Amen imwonderwoman! When we got hit with the first $54K lien from a supplier that our builder had taken a draw pay months earlier, our banker suggested that we pay off the lien using additional funds from our loan so long as builder agreed that he would forego his next draw (for a similar amount) and pay those subs and suppliers out of his pocket. We did - but then, for over three months builder NEVER finished the work for that next draw and the part that was finished he never paid for. We wound up paying that part too - after we fired out builder. Even having your architect act as "contract administrator" won't protect you if you get an unscrupulous builder who is willing to present bogus lien waivers from subs (ones he filled out himself and ones he got by giving his subs rubber checks) in order to collect his draws for "finished work". Nor will having your architect act as your contract administrator protect you if your builder skimps on things like tyvek and insulation and then covers over those things with the next layer of materials. It won't protect you when your builder purchases stuff for a spec house he is building for himself and has the materials delivered to your house so that when the supplier doesn't get paid, the leins get placed on your property instead of his! Typically the architect who is acting as contract administrator will make a certain (limited) number of trips to check on the build progress. They don't go out every day and watch everything like a hawk... which is the only thing that would even possibly have stopped my builder from pulling his shenanigans! A contract administator will also intervene to clarify what the specs and plans MEAN if there is a disagreement between builder and owner. IF the builder doesn't care what the specs say, then having the architect insist that the plans be followed won't do the homeowner any more good than the homeowner insisting that the plans be followed. I chose not to hire my architect as the contract administrator b/c, in fact, I had designed the house myself and then taken it to the architect to vet it and get the engineering done. I like my architect but I KNOW the design better than he ever did. After discussing the option of having him administer the contract, I felt that I could do at least as good a job as he would. And I still believe that. IF our builder had had an ethical bone in his body, administering the contract would have been a breeze. As it was, no one could have reined him in. He was robbing Peter to pay Paul and I was the last one in line. He was desperate to build my house as cheaply as he possibly could while getting as much money out of me as fast as he possibly could so he could try to pay off his lawyers who were attempting to protect him from two other lawsuits by aggreived homeowners. He declined to tell me about those when I asked, before we ever signed our contract with him, whether he had ever been sued! Two weeks into our build, I had already become convinced that we had made a mistake. I talked to my husband about firing our builder before things went any further. DH wasn't convinced. Two months into the build, DH had become convinced we needed to fire him. We talked to our banker to find out what we needed to do. Our banker insisted that we could not fire the builder b/c then our house woud never get built. As imwonderwoman discovered, in a certain sense the bank OWNS the house so they are in the driver's seat and they don't really care so long as it gets "finished". The homeowner is then on the hook to pay the bank for the house regardless of how badly built it is. After I realized what a scum-bag we had hired, I did my very best to go to the build site at least every other day. It was amazing to me just how much stuff my builder could screw up in 48 hours...when he was working at all. After our banker told us we could not fire him, I basically quit my 60+ hour per week job so I could be at the build site nearly every day. Once I started watching every single thing that was done - and documenting it all with a video camera, my builder QUIT work. Then the liens started coming in. It took another six months with almost no progress and lie piled on lie piled on lie - and my banker continuously telling me that we HAD to find a way to work with the builder to get the house finished - before I got fed up enough that I decided that I no longer CARED what my banker said. I was going to fire the builder and then figure out how to work things out with the bank. So I sent the builder a certified letter telling him he was fired, then notified the bank that I had done so. It then took me several more months before I could convince the bank that it was in the bank's best interests to allow me to take down the rest of the loan and finish the build as my own contractor. By that point tho, I was so broke I had to go back to work full time. So now, almost a year after firing my builder, we are finally getting close to getting the house finished. It will NEVER be the house we contracted for. We've downgraded almost every finish level since taking over in order to save money and try to bring it in within our budget. For example, I found tile for 99 cents/sq ft and hardwood flooring for $4.49/sq ft. And, DH and I have done a lot of the work ourselves on weekends instead of hiring it out. Still, between attorney fees, paying off liens that should never have been filed against us, and paying to fix some of the blunders builder made that we simply could not live with, the house will wind up costing us about 25% over the fixed bid price. And no, we did not accept the "lowest bidder." We got three bids, the two higher ones were within $10K of each other. We accepted the HIGHER one because we thought the builder would do a better job. HAH!

It appears to be a turn-key (not owned by you until finished) Fixed Price contract with Allowances for some items. Allowances are like small Cost of the Work contracts within a Fixed Price contract. These Allowances should be well defined in the contract. I've never known anyone to be responsible for permit fees other than the owner of the project but if the builder owns the project until the end I guess the permit fees would be part of the Fixed Price unless specifically excluded or listed as an Allowance.

