“It is what it is.” That phrase might just be the best way to sum up the cost-plus model, according to Ryan, a partner at Sustainable 9. But what does that really mean? And how does cost-plus compare to fixed-price contracts when it comes to protecting builders from financial risk, maintaining client transparency, and ensuring profitability?

Sustainable 9 has made a name for itself as a high-end, sustainability-focused luxury builder in Minneapolis, taking on complex, one-of-a-kind projects. But as Ryan shared, navigating material price volatility, design changes, and client expectations means builders need pricing models that protect both their margins and their relationships with homeowners.

The Case for Cost-Plus: Why More Builders Are Making the Switch

While cost-plus contracts have historically been more common in high-end, luxury custom homes, more builders are adopting the model after recent market volatility. COVID-19 sent material costs soaring, and now new tariffs on Canadian, Mexican, and Chinese imports are creating another wave of unpredictable pricing.

Here’s why cost-plus is gaining traction:

• Flexibility in Pricing – Builders don’t have to eat unexpected material cost increases.
• Transparency for Clients – Homeowners see exactly what they’re paying for, reducing disputes.
• Less Financial Risk – Instead of locking into a price that might become unprofitable, builders can adjust pricing as costs fluctuate.
• Better Alignment with Clients – Rather than cutting corners to protect margins, builders can focus on delivering quality work.

Fixed-Price: Stability or a Hidden Gamble?

Fixed-price contracts are still the most common in the broader homebuilding market, and for good reason: they offer predictability. Clients like knowing exactly what they’ll pay, and builders who have tight control over costs can lock in solid margins.

However, for high-end custom builders, fixed-price presents serious risks:

• Material Price Fluctuations – If costs spike mid-project, the builder absorbs the loss.
• Unpredictable Change Orders – Custom clients often make mid-build changes, making fixed pricing more difficult to manage.
• Strained Client Relationships – Disputes over pricing, surprise costs, and contract limitations can create tension.

"You don’t see as many fixed-price builders in the high-end custom market," Ryan noted. "When every project is unique, and you're dealing with a million different variables, locking in a price upfront can be incredibly risky. One unexpected challenge—bad soil conditions, structural surprises, or sudden material cost hikes—can wipe out your margin."

COVID, Tariffs & Market Volatility: The Shifting Landscape

One of the biggest shifts in recent years? The impact of economic uncertainty on pricing models.

During COVID, builders who locked into fixed-price contracts were forced to absorb huge, unexpected cost overruns. Now, with new tariffs hitting materials like lumber, windows, and appliances, the pressure is back on.

‍

The result? More builders are rethinking their approach to pricing, with many shifting toward cost-plus as a way to stay flexible, protect margins, and avoid the financial squeeze of unpredictable costs.

The Bottom Line

Both cost-plus and fixed-price have their place, but for luxury and high-end builders, cost-plus is proving to be the safer long-term bet. It allows for better financial control, fewer disputes, and a more transparent process that ultimately benefits both builders and homeowners.

‍

That said, cost-plus builders need strong financial workflows to track costs, manage invoices, and maintain client trust. That’s why Sustainable 9 and other leading builders use Adaptive to streamline their financial operations, keeping everything organized, automated, and easy to manage.

‍

"For us, cost-plus is about protecting both the builder and the client," Ryan explained. "Clients get full transparency—they see every invoice, every bill, every cost. And for us, it ensures that we aren’t stuck eating unexpected cost increases because we underestimated something upfront."

Listen to the Full Episode

If you’re a builder navigating the cost-plus vs. fixed-price debate, this episode is a must-listen.

And if you’re looking for a smarter way to manage job costing, AP, and financials, Adaptive has the tools to keep you ahead of the game.

‍

‍

‍

‍