Construction is a business that revolves around cost. When settling a construction agreement, the pricing method you choose to determine the project’s cost is probably the most vital decision you will make. The pricing you use not only determines the project cost, but also causes considerably different roles and opportunities for the group, relying upon the type chosen.   

Using construction pricing software helps you to determine the cost of your project, whereby the budget you set will finalize the job and give you profit. 

There are three major types of pricing systems in construction agreements;

1.   Fixed Price/Stipulated Sum method

2.   Cost-Based Method

3.   The Price Method 

As it happens in all contractual systems, it is essential to understand the negotiating ability of every member, the capacity of the total contract, the challenges of the project, and the degree of elegance and professionalism of the contractor and the owner when choosing a pricing method. 

1.   Fixed Price Agreements

In this pricing method, an exact price for the assignment is set. That figure is paid without considering the exact cost of the work, including the profit and overhead of the architect, which is calculated in the price. The only uncertainty in price would be caused by a change in scope or a well-provided order.

In this method, the assignment is divided into classifications of work. Each classification is allocated a value equal to the percentage of the job costs it defines. The fixed price method is most suitable where the easiness of control is a consideration due to the capacity of the project or the lack of professionalism or time availability of the client’s internal management parties.


This method is simple and certain. The simplicity of executing this method does not need much attention from the owner.


The savings acquired by the architect are meant for them alone. This method lacks the aspect of sharing savings.

2.  Cost-Based Method

The governance of the cost-based method is far more challenging and tough. In this case, the builder will be paid the whole amount for everything concluded upon construction associated costs, overhead, and an amount meant for the contractor’s profits. The basics behind a cost-based method are to permit the client to pay the cost of the actual work without markups for better clarity.  


  •          Probability for the owner to gain savings through executing efficiencies.
  •    It allows the initiative to proceed before the expounded design documents are completed.  


The method undergoes cost disadvantages of executing work before finalizing the end strategies and the critical reporting needs.

3. The Price Method

Unit type of pricing is used under specific conditions. Under a unit price method, the builder settles a price for each unit of work or assignment to be finalized. Typically, the architect’s fixed costs and profit are added to the rate of each unit. Not considering whether the full quantity or number of units is known, the client agrees to pay the builder for actual, fixed, or constructed units.

The pricing method is mostly used for continual projects and easily measurable assignments, which makes it especially known in public works, engineering, and road construction initiatives.


The pricing method provides benefits to both the owner and the contractor. The owner will gain because the assignment is proportionately easy to verify, and they will only cater to definite quantities executed, distributed, or constructed on the initiative.

Contractors will gain where the predicted quantities or units are underrated, as the contractor will be paid to agree upon unit cost for all units finalized. 


Challenges occur during the bidding procedure, where it is tough to determine which pay commodity applies to a specific activity when the work is separated into many distinct line units.