Cost Plus Construction Contract Example

• Category: Massachusetts Construction - Contractors
• State: Massachusetts
• City: Boston
• Control #: MA-00462
• Format: Word; Rich Text

Description

This form is a Construction Contract that may be executed with either a cost plus or fixed fee payment arrangement. The form contains the following additional subject matters and complies with the laws of the State of Massachusetts: scope of work, work site, warranty and insurance. A construction contract in Boston, Massachusetts can be structured either as a Cost Plus or Fixed Fee arrangement. Cost Plus contracts are defined by the project owner reimbursing the contractor for all allowable expenses incurred during construction, in addition to a predetermined fee or percentage for profit and overhead. This type of contract provides transparency as the owner has visibility into the actual costs incurred, and any changes to the scope can be accommodated without renegotiating the contract. On the other hand, a Fixed Fee contract sets a predetermined price for the entire construction project. This lump sum includes all costs, expenses, and profits, and is agreed upon before the work begins. Fixed Fee contracts are commonly used when there is well-defined project scope and limited possibility of design changes or unforeseen conditions. This type of contract provides cost certainty, as the project owner knows the final price upfront. There are variations within these contract types. In a Cost Plus Percentage Fee contract, the contractor's fee is determined as a percentage of the project's final cost. This can result in a higher fee for the contractor, which is determined by the markup percentage agreed upon. It is important for the owner to negotiate a reasonable markup rate to avoid excessive costs. Another variation is the Guaranteed Maximum Price (GMP) contract, which is a type of Cost Plus contract but with a limit on the maximum price that the owner will pay. The contractor is responsible for managing the project within the set budget, and any savings realized may be shared between the owner and contractor. This contract structure incentivizes the contractor to complete the project efficiently while minimizing costs. To choose between Cost Plus or Fixed Fee contracts, it is essential to consider the complexity and uncertainty of the project, the owner's preference for cost visibility or predictability, and the level of control and risk sharing desired. In summary, Boston Massachusetts Construction Contracts can be either Cost Plus or Fixed Fee agreements, with variations such as Cost Plus Percentage Fee and Guaranteed Maximum Price contracts. These contracts differ in how costs, profits, and risks are allocated between the project owner and contractor, offering different levels of cost transparency and certainty.

A construction contract in Boston, Massachusetts can be structured either as a Cost Plus or Fixed Fee arrangement. Cost Plus contracts are defined by the project owner reimbursing the contractor for all allowable expenses incurred during construction, in addition to a predetermined fee or percentage for profit and overhead. This type of contract provides transparency as the owner has visibility into the actual costs incurred, and any changes to the scope can be accommodated without renegotiating the contract. On the other hand, a Fixed Fee contract sets a predetermined price for the entire construction project. This lump sum includes all costs, expenses, and profits, and is agreed upon before the work begins. Fixed Fee contracts are commonly used when there is well-defined project scope and limited possibility of design changes or unforeseen conditions. This type of contract provides cost certainty, as the project owner knows the final price upfront. There are variations within these contract types. In a Cost Plus Percentage Fee contract, the contractor's fee is determined as a percentage of the project's final cost. This can result in a higher fee for the contractor, which is determined by the markup percentage agreed upon. It is important for the owner to negotiate a reasonable markup rate to avoid excessive costs. Another variation is the Guaranteed Maximum Price (GMP) contract, which is a type of Cost Plus contract but with a limit on the maximum price that the owner will pay. The contractor is responsible for managing the project within the set budget, and any savings realized may be shared between the owner and contractor. This contract structure incentivizes the contractor to complete the project efficiently while minimizing costs. To choose between Cost Plus or Fixed Fee contracts, it is essential to consider the complexity and uncertainty of the project, the owner's preference for cost visibility or predictability, and the level of control and risk sharing desired. In summary, Boston Massachusetts Construction Contracts can be either Cost Plus or Fixed Fee agreements, with variations such as Cost Plus Percentage Fee and Guaranteed Maximum Price contracts. These contracts differ in how costs, profits, and risks are allocated between the project owner and contractor, offering different levels of cost transparency and certainty.