How Reliable is a Builder's Bid?

[Jim Macedon]

Good afternoon.

I have a question about bids you receive from builders for new construction.  My understanding is that if you sign a contract for a guaranteed maximum price, that is pretty solid.  The builder has already built in contingencies to cover his or his subcontractors' mistakes in the bidding process, etc.  The price can only go up based on materials increasing in price by over 25% or whatever the contract states.  This is what several builders have told me and what I have read.

On the other hand, I keep hearing people say that there will always be cost overruns and you shouldn't trust a builder's bid.  

Which of these is correct?

I like to be vigilant and a realist.  But I also don't like to be limited by irrational fears/concerns either.  It seems to me if a contract states that the price is a guarantee, then it is probably a guarantee barring some unusual circumstance.