At a glance
- Fixed-price and cost-plus contracts hand the risk of a cost overrun to opposite people. Under fixed-price the builder carries it. Under cost-plus, you do.
- Cost-plus budgets usually drift through two mechanisms, allowances and change orders, and the drift is the norm rather than the exception. In recent US homeowner data, going over budget was more common than landing on target.
- A fixed price is only as real as the definition behind it. It depends on a complete design and a full set of selections before the number is set.
- Revelstoke adds real, knowable costs, permit fees from $10.25 per $1,000 of project value, development cost charges that can exceed $60,000, and Step 3 energy requirements. A firm contract prices these from day one.
- Two questions reveal most of the risk: is this cost-plus or fixed-price, and is the number backed by a real selection package and schedule?
When people set out to build a custom home in the mountains, almost all of their attention goes to choosing the right builder. That matters, of course. But there is a second decision that does more to protect your budget than the builder you pick, and most buyers never think to ask about it until they are deep into a project. It is the structure of the contract you sign. In residential construction there are two common ones, fixed-price and cost-plus, and they hand the risk of a cost overrun to opposite people. That single difference is often what separates a build that lands where you expected from one that quietly climbs month after month.
This post walks through what each contract actually is, where cost-plus budgets tend to drift, and how a fixed-price contract locks the number. Then it looks at the Revelstoke cost realities that make certainty worth having, and the questions worth asking any builder before you sign.
What each contract actually is
A fixed-price contract, sometimes called a lump-sum or stipulated-price contract, sets one agreed price for a clearly defined scope of work. That single number is meant to include all of the labour, materials, sub-trade work, equipment rentals and other expenses needed to complete the home. The important part is who carries the risk. Under a fixed-price contract, the risk of cost increases, labour problems, or material shortages sits with the builder, not with you. If lumber jumps or a trade comes in higher than expected, that is the builder’s problem to solve inside the price they quoted. This is the structure behind the industry-standard stipulated price contract used across Canada.
A cost-plus contract works the other way around. You pay the builder the actual cost of the labour and materials, plus a fee for managing the project, and that fee is often calculated as a percentage of the total cost. Because you are paying whatever the real costs turn out to be, the risk of the final number exceeding the early estimate sits with you, the owner. Cost-plus is a legitimate structure, and it suits certain complex or open-ended projects, but it comes with a caution that the industry itself repeats: the contract has to spell out very clearly what counts as a “cost,” because everything that qualifies flows straight through to your invoice.
There is a reason both structures exist. A cost-plus arrangement gives flexibility when the scope genuinely cannot be pinned down in advance. A fixed price gives certainty, but it can only be priced accurately when the scope and the finishes are well defined before the number is set. That last point is the whole game, and it is where the two contracts start to feel very different to live through.
Where cost-plus budgets tend to drift
On paper, a cost-plus estimate can look attractive. It is often lower at the start, and the transparency of paying actual costs sounds reassuring. The drift usually comes from two mechanisms that are easy to underestimate: allowances and change orders.
An allowance is a placeholder. It is a lump sum written into the contract for an item you have not chosen yet, such as flooring, fixtures, cabinets, or lighting. The builder has to price the home before you have selected every finish, so they insert an allowance and move on. The catch is simple. If the item you eventually fall in love with costs more than the allowance set aside for it, you cover the difference, and that difference is processed as a change order. Multiply that across a whole house of selections, tile, plumbing fixtures, appliances, countertops, millwork, and a stack of modest overages quietly adds up to a number nobody quoted you at the start.
Change orders are the second mechanism. A change order is a written amendment to the contract that alters the builder’s scope of work, and any reputable process requires it to be in writing and agreed to by both parties before the work proceeds. Change orders are not inherently bad. They are how a build absorbs a genuine change of mind or an unforeseen condition. The problem is when a budget depends on them, because a contract built on optimistic allowances is really a contract that expects a run of change orders, and each one is a small renegotiation of your budget after you have already committed.
None of this is hypothetical. In the 2026 U.S. Houzz and Home Study, 37 percent of homeowners who renovated in 2025 went over their planned budget, more than the 35 percent who landed on target, and among those who went over, 52 percent pointed to unexpected product or service costs. A separate U.S. report from Angi found that more than half of homeowners hit surprise expenses, with going over budget more common than coming in under. Those are U.S. figures rather than Revelstoke ones, but the mechanism is universal, and the local cost drivers below only make it sharper. Surprises are the norm, not the exception, and the contract structure is one of the few levers that decides who absorbs them.
