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What does cost-plus mean in contracting?

A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract.

What is the difference between lump sum and cost-plus fixed fee contract types?

Cost-plus contracts are similar to lump sum contracts in that the owner agrees to pay the contractors costs, including labor, subcontractors, equipment and materials and an amount for the contractors profit and overhead. But instead of a lump sum to cover all the expenses, those costs are reimbursed individually.

What is the difference between cost-plus and fixed fees?

A cost plus contract means that the price of construction is the costs plus an additional fee, normally designated as profit. The fixed costs include the cost of the materials and labor along with indirect costs known as overhead. It is simply an agreement to pay costs plus profit, all as defined in the contract.

What is a construction contract price?

The construction contract price includes the direct project cost including field supervision expenses plus the markup imposed by contractors for general overhead expenses and profit. The factors influencing a facility price will vary by type of facility and location as well.

How do you price a construction contract?

There are three basic types of pricing arrangements in construction contracts: (1) stipulated sum (also known as fixed price or lump sum), (2) cost plus (with or without a guaranteed maximum or not-to-exceed price), and (3) unit price.

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