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 California: scope of work, work site, warranty and insurance.
Santa Ana California Construction Home Improvement Contract Cost Plus or Fixed Fee
Category:
State:
California
City:
Santa Ana
Control #:
CA-00462
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FAQ
plusfixedfee contract is a costreimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract.
Unlike a fixed-cost construction contract, a cost-plus construction agreement is a contract in which the owner pays the contractor the actual costs of the materials and labor plus an additional negotiated fee or percentage over that amount.
Eliminate risk for the contractor By using a cost-plus percentage of cost contract, the payment directly relates to the cost for the contractor. This eliminates the risk that the client may underpay the contractor for their work or may not have the funds to pay for resources or labor to complete the project.
Cost-plus contracts are generally used if the party drawing up the contract has budgetary restrictions or if the overall scope of the work can't be properly estimated in advance. In construction, cost-plus contracts are drawn up so contractors can be reimbursed for almost every expense actually incurred on a project.
Avoid paying in cash. Contractors cannot ask for a deposit of more than 10 percent of the total cost of the job or $1,000, whichever is less. (This applies to any home improvement project, including swimming pools.)
Cost plus percentage contract means that as the project costs increase, the fee also increases. This is not typically used because the contractor has no incentive to control costs. In fact, federal government agencies are prohibited from using this type of contract.
For these reason I recommend avoiding cost-plus contracts in most cases. They simply carry too many risks for the owner and few benefits. They often lead to cost overruns and disputes over money. It's better to nail down as many costs as possible before starting the job and get a fixed bid.
8 Things Every Remodeling Contract Should Have Scope of Work, Selection Sheet and Drawings.License Number and Insurance.Description of Change Orders.Warranty information.Subcontractor Agreements.Payment schedule.Completion Schedule / Timeline.Clauses Required by Law.
Some advantages of a CPFF contract can include: The final cost may be lower than in a normal contract, as the contractor usually will not ?inflate? prices to cover risks. The contractor also has less incentive to control the project costs (in contrast to other types of contracts, such as a fixed-price contract)
The contract should describe, in detail, the products to be used and how the work will be performed, i.e., size, color, who will be doing what work, amounts of materials provided, manufacturer model number, etc. There must be a detailed, written payment schedule in the contract.