Arizona Construction Contract Cost Plus or Fixed Fee
What this document covers
This Construction Contract is designed for use when a project is financed with either a cost plus arrangement or a fixed fee. Unlike traditional contracts, which typically rely on fixed costs, this form offers flexibility to accommodate varying project expenses or predetermined fees. It includes essential components such as the scope of work, work site details, warranties, and insurance requirements, all tailored to comply with the laws of Arizona.
Common use cases
This form is ideal for property owners and contractors starting a construction project where costs are not fixed. Use this form when you aim to ensure clear communication regarding project scope, payment structures, or when adjusting the project as it develops. It is particularly beneficial for projects involving varying material costs or labor expenses, as well as for large-scale renovations or new builds.
Who can use this document
- Homeowners planning a construction or renovation project.
- Contractors and subcontractors engaged in construction agreements.
- Real estate developers managing various construction projects.
- Individuals in Arizona looking to establish clear contractual terms.
Steps to complete this form
- Identify the parties involved in the contract: include names and contact information for both the owner and contractor.
- Specify the work site: clearly outline the location of the construction project.
- Detail the scope of work: provide a comprehensive description of tasks to be completed.
- Outline payment terms: include deposit amounts, payment schedules, and progress payments.
- Sign and date the contract: ensure both parties acknowledge and agree to the terms.'
Notarization guidance
Notarization is generally not required for this form. However, certain states or situations might demand it. You can complete notarization online through US Legal Forms, powered by Notarize, using a verified video call available anytime.
Common mistakes to avoid
- Failing to accurately define the scope of work, leading to disputes later.
- Not detailing payment terms clearly, which can result in late payments.
- Overlooking necessary permits and regulatory approvals required for the project.
- Not addressing how changes in project scope will be managed through Change Orders.
Benefits of using this form online
- Convenience: Download the form anytime from your device without needing legal counsel.
- Editability: Customize the form according to your specific project requirements.
- Legal reliability: Forms created by licensed attorneys ensure compliance with current laws.
Form popularity
FAQ
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.
A cost-plus contract is an agreement to reimburse a company for expenses incurred plus a specific amount of profit, usually stated as a percentage of the contract's full price.
A Cost-Based Pricing Example Suppose that a company sells a product for $1, and that $1 includes all the costs that go into making and marketing the product. The company may then add a percentage on top of that $1 as the "plus" part of cost-plus pricing. That portion of the price is the company's profit.
Cost-plus-fixed-fee tends to me more advantageous to the buyer as opposed to the seller as it caps the fee and the fee will not swell or grow based on the future expansion or fluctuations of the budget. However, it also can protect the seller because, in the event the budget tightens, it provides a fixed fee.
In the cost plus a percentage arrangement, the contractor bills the client for his direct costs for labor, materials, and subs, plus a percentage to cover his overhead and profit. Markups might range anywhere from 10% to 25%.
A fixed price contract sets a total price for all construction-related activities during a project. Many fixed price contracts include benefits for early termination and penalties for a late termination to give the contractors incentives to ensure the project is completed on time and within scope.
A cost-plus contract, also known as a cost-reimbursement contract, is a form of contract wherein the contractor is paid for all of their construction-related expenses. Plus, the contractor is paid a specific agreed-upon amount for profit.
A fixed-price contract is a type of contract where the payment amount does not depend on resources used or time expended. This is opposed to a cost-plus contract, which is intended to cover the costs with additional profit made.
