what is cost plus in construction?

 A cost-plus contract is a type of construction contract in which the contractor is reimbursed for all of the costs associated with a project, plus a fee to account for the contractor's overhead and profit. The fee is typically a percentage of the project costs, but it can also be a fixed fee.

Cost-plus contracts are often used when the scope of the project is not well-defined or when there is a high degree of uncertainty about the costs. This type of contract can also be used when the owner wants to ensure that the contractor is not taking on too much risk.

The main advantage of a cost-plus contract is that it provides the contractor with a guaranteed level of profit. This can be attractive to contractors, especially when the project is complex or risky. However, cost-plus contracts can also be more expensive for the owner, as they do not have a fixed price.

Here are some of the key considerations when using a cost-plus contract:

The scope of the project must be well-defined. The contractor should be able to provide a detailed estimate of the project costs, including all direct and indirect costs.

The fee must be reasonable. The fee should be high enough to cover the contractor's overhead and profit, but it should not be excessive.

The contract should be well-written. The contract should clearly define the scope of the project, the costs that will be reimbursed, and the fee that will be paid.

Cost-plus contracts can be a good option for some projects, but they are not always the best choice. It is important to carefully consider the risks and benefits before using this type of contract.

Here are some of the different types of cost-plus contracts:

Cost-plus-fixed-fee (CPFF): This is the most common type of cost-plus contract. The contractor is reimbursed for all of the costs associated with the project, plus a fixed fee.

Cost-plus-percentage-of-cost (CPP): The contractor is reimbursed for all of the costs associated with the project, plus a percentage of the costs. The percentage is typically 10-20%.

Cost-plus-incentive-fee (CPIF): This type of contract includes an incentive fee for the contractor. The incentive fee is based on the contractor's performance, such as meeting the project deadline or staying within budget.

Cost-plus-award-fee (CPAF): This type of contract includes an award fee for the contractor. The award fee is based on the contractor's performance, such as the quality of the work or the satisfaction of the owner.

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1. https://medium.com/@accurateestimates.seo/construction-cost-estimation-services-by-accurateestimates-us-c6f812060b8e
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