I agree that the builder should not ask what your budget is before he bids your plan. But many do because they're trying to get an idea of how upscale you'll want your appliances, fixtures, countertops, etc. to be. The problem is that, even if a builder gives you a bid within your budget, you still won't know what quality of materials the allowances he gives will really cover. One builder will bid the plan based on the cheapest "builder grade" carpet, tile, appliances, countertops, fixtures, etc while another will bid it based on an unspecified level of upgrades. To the extent that there are any "allowances" within the bids you receive, you are not comparing apples to apples. And, unfortunately, builder "allowances" are almost never set high enough to purchase the quality of finishes you really want. Sometimes they're set so artificially low you can't possibly purchase anything for the amount set - much less anything you would want to have in your home. Rather than paying attention to my specs, one of the builders I asked to bid tried to put in an allowance for plumbing fixtures of just $5000. My home has three full baths (one with a claw-foot tub, one with an extra-long garden tub, and one with a particular neo-round shower available only from one manufacturer) plus two powderrooms. Since I had already priced claw-foot tubs ($3000 for the least expensive one I could find), garden tubs ($1800 for the one specified), the neo-round shower unit ($1600), the toilets I'd specified ($300 each X 5) plus the sinks and faucets for all of the above and kitchen and laundry sinks, I knew his allowance was ridiculously low! His lighting fixture "allowance" was equally low-balled. I handed his bid back to him and told him I had specified exactly the fixtures I wanted and that if he was willing to contract that he would supply the specified items for the allowance amounts, we would talk but that he might want to do a bit more research. He revised his bid upward by nearly $25,000. The best way around this issue is to specify as many of the details as you possibly can BEFORE you send your plan out for bids and then only accept bids that do not include "allowance" amounts. I.e., the builder agrees to include everything specified for the bid amount. Some of the items you should specify in detail - by manufacturer, design/style, color, item number, size, and so forth - include: 1) Roofing material (Do you want asphalt shingles? 30 year architectural shingles? wood shakes? clay tiles? metal?) 2) Siding materials (brick? stone? hardi? aluminum or vinyl siding?) 3) Windows and window hardward 4) Doors and door hardware(don't forget the garage doors and door openers) 5) Flooring (carpet/carpetpads? tile? hardwoods? stained cement?) 6) Wallboard and ceiling finish level (Level 5 smooth? knockdown? orange peel?) 7) Paint, primers and stains for each part of the house(manufacturer, quality, number of coats to be applied, and method of application. You should probably also figure out how many different colors of paint you're going to want to use and specify that. The exact colors can wait till later.) 8) Millwork (crown molding, baseboards, chair moulding, etc.) 9) Stair parts (newels, balusters, treads, risers, handrails.) 10) Plumbing fixtures (tubs, shower units, toilets, faucets, kitchen sinks, laundry sinks, bath sinks) 11) Lighting fixtures (don't forget ceiling fans) 12) Built-in cabinetry (kitchens, bathrooms, laundry, mudroom, plus bookcases throughout the house) 13) Kitchen appliances 13) Fireplace and mantle 14) HVAC system 15) Hot water heaters 16) Prewired audio/video systems 17) Rain gutters 18) Decking materials 19) Mirrors, towel bars, toilet paper holders... all the little "finish" stuff. 20) Landscaping (watering systems, how many plants and what types, etc.) I'm sure others can and will add to this list but don't despair. You'll have to make all these decisions eventually, you might as well do it up front. Plus doing research to decide on all these details ahead of time will also give you a chance to get a feel for what items really cost and help you determine whether or how much you need to cut back on your desires. Ultimately, unless you have an unlimited budget (HAH!) there will come a point when you will have to compromise and purchase something less costly than the item you'ld prefer to have. Better to shave costs as you go along on items you don't really care all that much about than to get to the end of the build and discover that your budget just won't stretch to cover those gorgeous granite countertops that you really really really want and have been dreaming about since you first started talking "new home". Besides, "allowances" are bugbears in residential construction contracts. They are the basis of more disagreements between builders and owners than anything else I can think of. See the link below for some examples of issues. Trust me, the more you specify details ahead of time, the happier you will be with your new home and the less problems you'll have with your builder. Here is a link that might be useful: Avoid Contractor Allowances

Great points above. Sensing a trend that its mostly about Overhead and Profit which might be true sometimes but certainly not always. If I had to bid on some plans right now, it would be a higher than typical price as I currently have enough clients who will work in my preferred Cost Plus arrangement. My overhead is extremely low but I also use preferred contractors who cost more. Building a good home is a combination of the right products, right labor, and right knowledge. There are increasingly stringent building codes which are creating an ever widening gulf between builders as I see it. Minimum building codes are pretty easy to achieve but it will cost more money. Many of the things that make a better home cost more money and its impossible to specify all the materials, labor and knowledge in a set of bid documents. Does your detailed specs and plans include how to protect your freshly poured slab on a hot day or cold day? Type and # of anchor bolts. 3" washers? Does the Radon pipe just stub under the slab somewhere or is it tied to a sub slab drainage to daylight? Very cheap insurance that I would not install if it wasnt in the plans or specs. Do the plans call out the type of sill sealer? I would never use an off the shelf version with what I know. How about sheathing fastener schedule? Its pretty cheap to use the newer APA recommendations but might have my carpenters skip it on a bid job. Just how detailed is that wall section of yours? Ive never had one to bid on that I would feel comfortable following to a tee in the field. How about sloping window pans for the rough sill? What type of flashing tapes? I find its best to mix brands depending on application but wouldnt want to waste my money or time on something I wasnt getting paid for. A 12 SEER unit could easily outperform a 16 SEER unit depending on what HVAC sub you go with or how much you babysit them. Surely you have the Manual J in the specs and blower door test goals? Its surprising the difference you might see between houses in this area in terms of comfort, energy efficiency and durability. Do the plans spell out how to meet ASHRAE 62.2? I dont think I could build a house without meeting this minimum ventilation standard but I know I would use a drastically different way to achieve it on a bid job. It wouldnt cost me as much and would not work as well as the slightly more expensive system I would recommend for most clients. Fixed bids are very likely to omit some important details that take place below the finished surfaces. In addition to what others have mentioned (and many more) the difference in prices will surely reflect a bit of this discrepancy between builders too.