COST PLUS vs FIXED PRICE CONTRACT

0

Adrien Jones | FRAMES Inspired houses

When building a custom home or renovating your current home, it’s important to know the difference between a cost-plus contract and a fixed-price contract. A cost-plus contract works from estimates of construction expenses, making the final cost unknown. A fixed price contract provides a solid plan for completion and a guaranteed cost before construction begins.

COT PLUS CONTRACT

In a cost-plus contract, the owner pays the cost of construction of materials and labor plus additional charges for the benefit of the contractor commensurate with the construction expenses. The contractor provides an estimate, but as the expense increases, the builder gets a higher profit. Another advantage for the builder is that if the job takes longer, the labor costs also increase. With a cost plus contract, the final cost to the owner can skyrocket.

FIXED PRICE CONTRACT

A fixed price contract predetermines the final cost of construction and includes the builder’s profit. It is the simplest form of construction contract and it facilitates financing for lenders. The builder is not estimating but budgeting according to a well-developed plan for your custom home or renovation project.

A fixed price contract guarantees your final cost of construction by specifying and locking in prices before proceeding to construction. It requires the contractor to work with design partners, including architects, interior designers, engineers, and contractors, to provide accurate and reliable information.

THE LOWER LINE

A cost-plus contract benefits the builder because he is not held responsible for the construction schedule or increased expenses.

A fixed price contract is advantageous for you because it provides for the construction times and the final cost in advance, regardless of the evolution of construction costs.

—————————————————————————————————————————————

Adrian Jones, owner and lumber framer, in the construction of beautiful, functional structures and renovations, continues to face and benefit from new construction challenges. He has built the culture, teams and systems to successfully meet the vision and unique building needs of his clients. To find out more, visit 3 Old Town Square or on: frameworkstimber.com

Did you like what you just read?

Show your support for local journalism by helping us do more. It’s a kind and simple gesture that will help us keep telling you stories like this.

Click to donate

Northern Colorado Live Market


Source link

Share.

Comments are closed.