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 Tennessee: scope of work, work site, warranty and insurance.
Para su conveniencia, debajo del texto en español le brindamos la versión completa de este formulario en inglés. For your convenience, the complete English version of this form is attached below the Spanish version.Tennessee Costo del contrato de construcción más o tarifa fija - Tennessee Construction Contract Cost Plus or Fixed Fee
Category:
State:
Tennessee
Control #:
TN-00462
Format:
Word
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Description
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Key Concepts & Definitions
Construction Contract Cost Plus or Fixed Fee: In the US, these are two common types of payment agreements in construction contracts. A fixed fee contract stipulates a set amount that will cover all work performed by the contractor, offering a stable cost. In contrast, a cost plus contract covers the actual costs of materials and labor plus an additional fee that represents the contractors profit, which is usually a percentage of the project's costs.
Step-by-Step Guide to Choosing Between Cost Plus and Fixed Fee Contracts
- Evaluate Project Scope: Assess the complexity and duration of the project. Fixed fee is often favorable for projects with a well-defined scope, while cost plus may be better for projects where scope is subject to change.
- Analyze Financial Constraints: Consider your budget flexibility. Fixed fee contracts provide a predictable budget, whereas cost plus contracts can escalate if not tightly managed.
- Risk Assessment: Determine your risk tolerance as cost plus contracts might introduce budgetary uncertainty due to varying material costs and labor.
- Consult with Professionals: Engage with a construction attorney or a seasoned contractor who can provide insights based on past experiences and the specific nuances of your project.
Risk Analysis
- Budget Overruns: Cost plus contracts can lead to unexpected increases in costs, posing risks of budget overruns.
- Fixed Fee Limitations: Fixed fee contracts can lead to lower quality if the contractor cuts corners to stay within budget.
- Transparency and Trust: Cost plus contracts require high levels of transparency and trust between the contractor and client to ensure that costs are reported accurately.
Key Takeaways
Choosing the right type of construction contract depends heavily on the specific circumstances of the project, including its scope, duration, and the financial and risk preferences of the client. Both types of contracts have their advantages and challenges, and the choice should be made with a clear understanding of these factors.
Best Practices
- Detailed Documentation: Regardless of contract type, maintain thorough documentation of all costs, changes, and approvals.
- Clear Communication: Ensure continuous and clear communication between all parties involved to avoid misunderstandings and disputes.
- Rigorous Monitoring: Regularly monitor the cost and progress of the project to avoid surprises, particularly with cost plus contracts.
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