A Quick Guide to the Cost-Plus Construction Model
There are several different ways to approach a commercial construction project. The Cost-Plus model is one type of contract. Here’s how it works.
Construction projects can carry a lot of risk, both financially and time-wise. The overall goal of any building project is quality work that is completed on time without going over budget. This sounds simple enough, but anyone who has engaged in a building project knows this is easier said than done.
One of the many options when approaching a commercial construction project is called the ‘Cost-Plus’ model. Here’s a quick summary of what it entails and how this service may be beneficial to your next building project.
What is Cost-Plus?
The Cost-Plus model is a contract delivery option where the Contractor can get started with work before the design is completed and gets paid for all construction-related expenses, plus a reduced, agreed-upon fee.
As well, a Cost-Plus solution can be a good option when there isn’t enough information to perform a detailed estimate or when the design isn’t completed.
When the Cost–Plus model is useful
- Where due to timing factors the owner is unable to finish project designs and obtain accurate stipulated sum pricing prior to the commencement of work
- Where due to project complexities it is not possible for the owner to obtain sufficiently accurate and precise specifications for a project, or for certain parts of a project, and construction for that project, or parts of that project, must therefore be administered using a cost-plus pricing arrangement.
Who should use the Cost–Plus method for construction projects?
Owners who want the flexibility to make changes as a project progresses. If you or your business lacks experience with construction projects or you are operating on a tight budget, you may be better off with a lump-sum price, since there is unavoidable uncertainty about the ultimate cost of a project priced on a cost-plus basis.
Cost-Plus is often used by governmental agencies because they can select the contractor based on their qualifications instead of the low bid.
With years of experience, Antham Construction offers the highest quality services when it comes to Cost-Plus commercial projects. Contact us for more information on how we can help with your next build!
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