Cost overruns on fixed-price jobs: how to stop the bleed

The moment a fixed-price job starts bleeding, answer one question before you do anything else: is this extra cost something the customer caused, or something you got wrong? That split decides everything. If it is a genuine variation, you can charge for it, but only if you raise it in writing before you do the work and the customer approves it. If it is your own estimating error, you eat it on this job and fix the template on the next one. Most cost overruns on fixed-price jobs are not one dramatic surprise. They are six small unbilled changes, a quote written ninety days before the materials were bought, and a conversation nobody wrote down.

The 60-minute triage when a job goes red

Do this the day you notice. The value of a variation collapses the longer you sit on it.

1. Stop uncommitted spend. No more materials, no second van, until you know the number.
2. Forecast the cost to complete, not the cost spent. Sunk cost tells you nothing. Price the remaining hours, the materials still to buy at today's price, and the return visits you have stopped counting.
3. Split the gap: chargeable variation, or your error. Be brutal. A gap you cannot honestly defend will not survive a dispute.
4. Phone the customer the same day. "We have found X, it changes the price by roughly Y, I am sending it in writing this afternoon" is the difference between a signature and a fight.
5. Send the change note before the next shift. Nobody signs a change after the work is done. They pay for a decision they were allowed to make.

Fixed price, capped price, or time and materials

In Sweden you will hear three terms, and the distinction is the whole game. Fast pris is a fixed price. Takpris is a capped price: you bill actual hours and materials, but the customer never pays above a ceiling. Löpande räkning is time and materials. Elsewhere: fixed price, guaranteed maximum price, cost-plus.

That last row catches people out. Under the Swedish Consumer Services Act (konsumenttjänstlagen 1985:716), if you give a consumer an ungefärlig prisuppgift, the final price may not exceed it by more than 15% unless you agreed another limit. It applies to approximate prices only. A fixed price is a fixed price: there is no 15% on top. The same trap exists in UK consumer work, where an "estimate" and a "quote" are treated very differently once a dispute starts.

What changed for 2026

Material pricing has stopped being a rounding error. Copper, cable, timber, insulation, heat pumps and switchgear have all had spells where the price moved more inside a quote's validity window than your whole net margin. A 90-day fixed quote on a materials-heavy job is a free option you wrote for the customer: they exercise it if prices rise, and you carry it. Three fixes:

• Shorten validity to 14–30 days. Costs nothing, removes most of the exposure.
• Move materials-heavy work to takpris. A capped price gives the customer certainty without you eating a market move.
• Add a materials clause with an objective trigger. "Materials priced at supplier list of [date]. If the list price for these items rises more than 5% before order, the difference is passed on at cost and notified in writing before ordering."

Real variation, or your own estimating error?

In Swedish this is the ÄTA question: ändrings-, tilläggs- och avgående arbeten, changed, added and removed work. Elsewhere it is a variation or change order. Four questions, and you need a yes to at least one.

1. Scope. Was it in the quote, drawings, specification, or the photographs you priced from? If it was, it is not extra.
2. Change. Did the customer change their mind, upgrade a fitting, or move something after you priced it?
3. Discoverability. Could a competent tradesperson have seen it at the survey? If you could have opened the panel and did not, that is on you. Behind sealed plaster, it is not.
4. Risk. Does the contract say who carries the unknown? "Assumes existing circuits are serviceable" allocates that risk. A quote saying nothing allocates it to you.

Almost always your error: pricing from memory because "we did one of these last year"; an hourly rate that covers wages but not the van, insurance, unbilled quoting time or holiday pay; forgetting access, parking, scaffold, waste or the second trip for final fix; materials off a price list you last imported months ago; no contingency on a wall you never opened.

Almost always a genuine variation: the customer moves a socket or picks a different fitting after first fix; you lift the floor and the substrate is rotten with nothing visible beforehand; asbestos or someone else's non-compliant work appears behind a surface; an authority requires something the drawings did not show; access is denied and you make an extra journey.

