Kentucky Construction Contract Cost Plus or Fixed Fee

State:
Kentucky
Control #:
KY-00462
Format:
Word; 
Rich Text
Instant download

Description

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 Kentucky: scope of work, work site, warranty and insurance.

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  • Preview Construction Contract Cost Plus or Fixed Fee
  • Preview Construction Contract Cost Plus or Fixed Fee
  • Preview Construction Contract Cost Plus or Fixed Fee
  • Preview Construction Contract Cost Plus or Fixed Fee
  • Preview Construction Contract Cost Plus or Fixed Fee
  • Preview Construction Contract Cost Plus or Fixed Fee
  • Preview Construction Contract Cost Plus or Fixed Fee

Key Concepts & Definitions

Cost-Plus Construction Contracts: A contractual arrangement where the contractor is reimbursed for all direct project costs and receives an additional fee that represents contractor's profit. Fixed Fee Construction Contracts: Also known as a lump sum contract, where the contractor agrees to complete the project for a fixed price regardless of the actual costs. Direct Costs Overview: Includes costs that are directly attributable to the construction project like labor, materials, and equipment.

Step-by-Step Guide to Choosing Between Cost Plus or Fixed Fee Contracts

  1. Define Project Scope: Clearly define the scope of the project, considering the size and complexity of the real estate project.
  2. Consider Financial Implications: Assess financial stability and predict the variability of costs to decide whether a cost plus or a fixed fee contract suits your financial strategies.
  3. Project Risk Analysis: Higher risk projects might be better suited to cost plus contracts to allow for changing conditions.
  4. Consult Financial Lawyers: Obtain expert advice from financial lawyer services for construction contract review and to ensure all legal territories are covered.
  5. Use Project Management Tools: Leverage the best project planning tools and construction contract tracking software to keep the project in line with budget and deadlines.

Risk Analysis in Cost Plus vs. Fixed Fee Contracts

Cost plus contracts often carry the risk of uncontrolled spending as they do not put a cap on project costs. In contrast, fixed fee contracts impose a strict budget but can lead to shortcuts or lower quality if unforeseen costs arise, challenging contractors to stay within the set budget. Effective project scope control and monitoring through project management software are vital to mitigate these risks.

Comparison Table of Project Management Software

SoftwareFeaturesPrice FlexibilityUsability Rating
Software AReal-time budget tracking, automated alertsSubscription-based with different tiers****
Software BCollaborative project planning, integrated task managementSingle license fee/Per user***

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FAQ

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.

Determine your COGS (cost of goods sold). For example $40 . Find out your gross profit by subtracting the cost from the revenue. Divide profit by COGS. Express it as a percentage: 0.25 100 = 25% . This is how to find markup... or simply use our markup calculator!

Firm Fixed Price (FFP) The price will be set on the buyer's request. A FFP should be used for a product or service that is a repeated process. As an example, a car manufacturer would enter into a FFP contract for a standard model car. The manufacturer knows what it takes to complete the car and the associated cost.

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.

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.

Fixed-price contracts provide greater incentive than cost-reimbursement contracts for the contractor to control costs and perform efficiently. 2) Fixed price contracting shifts risk from the customer to the service provider.

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.

Disadvantages of fixed-price Therefore the biggest issue is usually around project scope and change requests. Lack of flexibility. A fixed-price project has a defined scope (requirements). As the cost cannot change, the scope of work is much less flexible.

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Kentucky Construction Contract Cost Plus or Fixed Fee