Construction glossary term

Cost-Plus Contract

A cost-plus fee contract, or cost-plus management fee contract, is an agreement between a homeowner and contractor, whereby the client agrees to pay all of the project costs plus a set fee to the contractor for managing the project. This additional fee, or management fee, is typically negotiated prior to the start of a project and represents compensation for the contractor's services in overseeing and managing the entire project from beginning to end.

The fees associated with cost-plus management contracts often cover costs such as organizing subcontractors, ordering materials, dealing with suppliers, scheduling work crews, coordinating work among multiple tradespeople, and monitoring quality control. This type of contract also usually includes provisions to handle any issues that arise during construction, such as delays or unexpected expenses due to unforeseen circumstances. Furthermore, these agreements tend to include language that address payment terms as well as any disputes that could arise between parties.

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