How a fixed-price contract locks the number
A fixed-price contract does not make surprises disappear. It moves them onto the builder’s side of the ledger. Once the scope, the drawings, and the finishes are defined, the builder commits to a single price to deliver all of it. If costs move underneath that price, the builder manages it. You are not exposed to the swing.
This only works because of everything that happens before the number is set. A fixed price cannot be pulled out of thin air. It rests on a complete design and a full set of selections, so that the quality and scope are defined tightly enough to be priced with confidence. That is precisely why a design-build builder invests real time in the design phase first. The design and the selections are not a formality on the way to construction. They are what makes a genuine fixed price possible, rather than a soft estimate dressed up as one.
Straight Up Construction is built around this on purpose. The approach is to choose everything up front, carry no allowances, and hand you one solid build cost with no surprises. It is the less common model. In the market Straight Up Construction works in, most builders run cost-plus and only a minority quote a true fixed price, even though a large share of buyers say certainty is exactly what they want. That is an observation from years in this market rather than a published statistic, but it matches what buyers describe when they compare quotes and realize they are comparing two very different promises.
“No allowances” can sound like a small technical detail, but for the buyer it is the whole difference. An allowance is a decision you have deferred, and a deferred decision is an open door for the price to move. Removing allowances means you and the builder select the real finishes during design, at real prices, and those numbers go into the contract rather than a placeholder. It takes more discipline early, and in return the figure you sign reflects the home you actually chose, not a hopeful average that gets trued up later through a stack of change orders. For an out-of-town buyer building a vacation home from four or five hours away, or a corporate buyer who values certainty over shaving a little off an early estimate, that is usually a trade worth making.
The Revelstoke cost realities that make certainty valuable
Building in a mountain resort community carries real costs that a flat-land build does not, and each one is a reminder of why a firm number matters here more than most places.
Permit fees alone are meaningful. In Revelstoke, the building permit fee starts at $10.25 per $1,000 of project value, so a $1 million build carries at least $10,250 in permit fees before a shovel is in the ground. Development cost charges are larger still. On a single-family home with a secondary suite they can run roughly $60,000 or more under the DCC bylaw that took effect on August 1, 2025, and because those charges are calculated on floor area, they scale with the size of the home. These are known, sourced numbers, which is exactly the point. They belong in the price from the beginning, not in a surprise later.
Energy requirements add another layer. Revelstoke currently builds to Step 3 of the BC Energy Step Code, and the lower steps typically add under 2 percent to construction cost, based on the province’s own metrics research. Higher steps and a Zero Carbon Step Code are on the way, with net-zero-energy-ready construction, meaning homes built to use far less energy rather than none, targeted across the province by 2032. A firm contract is the right place to account for the code you are actually building to, rather than discovering the implications partway through.
Then there is the mountain itself. Materials coming into Revelstoke travel through Rogers Pass, Glacier National Park, and 3 Valley Gap, all of which are avalanche-prone, so winter delivery delays are simply part of building here. The design phase generally runs 6 to 9 months, permit processing takes 6 to 8 weeks, and construction runs 9 to 12 months, longer on bigger builds. A cost-plus contract leaves you exposed to how those variables land, while a fixed-price contract asks the builder to have already thought them through and priced accordingly. Every finished home also carries the standard 2-5-10 home warranty, which applies to new-home construction and is available through several providers, and Straight Up Construction is BC Housing Licensed.
It is worth adding what a fixed price does not have to mean. Choosing everything up front does not mean handing the whole project to an architect at the highest possible cost. The architect route, working through AIBC where fees are set as a percentage of building value, commonly runs $100,000 to $180,000 for design. Straight Up Construction handles the design phase starting in the $50,000 to $70,000 range, with the final number depending on the size and complexity of the home. That is possible by working with key professionals rather than carrying in-house architects, designers, and engineers. You get the complete design that makes a fixed price real, without the AIBC percentage stacked on top.
The questions to ask any builder before you sign
You do not need to be a construction expert to protect yourself here. You need two questions, and the answers tell you almost everything about the risk you are taking on.
