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Cost plus construction contract example

Cost plus construction contract template 2025

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This document is a Construction Contract between a Contractor and an Owner, outlining the terms and conditions for the construction of a project. It details the scope of work, work site, timelines for commencement and completion, permit requirements, insurance obligations, soil conditions, payment structure (either cost-plus or fixed fee), late payment penalties, and procedures for changes to the scope of work. Additionally, it includes clauses on destruction and damage, assignment of the contract, interpretation of documents, subcontractors, warranty limitations, and cancellation rights for the Owner. The contract emphasizes compliance with local laws and regulations.

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What are the disadvantages of a cost-plus contract?

Cost plus construction contracts offer advantages like transparency, flexibility, and reduced contractor risk. They also come with drawbacks, including uncertain pricing, a higher administrative workload, and a greater risk of disputes.

What is a construction cost-plus contract?

A cost-plus contract is a construction agreement that requires reimbursement for project costs as well as a markup that covers the contractors overhead and profit. In other words, the name is a short-hand way of remembering what the contract covers: project costs plus contractor markup.

What should be in a cost-plus contract?

With a cost-plus contract, the contractor and client first agree on what counts as costs and how profit will be calculated. Costs: Costs might include only direct costs, such as labor and materials, or they might include additional indirect costs, such as overhead expenses.

What percentage do contractors charge for cost-plus?

Example of a cost-plus clause The Buyer agrees to pay the Seller for the cost of materials and labor used in the project, plus an additional 15% markup to cover overhead and profit. The total amount shall be invoiced monthly, and payment will be due within 30 days of receipt of the invoice.

How to structure a cost-plus contract?

Most contracts have a cost-plus fee scale of 10-25%. A contractor would use takeoff software to calculate the materials costs, but they wouldnt need to be exact. Some companies use a cost-plus-fixed-fee (CPFF) instead of a percentage.