, and we use those descriptions below. For a home, the Canadian Home Builders' Association of British Columbia (CHBA BC) sells sample contracts, which BC Housing's guide points to.
A fixed price contract sets one price for all the work in the contract. The CCDC calls its version a stipulated price contract. Its CCDC 2 page says the contract "establishes a single, pre-determined fixed price, or lump sum, for the project" and assumes monthly progress payments.
How the builder is paid. You pay the agreed price in stages, as set out in the payment schedule. The builder's profit and overhead are inside that price, and the contract does not need to show them as separate lines.
Who carries the risk. For the work the contract describes, the price stays the same. If the builder's own costs for that work go up, the builder pays for it. The price moves when the work changes, through a change order. Ask whether the contract has any clause that lets the price change for other reasons, and have your lawyer read it.
What you see. A price, the plans and the specifications. Trade quotes and invoices are the builder's own records, so if you want to see them, the contract must say so.
When it fits. BC Housing's guide says fixed price contracts are usually used only for small, simple projects, and that the quality standards should be defined in enough detail that the price can be predicted. In plain words, a fixed price works when the drawings and the finish list are complete before you sign. A gap in the specifications will come back later as a change order.
In a cost plus contract, BC Housing's guide says, "the builder will charge for materials, labour and other expenses plus an additional fee for managing the project." The guide says this type is "typically used for more complex projects."
How the builder is paid. BC Housing says the fee "is often calculated as a percentage of the total cost." The CCDC's CCDC 3 page describes its cost plus contract as work done "on an actual-cost basis, plus a percentage or fixed fee which is applied to actual costs." The difference matters to you. With a percentage fee, the fee grows when the cost grows. With a fixed fee, the fee stays the same while the cost changes, unless the contract adds to it.
Who carries the risk. You do. You pay the actual cost of the work, so a price rise on a material or a trade is added to your total. This is the reason a cost plus budget needs a contingency, which we cover below.
What you see. With cost plus, you pay what the work actually cost, so ask to see the records behind each bill. Write down in the contract which records you will see: trade quotes, supplier invoices, time sheets for the builder's own crew, and how often you receive a bill. BC Housing suggests asking a builder to show you a sample invoice before you sign, so you know how often you will receive one.
Define "cost". BC Housing says a cost plus contract should set out clearly what counts as a "cost." Its guide gives an example worth reading twice. An owner agrees that the builder will buy the light fixtures, then decides to buy them directly to lower the cost the fee is based on. The builder may still charge the fee as if it had bought them, because it still manages the work tied to those fixtures. Settle questions like this in writing before construction starts: the builder's own staff and equipment, site costs, permits, design fees and anything you buy yourself.
BC Housing's guide describes a third set-up: "Sometimes an owner hires a builder as a construction manager on an hourly or other basis to oversee all the trades directly." It adds that owners "should make sure they understand the responsibilities and risks of this type of contract."
The CCDC publishes two construction management forms, updated in 2025:
- CCDC 5A, for services. The CCDC 5A page says the work is done by trade contractors, and the construction manager "acts as a limited agent of the Owner," giving advice and running the contracts "between the Owner and Trade Contractors." In this set-up, you sign with each trade.
- CCDC 5B, for services and construction. The CCDC 5B page says the construction manager gives advice before construction and then does the work. The work starts on an actual cost basis plus a percentage or fixed fee, and the parties may agree to a Guaranteed Maximum Price, to a Guaranteed Maximum Price plus a share of cost savings, or to convert the contract to a stipulated price.
How the manager is paid. A fee, by the hour or on another basis, for managing the work. Under 5B, the cost of the work is paid on top, as in cost plus.
Who carries the risk. Under a 5A style set-up, the trade contracts are yours, so their prices, their delays and their disputes are yours as well. The manager advises and coordinates. Under 5B, the risk sits with you until the parties agree to a maximum price or a stipulated price.
A BC licence rule. Under the Homeowner Protection Act, a "residential builder" includes a person who manages "all or substantially all" of the construction of a new home, and section 14 says a residential builder must be licensed. A company that manages the building of your new Vancouver home as a construction manager falls under that rule, so check its licence on BC Housing's registry. If you plan to build under an owner builder authorization instead, BC Housing's Regulatory Bulletin 25 says hiring a construction manager to manage the build breaks the owner builder declaration. Our post on owner builder or licensed builder explains that choice.
An allowance is an amount written into the contract for part of the work that is not chosen yet, such as tile, light fixtures or appliances. The CCDC 2 contract has its own section on allowances. Writing about the 2008 edition of CCDC 2, McLennan Ross lawyer Graem White explains that when the actual cost is higher than the allowance, the contractor is paid the difference plus overhead and profit, and when it is lower, the owner gets a credit for the unused part.
