A cost-plus construction contract comes in handy where the scope of work and final costs are uncertain or difficult to estimate, such as in complex construction projects or renovations. It outlines the contractor’s responsibilities, owner(s) obligation, and cost of the project. It also allows the contractor to be reimbursed for all costs incurred during the project.
This Cost Plus Construction Contract ("Contract") is entered into on (Date), by and between [Contractor.Company] (Your Construction Company's Name), hereinafter referred to as the "Contractor," and [Owner.FirstName] [Owner.LastName] , hereinafter referred to as the "Owner."
Name: [Owner.FirstName] [Owner.LastName]
Address: [Owner.StreetAddress] [Owner.City] [Owner.State] [Owner.PostalCode]
Name: [Contractor.FirstName] [Contractor.LastName]
Address: [Contractor.StreetAddress] [Contractor.City] [Contractor.State] [Contractor.PostalCode]
WHEREAS, the Owner intends to undertake a construction project (the "Project") described as follows:
Brief Description of the Project: (Insert a brief, specific description of the Project) Location: (Insert the complete address or legal description of the Project location)WHEREAS, Contractor is willing to provide construction services for the Project, as further described herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows:
A crucial component in a cost-plus construction contract is defining the responsibilities of each party. Detailing the contractor’s and owner’s responsibilities in this section helps in creating a harmonious working relationship.
The Contractor shall diligently and competently perform all work in strict accordance with the contract documents, including but not limited to the plans, specifications, and any subsequent modifications or change orders. The Contractor shall ensure the quality of workmanship and materials meets or exceeds industry standards.
The Contractor is responsible for the procurement of all necessary materials, equipment, and labor required to complete the construction project. This shall include but is not limited to, the selection, purchase, delivery, and storage of all materials and the hiring, supervision, and payment of all laborers, subcontractors, and suppliers.
The Contractor shall promptly and, in accordance with the terms of their agreements, make all payments to subcontractors and suppliers associated with the project. The Contractor shall bear full responsibility for the management and payment of all subcontractors and suppliers.
The Contractor shall, at all times, comply with all applicable federal, state, and local laws, regulations, ordinances, codes, rules, and standards pertaining to the construction work. This includes but is not limited to safety standards, building codes, environmental regulations, and permits required for the project.
The Owner shall be responsible for making payments to the Contractor for the cost of the work, as well as the agreed-upon fee. The cost of the work shall include all allowable costs as defined in this Contract.
The Owner shall ensure that the Contractor has unobstructed access to the construction site and shall provide all necessary utilities required for the construction, including but not limited to water, electricity, and sanitation facilities.
The Owner shall be responsible for obtaining all necessary permits, licenses, and approvals required for the construction project. This includes, but is not limited to, building permits, zoning variances, and environmental clearances.
The Owner shall obtain and maintain the builder's risk insurance for the construction project. This insurance shall cover any loss or damage to the work, including materials and equipment, caused by perils such as fire, theft, vandalism, and natural disasters.
In this section of the cost-plus construction contract, you should address how to pay for the project. This includes the contractor’s fees, labor, materials, and other project-related items.
The Contractor's compensation under this Agreement shall be based on the cost of work. The Contractor shall receive a fee calculated as a negotiated percentage of the cost of work, exclusive of certain components.
The Contractor's fee shall be calculated based solely on the following:
(a) The Contractor's costs for materials, labor, equipment, and other direct project expenses as directly related to the cost of work.
(b) No markup shall be allowed on subcontracts for the execution of the cost of work.(c) Excluded from the calculation of the Contractor's fee are Contractor overhead, profit, salaries, and other indirect expenses.
Payment to the Contractor shall be made through progress payments based on the Contractor's invoices, which shall accurately reflect the Cost of Work as defined in this Agreement.
The final payment to the Contractor shall be made after the completion of the Work and the acceptance of the project by the Owner. Final payment shall be based on the final Cost of Work as determined in accordance with the terms of this Agreement.
A well-structured cost-plus construction contract should address issues such as delays that can affect the project timelines. This includes leaving an allowance for things within the contractor’s control and unexpected delays.
In the event that the Contractor is delayed in the progress of the Work for reasons beyond the Contractor's control, including but not limited to acts of God, strikes, material shortages, changes in the Work ordered by the Owner, or other excusable delays, the Contractor shall promptly notify the Owner in writing of the cause of the delay. The Owner shall have the right to grant or deny time extensions, at the Owner's sole discretion, for any delays that are found to be excusable.
The Contractor acknowledges and agrees that, except for the extension of time for completing the Work as provided herein, the Contractor shall not be entitled to any additional compensation, damages, or claims for any delays or interruptions in the progress of the Work, regardless of the cause of such delays. The Contractor further waives any right to recover consequential damages, lost profits, or any other indirect damages arising from any delay.
This section of the cost-plus construction contract addresses the types of insurance both parties require. You should clearly outline what the contractor ought to cover and the validity period of the coverage.
The Contractor shall, at its own expense, procure and maintain insurance coverage during the term of this Agreement, in accordance with industry standards and with limits of liability as specified herein, and shall provide evidence of such insurance to the Owner prior to commencing any work under this Contract. Such insurance shall include, but not be limited to, general liability insurance, workers' compensation insurance, and automobile liability insurance, with minimum coverage limits as required by applicable laws and regulations.
The Contractor shall furnish to the Owner, within (Specified Time Frame), performance and payment bonds executed by a surety company licensed to do business in the jurisdiction where the project is located. The performance bond shall be in an amount not less than (Specified Amount) and shall guarantee the faithful performance of all Work under this Agreement.
The payment bond shall be in an amount not less than (Specified Amount) and shall guarantee the payment to all subcontractors, laborers, and material suppliers for labor and materials furnished in connection with this Contract. The Contractor shall maintain these bonds in full force and effect throughout the duration of the project. The bonds shall be issued on forms acceptable to the Owner and in compliance with applicable laws.
This Contract shall be governed by and construed in accordance with the laws of the State of (State), without regard to its conflict of law principles. Any legal action or proceeding arising under or in connection with this Contract shall be brought exclusively in the state or federal courts located within the State of (State), and the parties hereby consent to the personal jurisdiction and venue of these courts.
The prevailing party in any such legal action or proceeding shall be entitled to recover its reasonable attorneys' fees and costs incurred in connection with such action or proceeding.
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