We run architect-led new builds and major renovations on a charge-up basis. Charge-up means the client pays the actual cost of labour and materials plus a set management fee and margin. The alternative, fixed price, is a contract where the builder commits to deliver the work for a nominated lump sum. Each model has its uses. Our view on why charge-up is the right model for the work we do, and how the administration works so the client retains cost control, is worth explaining upfront.

Why we do not quote fixed price on architectural work

Architectural drawings evolve through construction. Selections land after consent. Variations arise from site conditions revealed during opening up. The design intent on a Ness Valley pavilion home or a Ponsonby villa restoration is not fully documented at the moment of tender. On work where the detail is settled entirely at tender, fixed price is appropriate. On architect-led work that is not the reality.

A fixed-price contract priced against incomplete documentation is always priced up for risk. The builder adds contingency to cover the unknowns. On a large architectural project the risk contingency added to a fixed-price tender is typically ten to twenty percent of the base cost. That contingency is money the client pays whether the risks materialise or not. On charge-up, only costs that actually occur are charged. The client keeps the contingency they would otherwise pay for in a fixed-price contract.

How the numbers actually work

The cost to the client on charge-up is the sum of the direct labour, the materials at cost, the subcontractor invoices, and the site-management overheads, plus a management fee and margin. The labour rate is charged at an hourly rate that covers wages, leave provision, insurance, and small tools. Materials and subcontractors are charged at the invoice rate from the supplier. The margin is a percentage applied on top of the direct cost total, typically fifteen to twenty percent depending on the project.

The budget and the cost plan

Charge-up does not mean no budget. At tender we produce a detailed cost plan showing the expected cost of the work broken down by trade, by material package, and by programme stage. That cost plan is the budget the project runs against. The client sees the cost plan at the outset and monitors progress against it through monthly reporting.

Our reporting includes four documents each month. The cost-to-date report, showing actual spend by trade and material. The forecast-to-complete report, showing our current best estimate of final cost given known variations. The variations register, listing every change from the tender scope with its cost impact. The programme update, showing where the project sits against the programme.

Where the client retains control

Every selection over a threshold amount, typically five thousand dollars, is signed off by the client before it is ordered. The supplier invoices are available to the client on request. The client can attend the procurement meetings if they want to. There is nothing hidden in the cost base.

The client can adjust the scope during construction. A window position can move. A cabinetry specification can change. A tile selection can change. The cost impact is reported transparently and the client makes the decision. Under a fixed-price contract any change of this type is a variation that requires renegotiation and typically carries a higher margin than the original pricing.

The builder's incentive

The question clients sometimes ask is whether a builder on charge-up has any incentive to be efficient. The answer is trade reputation. Our margin is a percentage of cost, not a fixed fee. On paper that looks like an incentive to inflate costs. In practice, inflated costs get the builder fired and damage the trade relationships that drive the next project. The work we get by architect referral depends on a track record of cost discipline and efficient programme. A builder who abuses charge-up stops getting architect referrals quickly.

Where charge-up is the wrong answer

A client who needs a guaranteed maximum cost because of external financing constraints or because they cannot tolerate any upside risk. A scope that is fully documented at tender and will not change. A project where the client is not engaged in monthly reporting and would rather pay a single number.

For those situations a fixed-price or guaranteed-maximum-price contract model makes sense. We do that work on some projects. Most of our architect-led work runs better on charge-up because the client wants the cost discipline without the risk premium that fixed price carries.

What the first month looks like

The first month on site produces the first cost-to-date report. The client sees the format, asks questions, and confirms the reporting is working for them. We adjust the report if they want more detail in one area. From month two onwards the report is familiar. The project runs.