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Unlike a fixed-cost construction contract, a cost-plus construction agreement is a contract in which the owner pays the contractor the actual costs of the materials and labor plus an additional negotiated fee or percentage over that amount.

Cost-Plus Agreements: With this contract, the owner pays a contractor for the costs incurred for labor, materials, and other services. On top of these expenses, the “plus” is an additional amount intended to serve as profit for the contractor.

Cost Plus Contract Disadvantages For the buyer, the major disadvantage of this type of contract is the risk for paying much more than expected on materials. The contractor also has less incentive to be efficient since they will profit either way.

Cost-plus percentage of cost is a method contractors often use to price services. This type of contract specifies that the buyer must pay all the project costs incurred by the seller, plus an additional amount for profit.

Here are six practice tips that can help an owner protect themselves from the risk posed by a Cost-Plus contract: 1) Demand Quantity Guarantees. ... 2) Limit Increases in the Contractor's Fee. ... 3) Eliminate Budgetary Fluff. ... 4) Carefully Select the Project Team. ... 5) Demand Transparency. ... 6) Reduced Risk means a Reduced Fee.

A Texas residential purchase and sale agreement outlines the terms and conditions of an offer to purchase real estate. The document informs the seller of the amount the buyer is willing to pay and specifies various terms the seller must satisfy if the buyer is to agree to the sale.