A fixed-price contract sets one total for a defined scope, and the contractor carries the risk of going over on that scope. A cost-plus contract bills actual costs plus a fee, and you see every invoice and carry the cost risk. A guaranteed maximum price is the hybrid: cost-plus with a cap.
When each one fits
Fixed price works when the drawings and the finish selections are done, because you cannot fix a price on something nobody has decided yet. Cost-plus works when you want to start before design is finished, or when you are renovating an old building where what is behind the walls is genuinely unknown. A guaranteed maximum price suits developers who need a cap their lender will accept but still want open books.
What to watch in each
On fixed price, make sure the scope and the held amounts are specific. A low fixed price with vague scope is the most expensive contract in construction. On cost-plus, pin down the fee basis, the markup on subcontractors, and what counts as a reimbursable cost, and ask for a monthly open-book report. The fee is not where you get hurt; the definition of cost is.
Los Angeles County figures, reviewed 2026-10-29 by America General Contractors, California contractor licence CSLB 1083262. Planning ranges, not a quote, and not legal advice. We confirm the current rules for your parcel before anything gets drawn.
