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Connecticut Construction Contract Cost Plus or Fixed Fee

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This document is a construction contract between a Contractor and an Owner, outlining the terms and conditions for a construction project. It details the scope of work, work site, time of completion, permits, insurance requirements, changes to the scope of work, payment structure, late payment penalties, and warranty provisions. The contract emphasizes the responsibilities of both parties and includes clauses on destruction and damage, assignment rights, governing law, and cancellation rights for the Owner.

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When should you use a fixed-price contract?

A fixed-price contract with economic price adjustment may be used when (i) there is serious doubt concerning the stability of market or labor conditions that will exist during an extended period of contract performance, and (ii) contingencies that would otherwise be included in the contract price can be identified and

When to use cost-plus fixed-fee?

This contract is often used when the scope of the work cannot be precisely defined at the time of the agreement, and there are doubts about potential changes and variations in the course of the project. In a CPFF contract, the buyer agrees to reimburse the supplier for the allowable costs of the project.

What is the difference between a fixed price contract and a cost-plus contract?

A cost plus contract guarantees profit for the contractor. It is stated in the contract that the contractor will be reimbursed for all costs and still generate a profit. Conversely, a fixed price contract establishes a projects price beforehand.

Why should I use cost plus pricing?

Advantages: Simplicity: The cost plus pricing method is easy to implement. Calculate your production costs and set your markup percentage. To determine your markup, you should have a basic understanding of the market to be competitive.

When should firms use cost plus pricing?

Cost-plus pricing is most appropriate in industries with stable, identifiable costs or when businesses want to ensure predictable profit margins. It can also be useful in less competitive markets where demand is relatively inelastic.

What are the disadvantages of a cost-plus fee 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 the percentage of cost-plus in construction contracts?

A CPPC contract is one that is structured to pay the contractor his actual costs incurred on the contract plus a fixed percent for profit or overhead (that is not audited/adjusted) and which is applied to actual costs incurred.

What are the advantages of cost-plus fixed-fee contract?

Benefits of a cost-plus fixed-fee contract They allow you to explore and adjust the scope, unlike firm-fixed-price contracts. CPFF contracts foster better communication between clients and contractors, especially when both parties must work closely to guarantee contract performance.

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