Demolition exposes damaged framing. The client wants the crew to keep moving, but nobody has agreed whether the repair sits inside the builder cost plus contract. Stop the affected work. Check the scope, record the condition and get the right approval.
Cost-plus is not an open cheque. It is a job-control method. The quote and contract need to state what you can charge, how your fee works, what records the client receives and who can approve a change.
Walk the renovation and write the physical scope first
Inspect the site before choosing the pricing method. Open the drawings. Measure accessible work. Photograph existing conditions. Record which products the client has selected and which decisions remain open.
Break the renovation into rooms, phases and trade packages. Use plain labels such as demolition, framing, electrical, plumbing, cabinets, finishes and clean-up. Use those same labels in the estimate, purchase records, timesheets, progress claims and final job-cost report.
Write the work needed to reach the finished result. Include access, protection, temporary services, testing, disposal and making good where those tasks belong to you.
If the enquiry is still loose, use a builder renovation enquiry checklist before spending hours on a site visit or contract draft.
Put exclusions beside the affected work
Do not dump every unknown into one exclusions paragraph. Put each exclusion beside the work it affects.
For a bathroom, state whether the scope includes repairs to concealed framing, removal of hazardous material, fixture supply and restoration outside the room. For a kitchen, state who disconnects services, removes old cabinets and repairs walls after demolition.
An exclusion is a boundary. It does not approve extra work beyond that boundary.
Give concealed conditions an investigation and stop point
State what the crew can do when hidden damage appears. Investigation may be part of the agreed work while repair is not. Those are separate decisions.
If demolition exposes damaged framing, photograph it and make the area safe. Record what must be opened or tested to understand the damage. Then tell the crew whether to pause that area, protect it or continue unrelated approved work.
Write that stop point before mobilisation. A foreman should not have to invent the approval process while the wall is open.
Decide when a builder cost plus contract fits the uncertainty
Use fixed pricing when you can settle the design, measure the work, confirm products and understand access. Your estimating mistake is not a client variation.
Use cost-plus where actual labour, materials or subcontractor inputs need to be recorded as work develops. Concealed conditions, unfinished design or unsettled selections may support that choice. They do not excuse a vague scope.
Keep these documents and figures separate:
- A planning estimate forecasts the likely cost from what is known.
- An allowance covers an unfinished selection or defined item.
- A fixed price states the selling price for an agreed scope.
- A cost ceiling limits spending under separate rules.
A cost-plus renovation quote should identify which figure is a forecast and which amount, if any, acts as a ceiling. Do not make a planning estimate look like a guaranteed maximum.
If the parties agree on a ceiling, state what happens as the current forecast approaches it. Name who reviews the forecast, who can approve continued work and what the crew does while waiting.
Ask one blunt question: can you define and confidently price the physical work now? Test fixed pricing when the answer is yes. Build controlled cost-plus rules around the actual unknowns when the answer is no.
Check the Australian contract and GST position before issue
Do this before setting the fee or sending the document. A pricing method does not replace the contract required for the work.
For a project in New South Wales, ask NSW Fair Trading (opens in a new tab) which contractor licence and home building contract requirements cover the proposed work. For a project elsewhere, put the same question to that state or territory licensing regulator. Write down the answer and have the proposed contract reviewed before issue.
Do not copy contract wording from an old job in another jurisdiction. The work, contracting entity and local contract position may be different.
Check how GST should appear on allowable costs, the builder fee, progress claims and the final tax invoice with the Australian Taxation Office (opens in a new tab). Use your tax adviser for the treatment of your particular contract. Do not guess whether the fee base includes or excludes a GST amount.
Keep the ABN, legal contracting entity, business name and client name consistent across the quote, contract, variations, progress claims and tax invoices. A builder cost plus contract should not name one entity while purchase orders and invoices use another without explanation.
Build the allowable-cost schedule before choosing the fee
Every client charge needs three things: an agreed category, a job allocation and a supporting record. If the office cannot show where a cost came from and why it belongs to the renovation, hold it out of the claim.
Define chargeable site labour and supervision
State which labour can be charged. Name the roles or types of work. Cover working supervisors, site clean-up, approved return visits and direct project administration only where the reviewed contract permits them.
