In a JCT Design and Build contract one of the key early commercial decisions that needs to be made is whether to procure the works on a fixed price or open book basis. This choice influences risk allocation, cost certainty, procurement flexibility, and how both the client and contractor manage the project throughout its lifecycle commercially.

This blog explores the advantages and disadvantages of each approach and how they function within an amended Design and Build contract with job specific examples.

Fixed price

A JCT Design and Build fixed price contract is where the contractor agrees to undertake the design and construction of the project for a lump‑sum amount established before signing the contract. This price remains largely fixed and is only adjusted through mechanisms such as variations, provisional sums, and fluctuations.

One of the key benefits is cost certainty. Clients with strict budgets often prefer this model because the financial commitment is known and agreed upfront. However, fixed price contracts can be more expensive as contractors typically include allowances for risk, design uncertainty, and inflation within the lump sum. This may result in the contract price being higher than the true cost of constructing the works.

Risk allocation is another defining characteristic and key benefit. Under the Design and Build the contractor carries substantial design responsibility, meaning the client is protected from additional costs arising from design issues unless caused by their own changes. A well‑defined scope, accurate provisional sums, and robust change management are crucial to limiting the client’s risk. It’s important to note that if the scope of works has gaps, then this usually results in variations on site which could increase the price substantially.

As a Quantity Surveyor on a lump sum project, I managed valuations throughout the job making sure that only items agreed in the contract are claimed. There were instances where the contractor tried to claim over the contracted amount for prelims as they may have expended more than originally agreed however, as this was a fixed price contract had to knock them back to the agreed amount. In this scenario the fixed price approach was beneficial for the client as they agreed to a value below what was expended on the job.

Open book

In contrast, an amended JCT Design and Build with an Open Book approach is an arrangement where the client pays the exact expenditure of the project where there is full transparency between the client and contractor on the actual cost for delivering the works. This shows the real-time market prices and removes the need for contractors to price significant risk allowances or increases upfront.

However, this transparency comes with reduced cost certainty. The client is exposed to changes in material prices, labour rates, and other fluctuations. While this approach does not necessarily guarantee “value for money”, it does ensure the client pays the real, evidenced cost of the project. Achieving genuine value for money relies heavily on the contractor’s procurement capability where strong tendering, competitive sourcing, and efficient supply chain management are key.

In terms of design risk and cost associated with design, any issues that arise are often treated as part of the expenditure and are reimbursable but can vary depending on the amendments. This increases the client’s exposure to unforeseen costs when compared to a fixed price model, which is why a detailed scope of works and a thorough pre-contract design process are important.

One key advantage of the open book approach is procurement flexibility. Variations and changes can be progressed more quickly, reducing friction between parties, a significant benefit to programme where time is a priority for the client.

In practice, valuations and cost management under an open book approach are based on the contractor’s actual expenditure, with costs linked to internal cost codes and supported by invoices upon request. Where strong procurement is in place, this approach can deliver real savings, on one project we carried out, the forecasted final account came in approximately £100,000 under the original budget. The open book method also simplifies the valuation process; provided invoices and remittances align with applications, payments reflect actual expenditure without the need for negotiation or agreement of costs.

Conclusion

Ultimately, neither approach is better. The appropriate approach should be determined based on the client’s needs and appetite to risk. If the client prioritises time and has a budget that is open to risk and wants to pay for true expenditure, then an open book approach is best suited. However, if the client has a tight budget, is more averse to risk and wants cost certainty early on then the fixed price is best suited. The optimal choice is dependent on the project and the client’s objectives and needs. Fixed price is only as good as the scope, but open book is only as good as its procurement.