I have heard of contractors using this method however, I have never found it to be very practical. This method doesn't allow for change orders or special installations as needed. It just seems to be too generic and not specific enough for proper determination of total costs, labor, and potential profit. Just my opinion.
Square foot pricing is tricky. Is it a wire to code, with no fixtures? Is it 20 x 20 a great room additon or is does it include a new kitchen, service upgrade, central heat and AC...Unless you have just recently completed a similar project, I would stick with more cnventional methods of estimating.
I have done a few houses for a simple square footage charge, and none of them have been worth the time.
However, I'm learning from my early mistakes...I think.
I now add to the standard/basic square footage price for any upgrades, added drops, etc. This is discussed prior to performing any work, and given to the customer in writing so any added fees can/will be as clear as possible for the customer.
Again, I'm not sure if this is the best way, but it is a way to give the customer a number to work with for his/her estimating. Since most are wanting a cost per sq. foot number from each contractor.
The only time I see a flat square footage bid can work is when the work is being performed for a builder that will be building only a minimal number of floor plans over and over and over...