The choice between fixed-bid and time-and-materials (T&M) contracting sounds technical. It’s actually one of the most important decisions in how a remodeling project goes. The decision affects who carries the risk of overruns, what incentives the contractor has to work efficiently, and whether you know your total cost before you commit.
This is Tessera’s position: we price residential remodeling on a fixed-bid basis. Here’s exactly why — including the cases where we’d recommend T&M.
What fixed-bid means
A fixed-bid contract states a defined scope of work and a defined price. If you’re getting a kitchen remodel for $52,000 under a fixed-bid contract, that means: the scope we agreed on is delivered for $52,000. If it takes us more hours than we estimated, that’s our problem. If material prices move between quote and delivery, we’ve absorbed that risk in the bid.
Change orders — work outside the defined scope — are separate. If you decide mid-project to add a pot-filler over the range that wasn’t in the original scope, that’s a change order priced and approved before we do the work. Fixed-bid doesn’t mean no change orders ever; it means the original scope is locked.
What time-and-materials actually means
A T&M contract means you pay the contractor’s hourly rates for labor plus actual material costs plus a markup (typically 10–25%). If the job takes longer than estimated, you pay more. If material prices increase, you pay more. If the contractor’s crew works inefficiently, you pay more.
T&M is often pitched as “more transparent” — you can see every hour and every receipt. In practice, it transfers all the cost risk from the contractor to the homeowner. A contractor with 20 experienced remodeling projects’ worth of data on how long a job takes has a much better ability to estimate accurately than a homeowner who’s done one. The fixed-bid contract transfers that estimation risk to the party with the better information — the contractor.
Under T&M, the contractor’s incentive structure also changes. A contractor paid by the hour has no financial incentive to work efficiently. A contractor with a fixed-bid contract has every incentive to execute the scope efficiently because their margin is the difference between their bid and their actual cost.
The real cost comparison
An example from KC market conditions:
A bathroom remodel with a defined scope — gut to studs, Schluter waterproofing system, large-format tile shower, freestanding tub on freestanding plumbing, double vanity, heated floor, zero-threshold entry. A KC contractor bids this at $38,000 fixed-bid.
A second contractor offers T&M at $85/hour labor plus materials + 15% markup. They estimate 180 hours. At 180 hours that’s $15,300 in labor alone. Materials for this scope: $12,000–$16,000. Markup on materials: $1,800–$2,400. Estimated T&M total: $29,100–$33,700.
Sounds cheaper. But: T&M estimates are not guarantees. Bathroom tile work is skilled and slower than general labor. If the actual hours run 220 instead of 180 — and on a job with complex tile work in an older home with non-plumb walls, this is common — the T&M total is $33,700–$38,000. Now you’re at the same price as the fixed-bid, but you got there with no certainty along the way. And you had no leverage to ask why the job is running long.
When T&M is actually appropriate
T&M is the right structure for work where the scope genuinely cannot be defined in advance:
Emergency repairs. An active water leak, storm damage, or a plumbing failure where the extent of the damage isn’t known until demo begins. In these situations, you can’t write a fixed-bid scope because you don’t know the scope. T&M with a defined hourly rate and a transparency commitment from the contractor is appropriate.
Exploratory work. “Open the ceiling in this area and tell us what’s going on with the framing” — this is inherently T&M until the scope is determined. Once the scope is known, convert to fixed-bid for the actual repair.
Ongoing maintenance relationships. Facilities maintenance, small punch items, minor repairs — these are often T&M because the transactions are small and the overhead of writing a fixed-bid scope isn’t worth it.
For any defined remodeling project — kitchen, bathroom, addition, deck — fixed-bid is better for the homeowner. Full stop.
Why some contractors prefer T&M
It’s simpler to estimate. A T&M bid requires no detailed takeoff of materials, no careful analysis of labor hours by trade, no risk pricing for the unknowns that might show up. You just start the clock.
It transfers risk to the homeowner. Every hour that runs long, every material surprise, every discovery — the homeowner pays for it directly, not the contractor.
It can be more profitable for inefficient contractors. A crew that works slowly on your kitchen is billing you for those hours. A fixed-bid crew has every incentive to move.
Tessera’s approach
We price every defined-scope project as a fixed bid. Our quote process includes:
- A site walkthrough to understand the existing conditions
- A detailed material takeoff
- Trade-specific labor estimates based on our actual historical data in KC
- Allowances called out specifically for anything you haven’t selected yet, with the cost impact of going over the allowance clearly stated
- A contingency line for discoveries (typically 5–10% depending on the age and condition of the home)
The resulting quote is a number. Not a range. You can make a decision with it.
Change orders, when they happen, are written, priced before the work proceeds, and require your signature. We’ve had projects where change orders increased the total by 15–20% — older homes have surprises. But every one of those increases was presented to the homeowner in writing with a decision point before we spent the money.
That’s how this should work.