Each time record should show the worker or role, date, task, job phase and time. Renovation labour is too vague. Frame bathroom wall tells the office and client what happened.
Separate direct site labour from estimating, sales, office administration and general management. If a supervisor works on site, record the site task. Do not post an unexplained block of management time.
Use your payroll and employment-cost records to build the labour calculation. Do not borrow a loading or rate from another builder.
Set material, delivery, waste and credit rules
Name which materials are chargeable. State how freight, delivery, consumables, waste, restocking charges and damaged goods will be handled.
Connect each supplier bill to the job and phase. Record the purchase date, supplier document, delivery location and items used. If one order serves several sites, split it before posting the cost.
Post returns and supplier credits back to the same job and category as the original purchase. A credit is not spare money for a later claim.
A selected fitting may become unavailable. Record the cancelled item, any credit or cancellation charge, the proposed substitute and any change to installation work. Get approval before ordering where the authority rules require it.
Match subcontractor invoices to written trade packages
Give each subcontractor a written package. State the physical work, exclusions, access, documents and approval path for extras.
Check every subbie invoice against that package and the completed work. An invoice may contain agreed work, an unapproved extra and a charge from another address. Split it. Bill only the supported job cost. Hold the rest until corrected or approved.
Record equipment, disposal, permits and inspections
State how chargeable equipment enters the job ledger. Use the rental invoice, delivery charge or another method expressly written into the reviewed contract. Do not add an unexplained equipment charge at claim time.
Allocate disposal to the job and phase. If one skip or hauling run serves several sites, divide the cost using a recorded method before billing.
Keep permit and inspection charges with the job record. Connect each one to the phase or trade that caused it.
Keep overhead out of direct job costs unless the contract says otherwise
Office rent, broad advertising, general administration and unrelated vehicle costs are not automatically direct renovation costs. Recover overhead through the pricing method you have chosen unless the reviewed contract expressly treats a specific item differently.
Finish this schedule before calculating builder markup. Otherwise the fee may be applied to a cost category the client never accepted.
Set builder markup in the builder cost plus contract
Choose a fixed fee or a percentage fee. Then define the base.
A fixed fee pays the builder for managing and delivering the written scope. State what happens to that fee when work is added, removed or substituted.
A percentage fee applies the agreed percentage to named allowable costs. List the categories that receive the fee. Labour, materials and subcontractor costs might be treated differently from permits or credits, but the document must state the method before billing starts.
Set out how the fee responds to:
- Supplier returns and credits
- Corrected or disputed charges
- Removed work
- Approved variations
- GST treatment confirmed for the job
Do not choose a percentage because it looks familiar. Use your own overhead, management work, risk and required profit. The markup versus margin guide explains the arithmetic before you lock the fee into the quote.
Worked example: markup is not margin
Oak Street is the house electrical example. It is not a cost-plus building job. The figures are sample currency units, not a rate card.
Quote Q-1847 for R. Chen at 14 Oak Street covered a bathroom exhaust fan, 150mm and ducted through the roof, plus four LED downlights. The original quote total was 1,105. Job cost measured against that quote was 850, so profit was 255.
Markup was 255 ÷ 850 = 30%. Margin was 255 ÷ 1,105, which is about 23%. Markup is added to cost. Margin is profit as a share of the selling price.
The invoice later became 1,265 after an approved 160 variation. Do not calculate profit using 1,265 and the original job cost of 850. The costs of the variation are not supplied.
Define the open-book pricing records
Open-book pricing needs a defined disclosure package. It does not give the client unrestricted access to every business record.
List what accompanies each progress claim or tax invoice. The package may contain:
- A current job-cost report by agreed category
- Chargeable labour records
- Supplier bills and receipts
- Subcontractor invoices
- Equipment, delivery, disposal, permit and inspection records
- Returns and supplier credits
- Approved variations
State whether the client receives copies, a cost report or both. Set one path for raising questions and correcting allocations.
Use the same cost buckets in the estimate, job ledger and claims. A framing cost should not become general materials at billing time. Keep the trail boring and obvious.
Give each cost a status. Planned, committed, incurred, credited, disputed and billed are not interchangeable. An ordered fitting is a commitment. A supplier invoice creates an incurred cost. A disputed extra stays out of the client bill until resolved.