This means a fixed price contract with many allowances has a price that is less fixed than it looks. Ask for every allowance to be listed with its amount and what it covers. Then choose those items early, so the real prices are known before construction reaches them. On a cost plus contract, an allowance works as a budget line: you pay what the item costs, and the allowance tells you how far you are from the plan.
BC Housing's guide says a change order is "an amendment to a construction contract that changes the builder's scope of work," such as adding a window or choosing a more expensive finish. It says most contracts state that a change order must be in writing and agreed by both parties, that the contract should name who may approve one, and that change orders "often add to the timeline" of a project. CHBA BC sells a Change of Work Order form that "sets out the conditions under which a change is to be made."
Each contract type prices a change in its own way:
- Fixed price. The builder quotes the change, and the contract price goes up or down when you sign it. Compare the quote with the work, because once you have signed the main contract, the builder is the only one quoting.
- Cost plus. The change is paid at actual cost, and the fee applies to it as the contract says. Ask for an estimate in writing before you approve, so you know the cost ahead of the invoice.
- Construction manager. The manager prices the change with the trades. Under a 5A style set-up, you may sign the change with each trade it touches.
On a multiplex with several families or partners, write down who can approve a change. BC Housing's guide gives the example of two spouses: if both, or either one, must approve a change order, the contract should say so.
BC Housing's guide says a budget "should include a contingency fund for unexpected costs or changes," and recommends "a contingency fund of 10-20 per cent of the total project budget." It also says estimates "should include an amount for contingencies."
A contingency matters under every contract type, but it protects you in different ways. On a fixed price contract, it pays for your own change orders and allowance overruns. On a cost plus or construction manager contract, it also pays for price rises in the work itself, because those come to you.
Your lender will look at this too. CMHC's Improvement page, for insured loans to build a new home, says "the lender must consider the borrower's financial capacity to cover cost overruns." The same page describes a "contract-built home" as one where the borrower "has a contract with a single builder." If your contract has you signing with many trades, ask your lender how they treat it. Our guide to paying for a multiplex in Vancouver explains construction loans in more detail.
Whatever the contract type, the Builders Lien Act requires the person paying to hold back 10 percent of each payment for a set period, and our guide to the holdback explains how it works.
Here is when each type fits, based on BC Housing's guide:
- Small, Fully Drawn Work. A fixed price fits when the drawings, specifications and finishes are complete and the job is simple. This matches BC Housing's description of where fixed price is "usually" used.
- A Custom Home or a Multiplex. These are the "more complex projects" BC Housing names for cost plus. BC Housing's guide says that with any custom home, you will likely want to make changes at some point before the project is finished. With cost plus, those changes are paid at cost, and you see each one.
- An Owner Who Wants to Hold the Trade Contracts. A construction manager set-up fits an owner who has the time and the knowledge to sign with each trade, and who accepts the risk that comes with it. Check the manager's licence first.
BC Housing says the contract should state its type. If a quote calls itself a fixed price but is full of allowances, ask which parts are fixed.
BC Housing says detailed estimates are "likely" based on bids from subcontractors, and that one-page quotes do not give enough information. Ask to see how the estimate is built, line by line.
For cost plus, list what the fee applies to and what it does not, including items you buy yourself.
Ask for the amount and the description of each one, and choose those items early.
One name, or two, written into the contract. Every change in writing, with its price, before the work is done.
BC Housing recommends 10 to 20 percent of the total project budget. Keep it in money you can reach during the build.
BC Housing recommends that you speak with a lawyer who works in construction law before you sign a homebuilding contract.
By Costar's own account on our process page, in the pre-construction stage Costar and the client "agree on a cost plus arrangement for transparency." We then discuss specification options, set a budget and sign a written contract, and Costar uses CoConstruct (of Buildertrend) software to track progress and expenses. During construction, the page says the client reviews details such as flooring, cabinets, lighting and plumbing, may visit the site regularly, and receives regular updates on progress.
With cost plus, a family sees what each choice costs at the time they make it, from the first tile sample to the last light fixture. Costar's project gallery lists South Cambie, a single-family home in Vancouver, with a scope of construction and management. Cost plus also puts the cost risk with you, the owner, so plan a contingency from the first budget meeting, whoever you hire.
If you do one thing this week, ask each builder you are talking to for a sample contract and a sample invoice, and read how each one defines cost, allowances and change orders. Then bring your questions to our team. Tell us about your project today.
Related on this site: Custom home building in Metro Vancouver · Multiplex construction in Vancouver · Building in Vancouver · Book a one-hour project consultation
