What is a Cost Plus Construction Contract?
A cost plus construction contract is a type of construction contract that allows for the contractor to bill the client for any and all costs associated with the construction project, plus a fee for the contractor’s services. It is a popular option for large projects where the contractor can be sure that all costs will be covered.
Advantages of Cost Plus Construction Contracts
Cost plus construction contracts can provide a greater degree of flexibility and control to the contractor, and can also provide greater financial security. The contractor knows that all costs will be covered and they can plan and budget accordingly. Additionally, the contractor can charge a fee for their services, allowing them to maximize their profits.
Disadvantages of Cost Plus Construction Contracts
The main disadvantage of cost plus construction contracts is that they can be difficult to manage and monitor. There is a risk that the contractor could overcharge for their services, or underestimate the costs associated with the project. Additionally, it can be difficult to predict the final cost of the project, as the costs can change as the project progresses.
Creating a Cost Plus Construction Contract Template
Creating a cost plus construction contract template can help to ensure that all parties involved have a clear understanding of the terms and conditions of the agreement. The template should include all of the important details, including the contractor’s fees, the estimated costs of the project, and how the payments will be handled. Additionally, the template should include any additional clauses or provisions that may be necessary for the project.
Things to Consider When Creating a Cost Plus Construction Contract Template
When creating a cost plus construction contract template, it is important to ensure that all of the necessary details are included. Additionally, it is important to ensure that the template is easy to understand and clearly outlines the expectations of both parties. Finally, it is important to ensure that the template is flexible enough to allow for changes as the project progresses.
Conclusion
Cost plus construction contracts can be a great option for large projects, as they allow the contractor to bill the client for any and all costs associated with the project, plus a fee for their services. However, it is important to ensure that a clear and concise cost plus construction contract template is in place, as this will help to ensure that the project runs smoothly.