COST PLUS CONTRACT Cost + (cost plus) is a Contract agreement where the Owner agrees to pay the cost of all labor and substances plus an amount for Contractor overhead and profit (usually as a percentage of the labor and substance cost). It is like a Labour Contract, but here the Contractor buys the substances and provides the labour and is reimbursed accordingly. Under this arrangement complete records of all time and substances spent by the Contractor on the work must be maintained. This type of Contract is favored where the scope of the work is indeterminate or highly uncertain and the kinds of labor, substance and equipment needed are also uncertain.
This type of Contract can be altered according to the basis on which the additional amount paid to the Contractor is fixed.
Cost + Fixed % Contract – It is based on a percentage of the cost of labour and materials.
Cost + Fixed Fee Contract – It is based on a fixed sum independent of the final undertaking cost.
Cost + Fixed Fee Bonus Contract –It is based on a fixed sum of money and a bonus is given if the undertaking finishes below budget, ahead of schedule etc.
Cost + Fixed Fee With Sharing Any Cost Savings Contract – It is based on a fixed sum of money and any cost savings are shared with the Owner and the Contractor.
Incentive Contracts – It is based on the Contractor’s performance on the agreed target – budget, schedule and/or standard.
Advantages of the Cost + Contract
Disadvantages of Cost + Contract