Separate cost movement from a variation
A higher actual cost does not automatically change the physical scope. A material price can move while the selected product and installation remain the same.
Continue under the agreed cost rules only when the expense belongs to approved work, fits an allowable category, carries the required evidence and sits within the purchasing authority already granted.
Stop the affected work when something is added, removed or substituted. Record a variation before proceeding under the approval rules in the reviewed contract.
The variation should state:
- The added, removed or substituted work
- The forecast cost effect
- How the builder fee applies
- The expected effect on the program of works
- The name of the approver
- The approval date and record
Do not disguise added work as ordinary cost movement. Do not raise a variation merely because an approved cost moved. The physical scope is the dividing line.
Worked example: chasing changes the work
On the Oak Street bathroom, the ceiling was lined and quote Q-1847 excluded chasing. Extra cable and chasing were outside the quoted work.
The affected work stopped. The extra cable and chasing were approved on site as a 160 variation. Invoice INV-1847 then totalled 1,265.
That record connects the changed physical work to the final invoice. It also stops a verbal request from becoming an unexplained charge.
Put purchasing and approval authority beside the quote
Name who can approve selections, substitutions, purchases, subcontractor work and variations. A client contact is not enough. Record what that person can approve.
If there are purchase limits, state what each limit controls. It may apply to one purchase, one category or the current job forecast. Do not leave the office and crew to interpret it differently.
When the approver cannot be reached, give the foreman a written instruction. Protect the site. Pause the affected work. Record the open decision. Continue unrelated approved work only when it is safe and practical.
Turn verbal site instructions into a written variation. Record the requested work, forecast cost effect, fee treatment and timing effect. Get the required yes before releasing the crew or purchase.
Build progress claims from the live cost ledger
Choose billing dates or completed stages that suit the reviewed contract. Build each claim from costs already recorded against the job, not from a rough total assembled at the end of the month.
Show current allowable costs by category, the builder fee and its base, approved variations, credits, corrections, previous billings and the amount now claimed. Keep the forecast for remaining work separate from incurred costs.
Reconcile subcontractor invoices and supplier credits before issuing the claim. A disputed extra stays disputed. A credit already received reduces the job cost under the agreed rules.
At completion, reconcile the final tax invoice to the final job-cost report. Check that every billed cost has a category and record. Check that every credit has returned to the job. Check that approved variations appear once.
The billing method in this progress claim guide is written for electrical work, but the control point carries across: claim work and costs that can be identified and checked.
Prepare a one-page cost-plus control sheet
Put the operating rules on one job record. The quote and reviewed contract remain the formal documents. The control sheet gives the office, foreman and client contact the same working instructions.
Copy this blank structure and complete it from the reviewed contract:
Job: [client, site address and job number] Contracting entity and ABN: [details] Physical scope: [rooms, phases and trade packages] Exclusions: [exclusion beside affected work] Concealed-condition stop point: [investigate, protect, pause or continue] Planning estimate: [forecast and assumptions] Cost ceiling, if agreed: [amount, warning point and approval action] Allowable labour: [roles, tasks and time-record fields] Allowable materials: [items, delivery, waste, returns and credits] Subcontractor costs: [approved packages and invoice checks] Other allowable costs: [equipment, disposal, permits and inspections] Builder fee: [fixed fee or percentage] Fee base: [named cost categories, credit and variation treatment] Open-book records: [documents supplied with each claim] Purchasing authority: [name, decision and limit] Variation authority: [name and written approval method] Stop-work instruction: [action when approval is missing] Progress claims: [dates or stages and accompanying records] GST presentation: [treatment confirmed for this job]
Yes Foreman can keep the quote and job-cost records connected for a building job. The document still needs the scope, fee base and approval rules you settled with the client.
Put this control sheet beside the builder cost plus contract before the pre-start meeting. Give the foreman the authority map and stop-work instruction, not just the client-facing price pages.
Attach the agreed evidence list to the cost-plus renovation quote. Then use the same cost categories when labour, supplier bills, subcontractor invoices, credits and variations reach the office.
Before the next site meeting, write the physical scope and mark the first point where the crew must stop for approval.