Parting Ways

For many years, it was hailed as the best new way to do business, a method that benefitted owner, contractor and contract glazing. Yet, as the practice continues to grow, a number of contractors, glazing and otherwise, are saying “no more.”

Once hailed as the ultimate quid pro quo, fixed price contracts have come into sharper focus in the last few months with many of those engaged in them opting out of the practice.

Fixed-price contracting is a practice through which the general contractor and the contract glazier (the GC—the buyer—and the CG—the seller) agree to a certain price (or a not-to-exceed price) for a job. General contractors also engage in fixed price contracts where they are the seller to a buyer, usually an owner or developer.

Fixed price contracts are not the same as T&M jobs. Time and material (T&M) contracts still have a degree of uncertainty to them. Even though the cost of the materials and the number of hours are estimated, unforeseen conditions could change them significantly. Some contract glaziers will only do certain jobs on a T&M basis. This usually means they feel there will be factors involved that require additional time and/or materials and/or that the cost of the fixes or remediation cannot be adequately estimated. T&M jobs are usually high-risk ones for the seller; fixed price ones generally are not.

Proponents of fixed price jobs say they are best for tightly timed and scoped work, and they can keep projects moving without additional risk to the buyer. Opponents say all that may be true, but that to protect itself from risk, the seller is going to price the job less aggressively. “You can be sure the job never goes over that amount,” one general contractor told me, “but you can never be sure you really couldn’t have gotten it for half what you paid.”

Now comes the word that some general contractors who were among the earliest and strongest proponents of fixed pricing agreements have said no more. ENR has reported that two large general contractors, both publically held, are leaving fixed pricing projects behind as a future strategy. “It is now clear that … the fixed price design-build delivery …model resulted in an untenable imbalance in risk-sharing,” Granite CEO James Roberts told ENR.

The big question is whether general contractors will expect contract glaziers to do unto others as they will no longer do themselves. And if glazing contractors want a good argument against the fixed-price model, all they need do is tell the general to look in the mirror.