£3,500 at £45 per night represents nearly 80 nights and that doesn’t sound a lot for building a new house, but perhaps he intends to use some local sub-contractors. At least by accepting the lump sum arrangement (provided it is within your budget) you know how much you are committed to – provided that you make it clear you will not pay more if the job overruns. Paying by the night is less satisfactory because you would become involved in clerical work checking the number of men on site each day. Neither arrangement is perfect but, of the two choices, the lump sum is likely to be the better one.