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What is a cost-plus contract in construction?

Unlike a fixed-cost construction contract, a cost-plus construction agreement is a contract in which the owner pays the contractor the actual costs of the materials and labor plus an additional negotiated fee or percentage over that amount.

What does cost-plus 10% mean?

Cost plus is about as simple as it sounds. Retailers set shelf pricing for every item in the store at their cost the item, transportation and warehousing costs and labor to get it on the shelf and simply charge consumers 10% of their total basket at checkout.

What is a fixed fee?

From Longman Business Dictionary ˈfixed ˌfee (also flat fee) [countable] a set amount paid for work or a service, that does not change with the time the work takes or the amount the service is usedQuebec doctors get a fixed fee for each medical service performed.

What is the major disadvantage of cost-plus percentage fee contracting method?

Cost Plus Contract Disadvantages For the buyer, the major disadvantage of this type of contract is the risk for paying much more than expected on materials. The contractor also has less incentive to be efficient since they will profit either way.

What is a typical markup for contractors?

Average Markup for General Contractors? Most contractors are looking at a 35% margin; thus, a markup of 54%, or 1.54, is required. Subs typically have a gross profit margin of 50%; hence they require a markup of 100% or 2x.

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