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 Florida: scope of work, work site, warranty and insurance.
Fort Lauderdale, Florida Construction Contract — Cost Plus or Fixed Fee: A Comprehensive Guide When it comes to construction projects in Fort Lauderdale, Florida, one crucial aspect is the construction contract. Two common types of contracts seen in the industry are cost plus and fixed fee contracts. In this article, we will delve into the details of these contracts, discussing their definitions, characteristics, and differences. Cost Plus Contract: A cost plus contract is an agreement wherein the contractor is reimbursed for all costs incurred during the construction process. Additionally, a predetermined percentage or fixed fee is added to the total cost as the contractor's profit margin. This type of contract provides more transparency regarding the project's expenses and allows for flexibility in case there are unforeseen costs or changes in the construction plan. Fixed Fee Contract: A fixed fee contract, as the name suggests, involves a prepared fixed amount that the contractor will receive for completing the project. This contract type is more commonly used when the project's scope and requirements are well-defined, allowing for easier cost estimation. Differences between Cost Plus and Fixed Fee Contracts: 1. Cost Control: In a cost plus contract, the owner has more control over the project's expenses since the contractor is reimbursed for all incurred costs. Conversely, in a fixed fee contract, the contractor assumes the risk of cost overruns, inspiring them to control expenses tightly. 2. Flexibility: A cost plus contract provides flexibility as it allows for adjustments and modifications during the construction process. Conversely, a fixed fee contract offers less flexibility, with any changes in scope or design resulting in additional negotiation and change orders. 3. Risk Allocation: The risk allocation differs between these two contract types. In a cost plus contract, the owner bears the risk of unexpected costs, as those costs will be reimbursed to the contractor. In contrast, a fixed fee contract transfers the risk of cost overruns to the contractor, who must complete the project within the predetermined fixed fee. Types of Fort Lauderdale Florida Construction Contract Cost Plus or Fixed Fee: 1. Lump Sum Fixed Fee: A lump sum fixed fee contract in Fort Lauderdale involves a predetermined fixed fee that covers the entire project scope. The contractor is responsible for managing costs, and any savings or overruns are absorbed by them. 2. Guaranteed Maximum Price (GMP) Cost Plus: A GMP cost plus contract sets a cap on the total cost that the owner will pay, including the overhead and profit for the contractor. This type of contract aims to provide cost certainty to the owner while allowing the contractor to be reimbursed for actual costs within the agreed boundaries. 3. Percentage of Cost: A percentage of cost contract involves the contractor receiving a predetermined percentage of the actual project cost as their fee. Here, the contractor's payment increases proportionally with the project cost. In conclusion, when entering into a construction contract in Fort Lauderdale, Florida, it's crucial to understand the differences between cost plus and fixed fee contracts. The choice between these contract types depends on the project's complexity, scope, and the owner's preference for cost control and risk allocation. Employing the appropriate contract can help ensure a smooth construction process, providing clarity in terms of cost accountability and project delivery.Fort Lauderdale, Florida Construction Contract — Cost Plus or Fixed Fee: A Comprehensive Guide When it comes to construction projects in Fort Lauderdale, Florida, one crucial aspect is the construction contract. Two common types of contracts seen in the industry are cost plus and fixed fee contracts. In this article, we will delve into the details of these contracts, discussing their definitions, characteristics, and differences. Cost Plus Contract: A cost plus contract is an agreement wherein the contractor is reimbursed for all costs incurred during the construction process. Additionally, a predetermined percentage or fixed fee is added to the total cost as the contractor's profit margin. This type of contract provides more transparency regarding the project's expenses and allows for flexibility in case there are unforeseen costs or changes in the construction plan. Fixed Fee Contract: A fixed fee contract, as the name suggests, involves a prepared fixed amount that the contractor will receive for completing the project. This contract type is more commonly used when the project's scope and requirements are well-defined, allowing for easier cost estimation. Differences between Cost Plus and Fixed Fee Contracts: 1. Cost Control: In a cost plus contract, the owner has more control over the project's expenses since the contractor is reimbursed for all incurred costs. Conversely, in a fixed fee contract, the contractor assumes the risk of cost overruns, inspiring them to control expenses tightly. 2. Flexibility: A cost plus contract provides flexibility as it allows for adjustments and modifications during the construction process. Conversely, a fixed fee contract offers less flexibility, with any changes in scope or design resulting in additional negotiation and change orders. 3. Risk Allocation: The risk allocation differs between these two contract types. In a cost plus contract, the owner bears the risk of unexpected costs, as those costs will be reimbursed to the contractor. In contrast, a fixed fee contract transfers the risk of cost overruns to the contractor, who must complete the project within the predetermined fixed fee. Types of Fort Lauderdale Florida Construction Contract Cost Plus or Fixed Fee: 1. Lump Sum Fixed Fee: A lump sum fixed fee contract in Fort Lauderdale involves a predetermined fixed fee that covers the entire project scope. The contractor is responsible for managing costs, and any savings or overruns are absorbed by them. 2. Guaranteed Maximum Price (GMP) Cost Plus: A GMP cost plus contract sets a cap on the total cost that the owner will pay, including the overhead and profit for the contractor. This type of contract aims to provide cost certainty to the owner while allowing the contractor to be reimbursed for actual costs within the agreed boundaries. 3. Percentage of Cost: A percentage of cost contract involves the contractor receiving a predetermined percentage of the actual project cost as their fee. Here, the contractor's payment increases proportionally with the project cost. In conclusion, when entering into a construction contract in Fort Lauderdale, Florida, it's crucial to understand the differences between cost plus and fixed fee contracts. The choice between these contract types depends on the project's complexity, scope, and the owner's preference for cost control and risk allocation. Employing the appropriate contract can help ensure a smooth construction process, providing clarity in terms of cost accountability and project delivery.
