The pricing model you choose decides who carries the risk of a job costing more than expected. There are three main types in Canadian construction: fixed price (also called stipulated price or lump sum), cost-plus, and time-and-materials. Fixed price puts the overrun risk on you; cost-plus and time-and-materials shift it to the customer. The standard CCDC forms map onto these models, and the right choice depends on how well-defined the scope is. The simple rule: fixed price suits a clear, drawn-up scope, while cost-plus and time-and-materials suit work you cannot yet pin down.
Fixed price (stipulated price, lump sum)
You agree one price for the whole defined scope. The customer knows the cost up front; you carry the risk that materials, labour or conditions cost more than you allowed. This is the most common model and the one customers prefer, because it is predictable for them. Its weakness is that it only works when the scope is genuinely clear: vague drawings plus a fixed price is how contractors lose money.
The standard form is the CCDC 2-2020 Stipulated Price Contract, the workhorse prime contract between an owner and a general contractor. The 2020 version replaced the old 2008 form, which was retired on 1 January 2022, so a contract still referencing CCDC 2-2008 is out of date. The matching subcontract a small sub signs is the CCA 1-2021 Stipulated Price Subcontract, updated to mirror CCDC 2-2020.
Cost-plus
The customer pays your actual costs (labour, materials, subtrades) plus an agreed fee, either a fixed dollar amount or a percentage. The customer carries the overrun risk, which makes cost-plus right for work where the scope cannot be defined in advance: emergency repairs, heritage restoration, or a job that starts before the drawings are finished. The trade-off is that the customer wants to see every receipt, so your record-keeping has to be airtight.
Cost-plus often appears on construction-management jobs. Under CCDC 5B, where the construction manager both advises and does the work, cost-plus is the usual basis because the manager is engaged before the design is final. There is a consumer-protection trap, though: in Ontario, every "estimate" you give on a cost-plus consumer job can anchor the 10% over-estimate cap, so you must either avoid loose estimates or get written approval at each stage (see Reading a Construction Contract).
Time-and-materials
You charge an hourly or daily labour rate plus the cost of materials, usually with a markup. It is the simplest model for small, open-ended jobs: service calls, troubleshooting, snagging work where nobody can say in advance how long it will take. Like cost-plus, the customer carries the risk of it running long, and the same estimate-cap caution applies on consumer work. Many trades cap time-and-materials with a "not-to-exceed" figure to give the customer comfort while keeping the flexibility.
Construction-management forms
On bigger projects the delivery model itself changes. The CCDC construction-management forms were updated in 2025:
- CCDC 5A (services only): the construction manager advises and oversees, while the owner holds the trade contracts directly. The manager's risk is limited to the quality of its services.
- CCDC 5B (services and construction): the manager advises and performs the work, taking on both service-quality and work-quality risk, usually on a cost-plus basis.
The 2025 forms adopted Ready-for-Takeover as the warranty trigger (consistent with CCDC 2-2020) and introduced termination for convenience, letting an owner exit without alleging default, subject to break fees and the manager's right to direct damages.
Pay-when-paid versus pay-if-paid: a clause that crosses every model
Whatever the pricing model, watch how the contract handles the chain of payment. A pay-when-paid clause is a timing mechanism: the contractor pays you when it is paid, which courts read as allowing a reasonable delay, not a permanent excuse. A pay-if-paid clause is a condition precedent: the contractor only pays you if it is paid, shifting the owner's insolvency risk onto you. Canadian courts are very reluctant to enforce pay-if-paid and will only do so where the wording is completely unambiguous; anything less is read as mere timing. And in the prompt-payment provinces the whole device is undermined anyway, because a sub has a statutory path to an interim payment order regardless of the clause (see Prompt Payment Explained).
Choosing the model
- Fixed price when the scope is fully drawn and you can price it with confidence.
- Cost-plus when the scope is uncertain but the relationship is one of trust and your records are tight.
- Time-and-materials for small, open-ended or diagnostic work, ideally with a not-to-exceed cap.
Common mistakes
- Pricing a vague scope as fixed price. Undefined drawings plus a lump sum is the classic way to lose money.
- Running cost-plus or T&M without watertight records. No receipts, no recovery, and a furious customer.
- Ignoring the estimate cap on cost-plus consumer jobs. In Ontario every estimate anchors the 10% cap.
- Signing a pay-if-paid clause without advice. It can shift the owner's insolvency risk onto you if the wording is clear enough.
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