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 Oklahoma: scope of work, work site, warranty and insurance.
Oklahoma City, Oklahoma Construction Contract Cost Plus or Fixed Fee: A Comprehensive Overview When undertaking any construction project in Oklahoma City, Oklahoma, it is vital for both contractors and property owners to understand the different types of contracts available. Two common options are the Cost Plus and Fixed Fee construction contracts, each carrying distinct benefits and considerations. In this article, we delve into the details of these contract types, shedding light on their key features, advantages, and potential applications. 1. Cost Plus Construction Contract: The Cost Plus construction contract, also known as a cost reimbursement contract, is an agreement where the contractor is entitled to reimbursement for the actual costs incurred during the construction process, along with an additional fee or percentage. Key features of a Cost Plus Contract: — Actual Costs: Under this arrangement, the contractor provides detailed documentation and receipts to support the incurred expenses throughout the project. This includes materials, labor, equipment rentals, and any other costs directly associated with the construction. — Fee Structure: In addition to cost reimbursement, the contractor receives an additional fee or percentage for their services. The fee can be a fixed amount or a percentage of the total project costs, negotiated and agreed upon by both parties. — Transparency: A Cost Plus contract promotes transparency as it allows the property owner to review and verify the actual expenditures, ensuring they pay fair and reasonable costs while also minimizing the potential for profit padding. — Flexibility: This type of contract is particularly useful for projects with uncertain scopes, where changes or additions might arise during construction. Cost Plus agreements provide flexibility as they accommodate modifications and variations smoothly without the need for extensive contract renegotiation. 2. Fixed Fee Construction Contract: A Fixed Fee construction contract, also known as a lump sum or stipulated sum contract, is an agreement where the contractor is responsible for completing the entire project for a fixed and predetermined amount. Key features of a Fixed Fee Contract: — Predetermined Amount: The contractor agrees to complete the project at a fixed price agreed upon before the start of construction, incorporating all direct and indirect costs associated with the project, including labor, materials, and equipment expenses. — Defined Scope: Fixed Fee contracts work best when both parties clearly specify the project's scope, minimizing uncertainties. It is crucial for the property owner to detail all requirements accurately, leaving no ambiguity that may lead to additional costs or disputes later on. — Risk Allocation: In Fixed Fee contracts, the contractor assumes the varying levels of risk associated with the project budget, any resource overruns, or unexpected challenges that may arise during construction. This places the onus on the contractor to complete the project within the predetermined budget while still delivering the required quality and specifications. — Competitive Bidding: Fixed Fee contracts are often utilized in construction projects with well-defined scopes. Property owners typically invite multiple contractors to bid on the project, comparing proposals based on the fixed price, thereby fostering competition and potentially securing more competitive rates. In summary, whether opting for the Cost Plus Construction Contract or the Fixed Fee Construction Contract, both approaches have their merits. The Cost Plus contract ensures transparency and flexibility, accommodating changes during construction, while the Fixed Fee contract provides a predictable budget and places the onus of risk on the contractor. Choosing the appropriate contract type largely depends on the project scope, timelines, and the level of control desired by the property owner. It is advisable to consult with legal professionals or experienced construction advisors to determine the most suitable contract type for your specific project needs.
