Open-Book vs Fixed-Price GC: Which Contract Model Works for Residential Investors?
The contract model a general contractor in Atlanta, Georgia uses is not a detail, it is the architecture of the entire financial relationship. For real estate investors, it determines cost transparency, lender compatibility, and who absorbs the risk when conditions change. Here is what each model actually means in practice.
How Fixed-Price Contracts Work Against Investors
In a fixed-price contract, the GC quotes a lump sum and assumes cost risk on paper. In practice, that risk is hedged in two ways: the price includes substantial contingency built in from day one, and change orders generate additional revenue whenever scope deviates. Cost transparency is structurally limited, the investor cannot see what anything actually costs, only what the final number is.
For investors whose lenders require auditable cost documentation for draw approval, fixed-price contracts create a structural problem. The documentation a lender needs does not exist in a lump-sum model.
Why Open-Book Cost-Plus Is the Institutional Standard
A cost-plus open-book model means the investor pays actual costs – subcontractor invoices, material receipts, field labor – plus a transparent, pre-agreed GC fee. Every dollar is visible. The contractor has no financial incentive to inflate costs because the fee does not increase when costs increase.
For general contracting for real estate investors, this model does several things simultaneously: it satisfies lender documentation requirements, it aligns contractor and investor incentives, and it eliminates the conditions that generate change order disputes. Lenders financing residential construction increasingly require open-book reporting as a condition of the draw process.
What Factum's Model Looks Like
Factum operates on Cost-Plus with a transparent fee structure and a minimum fee floor. Every project is documented with professional pay applications, photo logs, two-week look-aheads, lien waivers, and cost-to-complete projections, formatted for lender review from the first draw. For residential construction management that serves investors rather than just builders, open-book is not a selling point. It is the baseline.
Ready to work with a GC whose contract model is built for investors? Book a call with Factum.