Melbourne renovation builder Alex Palazzolo kept pricing architect plans his clients could never afford. His answer is to join the design from the first meeting and hold the fixed price back until the drawings are finished. Victorian contract law shows why that order matters.
The plans arrive. The builder prices them. The number comes back well above what the client had in mind.
Alex Palazzolo, founder of ATLI Building Company in Melbourne, says that sequence kept repeating across the renovations and extensions he quotes. Clients would design with an architect, carry a budget in their heads, then send the drawings over for a price.
“It was happening time and time again,” he told Az on The Good Builder Podcast.
Often the project never went ahead. In his words, clients had spent “tens of thousands of dollars on a design that’s a beautiful design, but it just can’t be built because they don’t have the budget for it.”
We covered his wider approach to client trust in our first piece on the episode. This one stays with the design stage, where most of a renovation’s cost is decided.
How does a design collaboration work?
Palazzolo’s fix is what he calls a design collaboration. It starts before any plans exist.
He visits the site, takes rough measurements and gives the client a ballpark figure. If the client is comfortable with that number, design begins, either with an architect he suggests or with the client’s own consultants.
He then stays in every meeting with the client and the architect, and every email chain in between.
His role is to keep the design inside the agreed number. Adding ideas is part of an architect’s job, he says. “A good architect, that’s what they do.” His job is to flag when the drawings start heading past the budget.
The pricing happens as the options come up. His example was a client asking for three skylights in the kitchen. He puts a dollar figure on it on the spot, then offers a trade. “If that’s important to you, maybe we can eliminate something else.”
Once the design is settled, the drawings, engineering and supporting documents are completed. Only then does the client get a fixed price quote. He says he has heard of other builders running something similar.
“I know that I could build it for the amount that I previously quoted,” he said.
Who controls cost while a renovation is being designed?
In the usual order, the architect works to the client’s brief and the builder sees the design at the end. Cost gets tested once, after most of the decisions have been made and paid for.
A design collaboration puts a builder’s pricing knowledge in the room while those decisions are still cheap to change. Removing a skylight from a sketch is a conversation. Removing it from a finished drawing set means more design fees, and sometimes a client who walks away.
“If that’s important to you, maybe we can eliminate something else.”
When can a Victorian builder give a fixed price?
Victoria’s Domestic Building Contracts Act 1995 helps explain why Palazzolo holds the firm price back until the end.
A major domestic building contract is one where the builder will receive more than the amount fixed by regulation, currently $10,000. Section 31 says those contracts must include the plans and specifications for the work, and that the plans and specifications must contain enough information to obtain a building permit.
A ballpark on a concept sketch is not that.
Cost plus pricing is tightly limited. Under section 13 and the regulations, it is allowed for contracts reasonably estimated at $1 million or more, or for renovation work where a substantial part of the cost cannot be calculated without first carrying out some of the work. Consumer Affairs Victoria’s guidance for builders reads that renovation exception narrowly, limiting cost plus to the investigative work needed to set a price, with the rest under a fixed price contract.
Rise and fall clauses are restricted under section 15 to contracts over $500,000 or clauses in a form approved by the Director of Consumer Affairs Victoria, and the regulator says none has been approved.
Allowances cannot carry an unrealistic number either. Prime cost items and provisional sums must not be set below the reasonable cost, and major contracts need a schedule for each showing estimated quantities and unit costs.
What is a fixed price contract under Victorian law?
The Act does not use the term fixed price. It describes a contract with a stated contract price that the builder must not exceed unless the Act allows it, such as through a documented variation, prime cost item or provisional sum. Cost plus contracts, where the final amount is unknown at signing, are restricted to work estimated at $1 million or more and certain renovation work.
What does a builder carry if the price is set before the design is finished?
The variation rules are where an early price can get expensive.
Under section 37, a builder who wants to vary the plans in a major contract must give the owner a written notice setting out the reason, the effect on the work, any delay and the cost, and needs the owner’s signed consent. Even then, the builder cannot recover the money unless the change was needed because of circumstances that could not reasonably have been foreseen when the contract was signed. The exception is where the Victorian Civil and Administrative Tribunal (VCAT) finds exceptional circumstances or significant hardship and decides recovery would not be unfair to the owner.
Changes the owner asks for run through a similar notice and signed request process under section 38. Small changes that need no permit variation, cause no delay and add no more than 2 per cent to the original price can go ahead without it.
A fixed price on incomplete drawings leaves a gap between what was priced and what gets built. Where that gap was foreseeable, the Act leaves it largely with the builder.
Quoting late carries the risk Palazzolo described: a design nobody priced along the way, a number the client cannot meet, and a job that never starts.
Where does design and construct sit under Victorian rules?
The Act’s list of covered work includes preparing plans or specifications for domestic building work. Since February 2024, it also covers managing or arranging that work.
Design carried out by an architect, a registered building designer or an endorsed building engineer is excluded. An architect’s design agreement with a client therefore sits outside the Act, while design work done under a builder’s own contract can sit inside it.
Where one contract pays a builder for domestic building work and for something else, section 12 requires the contract to identify and separate the domestic building work and the money attached to each part.
The podcast did not cover how Palazzolo documents his role during design, or whether it is charged separately. That structure shapes which of these rules apply, and how the contract is set up decides much of what follows.
The price of a renovation is decided before the quote
Palazzolo’s process does not remove risk. It moves the cost conversation to where changing a decision is still cheap, and holds the firm number until the drawings can carry it.
That order matches what Victoria’s Act expects of a contract price. The plans come first. The firm price follows.
For renovation builders, the useful question is not only what the job will cost. It is who is keeping track of that number while the design is being drawn.
The full conversation with Alex Palazzolo is on The Good Builder Podcast, wherever you listen.
The Good Builder Take
Most builders have priced a set of plans they knew would never get built. The client is disappointed, the architect is frustrated and the builder has spent days on a quote that goes nowhere. Palazzolo’s approach treats that as a process problem, not a client problem. The design stage is where a renovation’s cost is really set, and his answer is simply to be in the room for it.
Frequently asked questions
It is a preconstruction arrangement where the builder joins the design process from the start. The client agrees a ballpark budget before drawings begin, the builder prices changes as the design develops, and a fixed price quote is issued once final drawings and engineering are complete.
For a major domestic building contract, where the builder will receive more than $10,000, section 31 of the Domestic Building Contracts Act 1995 requires the contract to include plans and specifications with enough information to obtain a building permit.
Under section 13 of the Act and the regulations, cost plus contracts are allowed where the work is reasonably estimated at $1 million or more, or for renovation work where a substantial part of the cost cannot be calculated without first doing some of the work. Consumer Affairs Victoria says that exception covers the investigative work needed to set a price.
Under section 37, a builder needs a written notice and the owner’s signed consent, and can only recover the cost if the variation was caused by circumstances that could not reasonably have been foreseen when the contract was signed, unless VCAT allows it in exceptional circumstances.
Related articles
- Vinnie Vecchio says the fix for bad cash flow sits in the contract
- Running a building business in Australia
Last updated: 12 October 2026. Legislation references are to the Domestic Building Contracts Act 1995, authorised version 094, incorporating amendments as at 1 July 2026.
General Information Only: This article is general information only and does not constitute legal, financial or professional advice. Readers should seek advice specific to their own circumstances before acting on any information in it.
Author: TGB Editorial
0 Comments