Day rate or fixed price,
and when each one costs you.
Not a preference. A decision about who carries the risk of the unknown, and there is a right answer for most jobs once you are honest about what you do not know.
Published ·5 min read·Written by Unibuild
The choice is about who carries the risk of what nobody knows yet. A fixed price transfers that risk to you and pays you for taking it. A day rate leaves it with the client and pays you for time. Quote fixed where the scope is genuinely visible, charge a day rate where it is not, and use both on a job that is mostly one and partly the other.
The asymmetry both sides ignore
Arguments about this are usually one-sided. Fixed price is presented as professional and day rate as amateur, or day rate is presented as safe and fixed price as reckless. Neither is right, and the honest position is that each fails in a different direction.
A day rate caps what you can earn on work you are good at. If your gang is genuinely faster than average, a day rate converts that skill into fewer days billed rather than more money. You are paid for the time it takes, so being excellent at something reduces your revenue on it.
A fixed price uncaps what you can lose on work you have misjudged. Everything you did not see, did not price, or could not have known comes out of your margin and then out of your pocket. The upside is bounded by the price; the downside is bounded by nothing except the job finishing.
Efficiency is worth nothing on a day rate and everything on a fixed price. Ignorance is survivable on a day rate and expensive on a fixed price.
Which is the whole decision framework. Fixed price rewards knowing what you are doing. Day rate protects you from not knowing what you are walking into. The question for any given job is which of those is more true.
When to quote fixed
Four conditions, and the more of them hold, the more confident the fixed price.
- You can see what you are pricing. Drawings, a specification, or a survey you have actually done rather than a description over the phone.
- You have done this work before and have real output rates from your own jobs rather than from a book.
- The scope can be written down in a way that makes it clear what is not included, which is the half most exclusions get wrong.
- Nothing is hidden. No opening up, no ground, no existing services of unknown condition, no building you have not been inside.
Where those hold, fixed price is usually the right answer commercially as well as competitively. Clients pay a premium for certainty, and a firm that can price confidently is selling something a firm that cannot does not have.
When to charge a day rate
The mirror image, and it is worth being unembarrassed about it.
Where you are opening up and nobody knows what is behind it. Where the client cannot describe the finished state. Where the work is genuinely investigative, such as fault finding, or reactive, such as a call-out. Where the programme is being driven by somebody else's decisions and you will spend time waiting.
Three things make a day rate work rather than merely feel safer. Record the hours properly, because a day rate you cannot evidence is a discussion at the end. Agree what a day is, including start and finish and what happens to travel. And agree in advance what happens if it takes longer than the client expects, because the moment nobody has discussed is the one that produces the argument.
The hybrid, which is what experienced firms actually do
Almost no article on this question mentions it, and it is what most well-run jobs look like.
Fixed price the part you can see, and handle the part you cannot with a provisional sum or a dayworks rate stated in the same quotation. So: a fixed price for the works described, plus a provisional sum for the drainage that may or may not need replacing, plus a stated hourly rate for any additional work instructed.
That gives the client the certainty they want on most of the job, gives you protection on the part nobody can price, and makes the boundary explicit before anyone starts rather than contested afterwards. It also does something quietly valuable: it tells the client, in writing and at the outset, that there is an unknown, which is a much better conversation than discovering it together in week three.
The one discipline it requires is that the boundary is clear in the document. A provisional sum with no description of what it covers is an argument waiting to happen, and a dayworks rate with no stated conditions attached is half a rate.
Which one binds you
Worth separating clearly, because people conflate the pricing basis with the contractual status.
A fixed price is not automatically binding, and a day rate is not automatically flexible. What binds you is whether the document you sent operates as an offer capable of acceptance, and that turns on its substance rather than on whether the number was fixed or hourly. A document headed Estimate that states one firm figure for a defined scope can bind; a document headed Quotation that is hedged throughout may not. That distinction is set out in quote or estimate, and which one binds you.
Practically, whichever basis you choose, say which it is in a sentence rather than relying on the reader to infer it from the shape of the numbers.
Both bases need the same thing and it is the thing firms most often cannot produce: hours against the job, with dates, that nobody has reconstructed. Unibuild takes hours from a QR clock-in with a photograph and a server timestamp that cannot be back-dated, landing on the right job on the day they are worked. On a day rate that is the invoice. On a fixed price it is how you find out whether your output rates were right, which is what makes the next fixed price better than the last one. Where a project was quoted through the platform, the works schedule draws on the priced sections of that quotation, so the comparison is between the price and the reality rather than between two spreadsheets.
Where to start, on Monday
Look at the last five jobs you fixed-priced and ask one question of each: could you actually see everything you were pricing. Where the answer is no, look at what that job returned. The pattern usually settles the argument without anybody needing to be persuaded.
Then, on the next enquiry with one genuine unknown in it, try the hybrid instead of picking a side. Fixed for the visible scope, a provisional sum for the unknown, and a stated rate for anything instructed. It is a better document than either pure option and clients accept it more readily than firms expect.
The follow-up questions.
How to build either number is in how to price a construction job.
Should I charge a day rate or a fixed price?+
Is a fixed price more profitable than a day rate?+
Can I use both a fixed price and a day rate on one job?+
What should be agreed before working on a day rate?+
Does a fixed price mean I am contractually bound to it?+
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