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Is cost-plus a good idea?

For these reason I recommend avoiding cost-plus contracts in most cases. They simply carry too many risks for the owner and few benefits. They often lead to cost overruns and disputes over money. Its better to nail down as many costs as possible before starting the job and get a fixed bid.

What is a disadvantage of a cost-plus fixed fee contract?

Disadvantages of cost-plus fixed-fee contracts may include: The final, overall cost may not be very clear at the beginning of negotiations. May require additional administration or oversight of the project to ensure that the contractor is factoring in the various cost factors.

What cost-plus contract means?

A cost-plus contract is an agreement that specifies the client will pay the contractor for construction expenses detailed in the contract, plus an additional percentage to provide the contractor with a profit.

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.

Which is an example of cost-plus fixed fee pricing?

A: As an example, a cost-plus contract may establish that the total estimated cost of a building project is $10 million plus a fixed fee of $1.5 million, roughly 15% of the total cost, as the contractors profit. So the total expense to the buyer would be approximately $11.5 million the cost plus the fee.

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