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EPISODE 441:

Most builders assume cost plus is the safe play. No locked-in price. No exposure if materials spike or scope grows. But according to the author of Markup and Profits, cost plus contracts end up in lawsuits two to three times more often — and in arbitration nine times more often — than fixed-price contracts.

That's not a pricing problem. It's a process problem.

In this solo episode of The Construction Leading Edge Podcast, Todd Dawalt breaks down why cost plus contracts are far riskier than most builders realize — and what actually creates that risk. He walks through the hidden traps that turn cost plus jobs sideways: the "just enough to start" trap that lets you move forward without real clarity, the budget heart attack that hits clients at the 60-80% mark, the microscope effect that turns every invoice into a negotiation, and why cost plus limits your upside while doing almost nothing to protect your downside.

👉 If you've been using cost plus as a safety net, this episode will change how you think about it — and show you what actually keeps you protected. Tune in.

Key Takeaways:

00:00 Intro

03:05 Why builders think cost plus limits their risk — and why it doesn't

08:45 Cost plus contracts end up in lawsuits 2-3x more often than fixed-price

12:55 The "just enough to start" trap and how cost plus enables it

17:15 Real legal case study: consumer fraud, treble damages, and what triggered it

24:25 The budget heart attack — what happens at the 60-80% mark

29:20 The microscope effect and the $40,000 Snickers bar

32:25 How billing disputes slow cash flow after your leverage is already gone

36:10 Cost plus limits your upside while barely protecting your downside

38:00 What real transparency looks like vs. open-book exposure

41:20 The three things to do right now if your pre-construction process needs work

Additional Resources:

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The Construction Leading Edge Podcast helps construction business owners maximize their revenue, eliminate chaos, systematize their work, and win back their time.