The basic problem with fixed-price bidding on the residential side is that it rewards builders who hire unqualified subcontractors. It's less of a problem with the licensed trades (plumbing, electrical, HVAC) than it is with the carpentry and finishing trades. General contractors who know they must compete on price to win a job have access to unskilled or low-skilled labor -- often, immigrant labor -- to reach a price goal. When combined with a GC with little or no technical construction skills, some of the basic aspects of a residential project can go very wrong.
Relatedly, because of the nature of the labor market and the emphasis on low-price fixed bidding, the apprentice system for developing unskilled laborers into highly skilled craftsmen has all but died. There is a tier in the market that works this way, but it's a rarified tier devoted to very expensive homes, historic restoration, and hobby construction. In the competitive building market, where price is king, it's not worth training workers to become craftsmen; no one will pay what a craftsman expects to earn.
At every price point in residential remodeling and construction, we suggest avoiding fixed-price contracts. We prefer modified cost-plus arrangements where a thoroughly professional and technically-skilled builder lines up subcontracting bids with known, good subs; prices carpentry out at hourly rates with an overall cap; and takes a fixed markup on everything. There are other bells and whistles, but this is the essence of a successful construction arrangement on the residential side.