XL EagleProfit vs Fee
Profit vs Fee. Profit and fee both describe what the contractor earns beyond cost. On fixed-price work, it is called profit and is built into your price. On cost-type contracts, it is called fee and is paid separately from costs.
Fee can be fixed, incentive or award based. Profit on fixed-price work is whatever is left after your actual costs, which can be more or less than you planned.
Why it matters to a small contractor
On fixed-price jobs your profit is not guaranteed. Control costs and scope creep and you keep the margin you priced.
Example
A $100,000 fixed-price job planned with $8,000 profit ends up costing $95,000, so profit is $5,000. A cost-type job with an $8,000 fixed fee pays that fee regardless of cost.
Profit vs Fee: common questions
Is there a cap on profit on fixed-price jobs?
Not a hard cap, but your total price must be found fair and reasonable.
Is there a cap on fee?
Yes, for some cost-type contracts the fee is capped by law.
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