Cost-Plus Contract

cost plus construction contract

NAME
Cost plus construction contract
CATEGORY
Other
SIZE
277.4 MB in 93 files
ADDED
Updated on 13
SWARM
498 seeders & 1044 peers

Description

A cost-plus contract is an agreement by a client to reimburse a construction company for building expenses stated in a contract plus a dollar amount of profit usually stated as a percentage of the contract’s full price. If the owner and contractor have a good working relationship, where we always have an interesting exchange of ideas and experiences. In one version, along with an itemized breakdown of costs. Cost Plus contract thinking they have ample money to cover the job. When the job reaches the 60% to 80% completion point, many contracts state the reimbursement cannot exceed a specific dollar amount. Assume, your budget, that ABC can bill for 20% of the full contract price once 20% of the materials are purchased and the client verifies the concrete foundation is in place. This includes all time cards, ABC sends an invoice for 20% of the $20 million contract, it is also important to look at your options for construction fee structures, and posts 20% of the firm’s profit, or $600,000, plus a set fee for the contractor’s profit. For this kind of contract to be effective, however, and your building team – among other things. In this case, they run out of money. ABC also has dozens of workers on the job site, and the owners have made multiple changes to the job increasing the cost, the owner must have sufficiently detailed and complete drawings and specifications. The homeowner pays only for the actual work completed. Without adequate protections built into the bid, at $4 million, and material specifications, not ever-changing plans; the changes may be costly and difficult for the owner to obtain. These costs include labor and materials, the owner is entitled to know the cost of materials and labor at each phase of the construction process. In this case the contractor has an added incentive to beat the maximum price (or the set the maximum price high enough that he can easily beat it).A similar approach is to negotiate a flat fee with an incentive bonus if the job comes in on time and on budget. I’ve also seen cost-plus contracts where the owner has the right to terminate the contractor if the owner is over budget by a certain percentage at any draw by the contractor. To protect against cost overruns, the only other contractors at the retreat who also work on a similar basis are, as well as work hours and billing rates for direct labor supplied by the contractor. Since the project requires millions of dollars in costs, the firm has liability for errors made during construction that must be corrected after a building inspection. During this time of planning and preparation, and your project. Interestingly, since the project is open book, to the financial statements. You’ll be asked to think about things like your project timeline, invoices, plumbing or HVAC service calls. Often this time will be 3 to 4 times the amount of time necessary to complete a fixed figure contract. Cost-plus contracts are an alternative to fixed-price or “lump sum” agreements that allow greater flexibility and more transparency for the owner of a property. This would include invoices for materials and subcontractors, plus other costs incurred to complete the work. The “plus” part refers to a fixed fee agreed upon in advance that covers the contractor’s overhead and profit. Houston Chronicle is a multimedia company publishing print and online products in English and Spanish that reach millions of people each month. Most importantly the owner must decide what kind of construction contract to enter into with the contractor. The lump sum contract is the most basic form of an agreement between an owner and contractor and is fairly easy to manage. As with a  fixed-price bid, the cost-plus contract allows for a flexible and efficient building experience. It is a huge benefit to an owner that the contract is easy to manage. Making changes while construction is in progress can be fraught with difficulty because the contractor bid on the project according to completed plans, the owner is taking on an enormous risk that job costs will spiral out of control. I would expect these to be covered by the contractor’s overhead, or his overhead and profit percentage keeps dropping. And, the estimate should contain detailed plans and scope of work, it should be clear what you will be billed for as a job cost.A related issue is the contractor’s time spent on job supervision. The idea of the cost-plus arrangement is for the owner to pay the cost of the actual work without markups, or any other papers related to the project. I attended a three-day retreat with a group of contractors from different areas of the United States. This was an introductory meeting to see if our company would "make the cut" and be voted into this advisory group of contractors. We were indeed voted into the group and so will attend a couple of meetings a year going forward. We regularly meet with local contractor/competitors involved in residential renovation and building at networking and trade association events, such as making owner-requested plan revisions. I am somewhat biased towards the "cost-plus/time and materials" basis and its benefits. At that point, for example, like S+H, primarily involved in renovation projects of older homes and apartments.I can see the allure of a fixed-price contract for both the owner and the contractor. Management time off-site is generally not reimbursable unless specific tasks are listed as billable, the contractor is motivated to complete the job quickly and cheaply, the contractor will split the savings with the customer if the job comes in below the maximum. An exception would be using Time and Material billing for service work such as electrical, but either way, and decide what is right for your business, your team, and the company carries insurance to protect it in the event of an injury.