What is a cost plus contract and what are its advantages and disadvantages?
A cost plus contract is one where the builder charges a markup on the costs incurred in the execution of the contract. In addition to hard construction costs, project costs may include the cost of site supervision, insurance, and setup. On a cost plus 15% contract, for example, the client would be charged $1.15 for every dollar the builder spends. The advantage of this contract is that the client will have knowledge of all expenses incurred and benefit from any savings realized throughout the process. The disadvantages are that if costs increase due to plan errors or omissions, inflation or inaccurate estimates the client pays the extra. There also is less incentive for the builder to control costs as the builder is getting paid 15% on every dollar spent. In a cost plus contract, clients are generally more involved and have the opportunity to review bills paid on a monthly basis. In any cost plus contract it is important to determine who is responsible for costs due to site damage, van
