Cost+Plus Construction Agreement


Cost+Plus is our most used agreement for client who are not using bank financing. The construction process is transparent and shows all the actual project cost invoiced directly from the construction vendors.

It is not a “fixed price” contract. Kirby Construction CO. estimates the project cost, but the actual project cost is ultimately determined by the actual costs of labor and materials supplied. The actual costs of construction may be higher, equal to, or lower than the cost estimated. This is not a “fixed price” or guaranteed maximum price under which the Owner is protected by a lump sum or guaranteed maximum amount. Rather, the Owner is responsible to pay for actual expenditures by the Contractor and for comparing expenditures to the amounts estimated by the Contractor. The Owner is to be provided a “control estimate” and is entitled to receive notice if the Contractor’s reimbursable costs exceed the control estimate by a certain percentage.

Cost Plus contracts permits the Owner to review the Contractor’s cost records (such as material purchase receipts, subcontractor invoices and labor costs) each time the Contractor submits a draw request. Each "draw request," will include all un-billed vendor invoices and a "construction fee." The construction fee can be fixed fee (amount agreed at the start of the project) or a contractors percentage that is added to each construction draw. You are not up-charged for any invoice during the project!

We shop our suppliers and subcontractors to get you the best price, while maintaining superb quality construction.

All cost for the construction project are invoiced to Kirby Construction CO. - no exceptions.

At predetermined stages of construction, we email a construction draw requesting payment. You receive one invoice, from Kirby Construction, of the total invoiced amount accrued from the project. The Draw requests include the original un-billed invoices from suppliers/vendors, and a Partial Release of Lien to keep for your records.

The three main components of a Cost-plus-contract are:

  1. Direct Costs: Labor, materials, supplies, rental equipment and job-site supervision by the general contractor.
  2. Overhead Costs (or Indirect Costs): Business related expenses that are necessary to perform the contract. Overhead costs are usually a percentage of estimated costs and can include office rent, insurances, office supply, communication expenses, mileage and drawing printing or reproduction.
  3. Fee (or Profit): The profit is usually a fixed percentage based on the costs directly associated with the project.

 

[Cost+Plus Fixed Fee]

The contractor fee is fixed; no matter if there is a change in the scope of work that changes the original estimated project cost and if the overall cost is above or under the original estimated budget, our contractor fee stays the same. *Contract details list any exceptions.

If Cost+Plus Fixed Fee, a percentage of the fixed contractor fee will also be requested at predetermined stages of construction as follows:

  1. 25% at slab completion, 
  2. 25% after framing inspection, 
  3. 20% when trim & cabinets are installed, 
  4. 20% when painting is complete, 
  5. 10% Final payment - When contractor receives a Certificate of Occupancy from the Building Department

 

[Cost+Plus Percentage]

The contractor's percentage fee is fixed; no matter if there is a change in the scope of work that changes the original estimated project cost, our contractor percentage fee stays the same. The construction percentage will be added to the gross amount of each draw request. Cost plus pricing provides the transparency missing from a lump sum price. It allows the client side to share in benefits that come from more efficient Work and costs that are lower than originally estimated. *Contract details list any exceptions.

 


[Example of A Cost+Plus Fixed Fee Construction Draw Email]

     Attached is our Draw #6 Invoice_Lot 35, Backup Invoices and Partial Release of Lien for your project in the amount of $32,540. If all is approved, please remit payment via wire transfer, mailed certified check, or pickup.

 
Note: Also attached is a PDF showing The Estimate vs Actual Cost + Construction Fee Report
 
 
Thank you,
-- 

[Example Attachments]

Draw #6 Invoice

Draw #6 Backup Invoices

Draw #6 Partial Release of Lien

Estimate vs Actual Cost + Construction Fee Report

 

Lump Sum Contract

This is mostly used with Bank financed projects, but can also be used for cash buyers. Kirby Construction CO. estimates the cost to provide the Work, add our overhead & profit margin, then propose the total sum as a price to the client. This is the number we all agree with for the project to cost. One of the most important issues with lump sum pricing is identifying when the payments are due during construction. Although the price is a lump sum, the client side doesn’t pay it all at once. Instead, payments are every 2 weeks to the amount of work completed or at pre-determined stages of completion. (Usually depends on the banks construction draw standards)

But if the scope of the work changes,  by change order, the amount of the Change Order fee will be a percentage agreed to at contract signing. A Change Order is any change to the original plans and/or specifications. Change Orders should be agreed upon in writing, including additional cost, additional time considerations and signed by both parties. (Note: Some Change Order's will have NO additional fee. These Change Order's will not be required to be signed by both parties.) 50% of the cost of each Change Order will be paid prior to the change, with the final 50% paid upon completion of the change order.

When you receive the estimate of cost for your home, you will have select Allowance items. Allowances, for the most part, are line items amounts only on a "Fixed Cost Contract or Lump Sum Contracts." Allowance budget amounts are based on your overall budget. If you want a $400,000 house, your allowance will be set at a certain number to accommodate your overall budget. If you want a $500,000 house your allowance and finish budgets will increase. These allowance are actual cost controlled by you, the home owner. These allowance items include, but not limited to; Brick Paving L&M, Landscape, Handrails, Cabinets, Hardware Locks, Granite Tops, Flooring, Appliances, Toilet Accessories, Plumbing Fixtures, and Electrical Fixtures. Kirby Construction CO. shows a budget amount for each allowance item. You are giving the choice to find selections/finishes for each item online or from one of our select vendors.

 

e.g. You have a $10,000 Appliance allowance and are able to find all your appliances for $9,000. You are only charge for $9,000. Not the full $10,000 allowance amount. If you choose certain appliance product that cost $12,000, then you will be billed the $2,000 overage via a Change Order. In simple terms explaining Allowance items..."They cost what they cost."

 

Read more about Allowances Here...MUST READ

 

A great source to choose allowance items is www.Build.com