Episode Details

A cost plus contract means your contractor gets reimbursed for every project cost plus a profit margin — but it comes in three flavors, and the structural differences determine who carries the financial risk.

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Bill Reid explains cost plus percentage (most dangerous for homeowners), cost plus fixed fee (better protection), and cost plus with guaranteed maximum price (safest hybrid). You'll discover why California banned pure cost plus contracts for residential remodels under Business and Professions Code 7159.5, the industry-standard markup range (15-25%, or $75K-$125K on a $500K project), and the five drift triggers that push projects into cost plus territory. Bill shares seven critical questions to ask yourself before signing, the narrow band of homeowners for whom cost plus genuinely works, and why disaster rebuilds almost always require this structure. This is part one of a two-part series — the decide episode. Episode 57 next week covers tactical execution. Related: Episodes 50, 53. Section 3.202 of The Awakened Homeowner book. Free download: Tale of Two Homeowners story + Fixed Price vs Cost Plus micro-tool. BuildQuest beta at buildquest.co

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### APPLE PODCASTS (subtitle 255 chars + description up to 4,000 chars)

**Subtitle (255 chars):**

Understanding time and materials contracts, markup percentages, legal restrictions, and when to walk away from cost plus deals

**Description:**

A cost plus contract reimburses your contractor for every project cost plus a profit margin — but it comes in three distinct flavors, and the difference between them determines who carries the financial risk. In this episode, Bill Reid breaks down cost plus percentage (the most dangerous for homeowners), cost plus fixed fee (better protection), and cost plus with a guaranteed maximum price (the safest hybrid). You'll learn why California banned pure cost plus contracts for residential remodels under Business and Professions Code 7159.5, the five drift triggers that push projects into cost plus territory, and the narrow band of homeowners for whom this structure actually works.

Bill shares the industry-standard markup range (15-25%, meaning $75K-$125K in fees on a $500K project), explains when disaster rebuilds require cost plus by necessity, and provides seven critical questions to ask yourself before signing. This is the decide episode — Episode 57 next week covers execution. If you're staring at a contract right now, this episode will give you the clarity to make the right call for your project.

**What You'll Discover:**

- The three flavors of cost plus contracts and why cost plus percentage creates backwards incentives that reward contractor inefficiency

- Why California Business and Professions Code 7159.5 makes pure cost plus illegal for residential home improvement — and what the exemptions are

- How industry-standard markup of 15-25% translates to real dollars on your project

- The five drift triggers that land projects in cost plus territory: incomplete plans, missing specs, scope changes, rushing to start, deprioritizing price

- Why disaster rebuilds (fire, flood) almost always require cost plus structures

- The three narrow audiences for whom cost plus genuinely works — and why most homeowners don't fit that profile

- Seven go/no-go questions to ask yourself before signing anything

**Related Episodes:**

- Episode 50: The Two Estimating Windows Every Homeowner Must Understand

- Episode 53: The Complete Bid Package — What Must Be In It

- Episode 57: Cost Plus Contracts Part 2 — The Execution Checklist (Next Week)

**Resources:**

- Section 3.202 of *The Awakened Homeowner* book covers the full cost plus framework

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