The first is simply this: is this a cost-plus or a fixed-price contract? If the answer is cost-plus, you now know the overrun risk is yours, and your follow-up is how allowances and change orders will be handled, because that is where the drift lives. The second question is about substance rather than structure: did the builder provide a real budget with a selections package and a schedule? A firm number attached to defined selections and a timeline is a builder who has done the work to stand behind their price. A vague estimate with a long list of allowances and no schedule is a number that is still moving, whatever it says at the top of the page.
There is one more habit worth keeping regardless of which structure you choose. Get every change to cost or timeline in writing. Consumer guidance in BC is consistent on this, and so is the industry: a custom home is too large an investment to run on a handshake, and any change on either side belongs in a signed, attached document.
The bottom line
The builder you choose sets the quality of your home. The contract you sign sets who pays when reality diverges from the estimate, and in construction it almost always does. A cost-plus contract keeps that risk with you and manages it through allowances and change orders. A fixed-price contract asks the builder to define everything first, carry the risk, and hand you one number you can plan a life around. In a market with permit fees, development cost charges, evolving energy codes, and an avalanche corridor between you and your materials, certainty is not a luxury. It is the thing you are actually buying. If you would like to talk through what a fixed-price build looks like for your project, Straight Up Construction is glad to walk you through it.
Frequently asked questions
Is fixed-price or cost-plus better for building a custom home?
Neither is universally better. The right structure depends on how well the scope can be defined before construction starts. A cost-plus contract suits work that is genuinely open-ended, where nobody can pin the scope down in advance. For a custom home where the design and finishes can be settled first, a fixed-price contract is usually the safer choice for the buyer, because it puts the risk of a cost overrun on the builder rather than on you.
What is a stipulated-price contract?
Stipulated price is another name for a fixed-price or lump-sum contract. The Canadian construction standard for it is the CCDC 2 Stipulated Price Contract, which sets a single, pre-determined price for a defined scope of work. When a builder refers to a stipulated-sum or lump-sum arrangement, this is the family of contract they mean.
Why do cost-plus budgets so often end up higher than the estimate?
Two mechanisms do most of the work: allowances and change orders. An allowance is a placeholder amount for a finish you have not chosen yet, and if the item you eventually pick costs more, you pay the difference. That difference is processed as a change order, which is a written amendment to the contract. A budget built on optimistic allowances quietly depends on a run of change orders, and each one nudges the final number upward.
What is an allowance in a construction contract?
An allowance is a lump sum written into the contract for an item the homeowner will select later, such as flooring, fixtures, or cabinets. It lets the builder produce a price before every finish has been chosen. The risk is that allowances are estimates, so if your real selections come in higher, the overage is yours to cover. A build with no allowances removes that uncertainty by pricing the actual finishes up front.
Does a fixed-price contract cost more than cost-plus?
Not necessarily. A cost-plus estimate often looks lower at the start, which is part of why it can be appealing, but the final number can climb as allowances and change orders accumulate. A fixed price asks for more decisions early, because the design and selections have to be complete before the number is set, and in return the figure you sign reflects the home you actually chose rather than a hopeful average.
How much does the design phase cost with Straight Up Construction?
Straight Up Construction handles the design phase starting in the $50,000 to $70,000 range, with the final number depending on the size and complexity of the home. That is possible by working with a group of key professionals rather than carrying in-house architects, designers, and engineers. The alternative of engaging an architect through the AIBC, where fees are set as a percentage of building value, commonly runs $100,000 to $180,000 for design.
Does the 2-5-10 home warranty cover renovations or additions?
No. The standard 2-5-10 home warranty applies to new-home construction only, and it is provided through licensed warranty providers. Renovations and additions to an existing building are not covered by it. Straight Up Construction is BC Housing Licensed and builds every new home under that coverage.
How long does it take to build a custom home in Revelstoke?
As a general guide, the design phase runs 6 to 9 months, permit processing takes 6 to 8 weeks, and construction runs 9 to 12 months, with larger builds taking longer. Building in the mountains adds one more variable, since materials travel through Rogers Pass, Glacier National Park, and 3 Valley Gap, all of which are avalanche-prone, so winter delivery delays are part of the local reality and belong in the schedule from the start.
