Illinois Construction Contract Cost Plus or Fixed Fee
Understanding this form
The Construction Contract Cost Plus or Fixed Fee form is a legal document that establishes a formal agreement between a contractor and a property owner for the construction of a project. This form caters to either a cost-plus or fixed fee payment arrangement, allowing flexibility in pricing. It includes essential details related to the scope of work, work site, warranty, and insurance, ensuring compliance with the laws of Illinois. This document differs from standard contracts by accommodating variable project costs and providing clear guidelines for payment and responsibilities.
Key parts of this document
- Details of the work site and project location.
- Requirements for obtaining necessary permits and regulatory approvals.
- Provisions regarding soil conditions and responsibilities of the contractor.
- Insurance obligations, including liability and workers' compensation.
- Process for changes to the scope of work through formal Change Orders.
- Late payment penalties and default provisions.
- Destruction and damage clauses outlining responsibilities in case of loss.
- Warranties covering workmanship and material defects.
Situations where this form applies
This form should be used when an owner wishes to engage a contractor for a construction project that may involve fluctuating costs based on actual expenses (cost-plus) or a predetermined fixed fee. It is ideal for both new constructions and renovations, especially when the scope of work is likely to change during the project. The contract ensures both parties understand their obligations and protections are in place regarding payment and project management.
Who should use this form
- Property owners planning to have construction work done on their property.
- Contractors who need to formalize their agreements with clients.
- Individuals or businesses looking for a flexible payment structure in construction contracts.
How to prepare this document
- Identify the parties involved, including the contractor and property owner.
- Specify the work site location and address clearly.
- Outline the scope of work and any specific materials to be used.
- Detail the payment structure, indicating if it is cost-plus or fixed fee.
- Incorporate required signatures to finalize the agreement.
Notarization guidance
Notarization is required for this form to take effect. Our online notarization service, powered by Notarize, lets you verify and sign documents remotely through an encrypted video session, available 24/7.
Mistakes to watch out for
- Failing to fully outline the scope of work, leading to misunderstandings later.
- Not including all required signatures, which could invalidate the contract.
- Overlooking local permit requirements that can delay the project.
- Neglecting to detail the process for change orders, which may lead to disputes.
- Not specifying the insurance obligations clearly, risking legal issues.
Benefits of using this form online
- Convenient access to legal forms anytime, which saves time.
- Editable templates allow for customization based on specific needs.
- Ensures that all forms comply with current legal standards and terminology.
- Easy downloading and storage for future reference.
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FAQ
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.
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 percentage of cost contract or CPPC is a cost reimbursement contract containing some element that obligates the non-state entity to pay the contractor an amount, undetermined at the time the contract was made and to be incurred in the future, based on a percentage of future costs.
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 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 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.
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-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.
