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Cost Plus Contract:
This is the second most common type of home building contract. This can be a great type of contract for homeowners and builders. It is great for large or complicated projects that are very hard to estimate the actual cost or where the client wishes to not make most of their specifications decisions up front where the builder can accurately estimate it. The advantages and disadvantages are listed below.
Advantages:
1) Full Disclosure: The owner gets to review all of the expenses of the entire project. Typically monthly statements are given to the owner with actual invoices for all expenditures. This gives the owner tighter control of the associated cost. Most builders do not want the owner to play in selecting suppliers and subcontractors, but provide financial statements.
2) Less risky for the builder: The builder is paid a % of the associated cost for overseeing the project, so any cost overruns does not come directly out of the builders profit as in fixed price contracts.
3) Flexibility: Some home building projects are highly custom or the owner wishes to make slower decisions along the way or make a lot of changes along the way. This type of contract is better in providing that flexibility. Remember though time/changes cost money.
4) Cost: It is possible that the project could actually cost less under this type contract depending on the circumstances.
Disadvantages:
1) Cost: The owner is much more prone to go over budget, because of the high flexibility issues. It opens the door to the owner to research out the, plus building products on the market today, and most of these non standard building materials are much higher in price than the builders standards.
2) The builder is incentivized to spend more money. The more project cost the more money the builder makes. It is especially important that there is a high trust between the builder and homeowner in this type of contract.
3) Accounting: Extra time is spent by the builder preparing the monthly statements for the homeowner, copying invoices, etc.
No Loss in manpower and Materials but penalty may imposed because of Delays.
enables ur as a company to rob as must as u want :D
1- No need for a detailed procurement statement of work.
2- Flexibility in changing parts of scope.
Cost plus can for example be used for C-Parts where a distributor buys parts for you. Good in cases of one-time demands. You do not need to setup a vendor for a single PO but pay to your distributor the price of the good plus a markup.
Cost plus can also be used for everything you exactely know the should cost from. You dictate the cost of a good / service and tender only the markup - e.g. by an backwards auction.
