Although the builder is the one taking the risks, potential problems also exist for the client. First, in a hot market where demand for builders is high, there’s no guarantee they will price their work aggressively. They may come up with a rough estimate, add a very high profit, and figure if they get the job, then they’ll be well covered. Even the lowest bid may not be a good deal.
Second, fixed-price contracts require complete construction documents, which can cost approximately 5% of the project total. If the bids are too high and the drawings need to be revised, the architect typically doesn’t have enough information from the bidder to know exactly where to change the plans.
Finally, a subtle but nevertheless important adversarial quality exists in the relationship between client and builder. The moment a contract is signed, the client wants to get a bit more for the money, while the builder wants to provide a bit less. That’s just human nature.