Your duty to warn about a price increase

This is the part that quietly decides disputes. Swedish consumer law does not merely let you tell the customer about a price increase. It requires you to. Konsumenttjänstlagen puts three duties on you:

• Safeguard the customer's interests and consult them where needed. You are not a passive supplier.
• Advise against the work (avrådandeplikt) if it will not be reasonably worth the cost. If you should have advised against it and did not, your right to be paid can be cut.
• Contact them before doing additional work (tilläggsarbete). If you genuinely cannot reach them, you may proceed only where the price is trivial relative to the agreed job, or where there is good reason to believe they would want it done.

That last one is not a licence to bill. It is a narrow exception for the small and the obvious, and the burden of showing it applied is yours. The guidance, and the standard consumer contract Hantverkarformuläret, sit with Konsumentverket.

Commercial work under AB 04 or ABT 06 is tighter. Variations should be ordered in writing before they are carried out, and where one arises another way you must notify the client without delay. Miss the notice and you can lose the right to be paid for work already done. UK JCT contracts take the same line: no instruction, no variation, no money.

Put your own threshold in the contract: any change over 5% of the contract value, or any single item above a fixed amount you choose, gets a written note and a signature before the tools come out. Below that, note it and carry it.

How to document a change so the customer signs it

A change note turns a problem into a decision the customer owns. Send one per change: a bundle invites a negotiation, a single item invites a yes or no. Every note needs:

• A number and a date. Variation 1, Variation 2. Sequential, per job.
• What changed, in language the customer's partner could read without you there.
• Why, and who caused it. "Customer requested" or "condition found on opening".
• Timestamped photo evidence. One photo of the rotten joist ends more arguments than two paragraphs.
• The price, broken out. Hours × rate, materials at cost plus your markup. A lump sum reads as a guess.
• The effect on the completion date, in days. Not "may cause delay". Two days.
• The net price after deduction on Swedish consumer labour. ROT is 30% of the labour cost, up to an annual per-person ceiling shared with RUT; check the current amount at Skatteverket. Customers argue with gross numbers and accept net ones.
• Approve or decline, and a signature line, plus "This work will not start until this note is approved."

If it is genuinely urgent, a live fault or water coming in, do it verbally and confirm in writing within the hour: "As agreed on the phone at 09:40, we are proceeding with X at approximately Y." A same-day written confirmation is evidence. A memory of a phone call is not.

Nobody wants to drive home, write a document, and drive back, which is exactly why variations go unbilled. Raising it from the job card on your phone, before you leave site, is the whole reason to run quotes, variations and invoices in one system. In OdinTask a variation is priced from your own price list, sent for electronic signing with a document hash and audit trail, and carried onto the final invoice automatically.

What cost overruns on fixed-price jobs do to your margin

The arithmetic is worse than it feels, which is why people tolerate it. Take a job quoted at 120 000 kr on a 10% net margin: 108 000 kr of cost, 12 000 kr of profit.

• A 10% cost overrun is 10 800 kr. Profit drops to 1 200 kr. You did the whole job for a tenth of the money.
• A 12% overrun is 12 960 kr. You now pay 960 kr for the privilege of working.
• To replace that 10 800 kr at a 10% margin you need 108 000 kr of new sales. One unbilled variation costs you a whole extra job.

Scale it down: two variations of four hours each, never written up, at a 700 kr charge-out rate, is 5 600 kr. Nearly half that job's profit, gone in two conversations nobody documented.

Rewrite the quote, not the invoice

Everything above is damage control. The fix lives in the quote template. Change these once:

• An exclusions list, written as a list. Buried prose is not an exclusion. "Not included: making good, decoration, asbestos removal, out-of-hours access."
• Stated assumptions. "Priced on the basis that existing circuits are serviceable." Assumptions turn surprises into variations automatically.
• Provisional sums for what you cannot see. "Provisional: 6 hours remedial work to existing wiring, billed only if required, confirmed before starting."
• A contingency you actually price. A fixed price with no contingency on an unopened wall is a bet, not a quote.
• A survey before the fixed price. Charge for it and credit it against the job.

None of this makes you the expensive one. It makes you the one whose final invoice matches the quote, which is what customers tell their neighbours about. If your variations live in text messages across three phones, the leak is not your pricing. It is the paper trail. Start a 14-day trial, or read more on quoting and pricing on the OdinTask blog.