What is a potential problem with a simple cost-plus contract?

Potential downsides to the cost-plus approach For contractors, the potential negatives include the interference of an owner who doesn't understand the construction process and the possibility of that person taking a peek into their books with an uneducated eye.

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Home Improvement or Remodeling Construction Contract - Cost Plus...

Tarrant Texas Home Improvement or Remodeling Construction Contract - Cost Plus Basis of Payment

Name: Tarrant Texas Home Improvement or Remodeling Construction Contract - Cost Plus Basis of Payment
Brand: US Legal Forms
Rating: 4.72 (246 reviews)

Category:

Construction - Contractors

State:

Multi-State

County:

Tarrant

Control #:

US-02023BG

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Description

A cost-plus contract is one in which the purchaser agrees to pay the cost of all labor and materials plus an amount for contractor overhead and profit (usually as a percentage of the labor and material cost). This type of contract is often used when the scope of the work is undermined or highly uncertain and the kinds of labor, material and equipment needed are also uncertain. It is important that the contractor maintain complete records of all time and materials spent by the contractor on the work.

This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.

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FAQ

Advantages and Disadvantages of Using Cost-Plus Contracts They eliminate some risk for the contractor. They allow the focus to shift from the overall cost to the quality of work being done. They cover all the expenses related to the project, so there are no surprises.

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.

Q: How does a cost-plus contract work? A: In a cost-plus contract, the buyer and seller agree on a set of expenses that will be reimbursed for a project, as well as a usually fixed fee on top of those costs. The fee represents the contractor's profit.

Advantages and Disadvantages of Contracting Higher take-home pay.Tax relief on business expenses.Greater opportunity for tax planning.Total control of your business and name.One company for all your business interests.Limited liability and protection of personal assets.

Disadvantages of cost-plus fixed-fee contracts may include: The final, overall cost may not be very clear at the beginning of negotiations. May require additional administration or oversight of the project to ensure that the contractor is factoring in the various cost factors.

Adjective ADJ n A cost-plus basis for a contract for work to be done is one in which the buyer agrees to pay the seller or contractor all the costs plus a profit. All vessels were to be built on a cost-plus basis.

Potential downsides to the cost-plus approach For contractors, the potential negatives include the interference of an owner who doesn't understand the construction process and the possibility of that person taking a peek into their books with an uneducated eye.

A cost plus contract is a contract where a contractor obtains material and services throughout the stages of the building process and costs are passed to the owners, with an agreed margin to cover overheads and profits. The hourly rates of the contractor's labour are usually agreed upon.

Tarrant Texas Home Improvement or Remodeling Construction Contract - Cost Plus Basis of Payment

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Interesting Questions

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