ADU comparisons
Fixed price vs cost-plus ADU contract
By the HyreADU research desk. Last checked .
The short answer
Fixed price vs cost-plus for an ADU contract is about who carries the risk of overruns.
A fixed-price contract sets the price for a defined scope, so overruns fall on the builder unless the scope changes.
A cost-plus contract pays actual costs plus a fee, so you carry the overruns but see every invoice. Either way, change orders must be in writing.
| Factor | Fixed price | Cost-plus |
|---|---|---|
| Who carries overruns | Builder, within the scope | You |
| Transparency | Lower; you see the price, not the costs | Higher; you see invoices |
| Needs complete drawings | Yes | Less so |
| Allowances | Common for finishes | Built in by design |
| Change orders in California | Written and signed before the work (Bus. & Prof. Code § 7159) | Same |
When fixed price wins
Fixed price wins when the drawings are complete and you want a budget you can plan around. The risk of a scope that was priced too low sits with the builder. Watch the allowances: a low allowance for cabinets or tile is a price that will rise later. See ADU bid red flags.
When cost-plus wins
Cost-plus can win when the scope is hard to define, such as a conversion of an old garage where nobody knows what the walls hide. Ask for a cap or a target price, open books, and a clear fee. Compare its progress payments to finished work, not dates.
California contract basics
A home improvement contract in California must state each progress payment in dollars and cents tied to the work it pays for, and change orders become part of the contract once written and signed before the work starts (Bus. & Prof. Code § 7159).
The down payment cap is $1,000 or 10 percent, whichever is less (§ 7159.5). Read ADU change orders and the ADU contract checker.
A mistake to avoid
The mistake to avoid is a fixed price built on incomplete drawings. When the scope is vague, the builder fills the gaps with allowances and exclusions, and the price grows through change orders.
A cost-plus contract without a cap has the opposite problem: no limit at all. Whichever you sign, read the exclusions list as closely as the price.
What to do next: check your lot with the ADU feasibility checker, read the questions to ask an ADU builder, then tell us about your project. Matching is not live yet, so we reply with information, not a quote.
Get ADU optionsQuestions
Which is more common for ADUs?
Many builders offer a fixed price with allowances. We have no dataset to say which is more common.
Can a fixed price change?
Yes, through signed change orders when the scope changes.
What is a guaranteed maximum price?
A cost-plus contract with a cap. Costs over the cap fall on the builder.
Do I get the savings on a fixed price?
Usually not, unless the contract shares them.
Sources
- Bus. & Prof. Code § 7159 (home improvement contract contents, change orders). Checked September 5, 2026.
- Bus. & Prof. Code § 7159.5 (down payment cap, no payment ahead of work). Checked September 5, 2026.
- FTC, How to avoid a home improvement scam. Checked September 5, 2026.
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