What you might not know
When planning a renovation, most homeowners are presented with a fixed price contract.
It feels reassuring. One number. One commitment. A defined budget.
But in older Toronto homes — where hidden conditions are the norm — fixed price contracts often create structural problems that homeowners don’t see coming.
This isn’t about criticizing competitors. It’s about understanding how different contract models handle risk, transparency, and incentives in an environment filled with unknowns.
The Illusion of Certainty ⚠️
A fixed price (or lump sum) contract commits to a total project cost before demolition begins and before concealed conditions are fully understood.
In a 80- or 100-year-old home, no one can fully see:
What’s inside the walls
The condition of structural framing
The state of plumbing and wiring
Whether previous renovations were done properly
Yet the contract requires a guaranteed total.
There are only two ways this can work:
The price includes significant hidden contingency.
The scope is tightly written, with change orders expected later.
Often, it’s both.
Homeowners believe they are locking in certainty. In reality, they are locking in assumptions.
Why “Extras” Become Inevitable 💸
Industry dispute reports consistently identify change orders as one of the leading causes of conflict in construction projects. The Arcadis Global Construction Disputes Report, for example, regularly cites change orders and scope disagreements among the top drivers of disputes worldwide.
In renovation work, change orders are not rare events — they are predictable outcomes when unknown conditions are uncovered.
Under a fixed price structure, these become “extras.”
That often means:
Additional charges for conditions that could not have been known at design stage
Negotiation over what was “included”
Repeated contract amendments
Growing tension mid-project
Once construction begins, the homeowner has limited leverage. The contract has already been signed. The project is underway. The financial structure is locked.
The friction is not accidental — it is built into the model.
The Incentive Problem No One Talks About 🎯
Here is the part that rarely gets discussed openly.
In a fixed price contract, profit is tied to completing the project for less than the agreed lump sum.
If real costs increase due to unforeseen conditions, profit shrinks.
That creates pressure.
Pressure can lead to:
Reducing labour hours
Selecting lower-cost trades
Compressing site supervision
Interpreting scope as narrowly as possible
Because everything is bundled into one number — labour, materials, overhead, and profit — homeowners typically cannot see:
What each trade is being paid
Whether sufficient time is allocated for proper workmanship
How funds are distributed within the contract
Many trades openly express frustration with this structure. When margins tighten, the people doing the work are often the ones asked to absorb the pressure.
That does not create an environment that rewards craftsmanship.
Renovation Is Not a Repeatable Product 🔍
Fixed price contracts work best in predictable, repeatable environments — such as building the same house model multiple times on clear lots.
Renovation is fundamentally different.
Every older Toronto home is unique. Every wall opened reveals history. Every project evolves as assumptions meet reality.
Trying to impose rigid certainty onto a variable process often produces conflict instead of collaboration.
What Cost-Plus Does Differently 📊
A cost-plus (time and materials) model separates:
Actual labour and trade costs
Material invoices
Project management fees
Instead of protecting a number, the focus shifts to documenting real costs transparently.
In this model:
You see what trades are paid.
You see real labour hours.
You see actual supplier invoices.
Decisions are made collaboratively as conditions are uncovered.
There are no hidden contingencies built into a lump sum. There is no financial incentive to compress trade budgets to protect margin.
Profit is defined clearly and separately.
This aligns incentives.
What the Industry Says About Transparency 📚
Contract structure is not arbitrary — it is formally defined within Canadian construction practice.
In Canada, fixed price (also called lump sum or stipulated price) and cost-plus contracts are both recognized and widely used contract models. Industry guides explain that a fixed price contract sets a single total amount for a defined scope of work, which can only be adjusted through formal change orders if site conditions or scope change.
Types of Construction Contracts Used in Canada: https://chrysandassociates.com/different-types-of-construction-contracts-canada
Procore Canada – Construction Contract Types Overview: https://www.procore.com/en-ca/library/construction-contract-types
Legal and industry commentary further notes that when fixed price contracts encounter unforeseen conditions, formal change orders become the mechanism for cost adjustments — often creating administrative and relational strain mid-project.
Fixed Price Contracts and Change Orders (Canada Overview): https://www.dlapiperrealworld.com/law/index.html?c=CA&q=fixed-price-contracts&s=forms-of-contract-procurement-methods&t=construction
In Canada, standard form agreements published by the Canadian Construction Documents Committee (CCDC) include both stipulated price and cost-based contract formats — acknowledging that different projects require different risk allocation models.
Canadian Construction Documents Committee (CCDC) Overview: https://practiceguides.chambers.com/practice-guides/construction-law-2025/canada
What these Canadian sources consistently show is this:
Fixed price contracts concentrate risk into a single number.
Cost-plus contracts distribute risk through transparency and documentation.
Change orders are a structural feature of fixed price projects when scope evolves.
In renovation — where scope almost always evolves once walls are opened — the way risk is allocated matters as much as the price itself.
Why We Do Not Offer Fixed Price Renovations 🤝
At Woodsmith Construction, we work almost exclusively on older Toronto homes.
These projects involve structural upgrades, mechanical modernization, energy improvements, and integration of new design within aging envelopes.
We do not offer fixed price renovation contracts because we believe promising certainty in an uncertain environment creates misalignment.
Instead, we operate on a documented cost-plus model because:
It reflects the true complexity of renovation.
It keeps financial transparency front and center.
It compensates trades fairly for actual work performed.
It prioritizes long-term quality over short-term number protection.
Trust is not built by defending a lump sum.
It is built by showing the work, documenting the costs, and navigating unknowns together.
In a city filled with aging homes and hidden variables, transparency is not optional.
It is foundational.
Planning a Renovation? Let’s Have an Honest Conversation 🤝
If you’re considering renovating your Toronto home and want clarity around how costs are structured, we’re happy to walk you through our process in detail.
We’ll explain:
How our cost-plus model works 📊
How trade costs and labour are documented
How we manage unknown conditions in older homes 🏡
How we protect both quality and financial transparency
No pressure. No inflated promises. Just a straightforward discussion about what your home may require and how to approach it responsibly.
📍 Woodsmith Construction Inc.
80 Redwood Avenue, Toronto, Ontario
📞 416-937-5874
🌐 www.woodsmith.ca
We Believe Renovations should feel collaborative — not adversarial.
Let’s build it the right way.
