Cost Plus Percentage Agreements

A Cost Plus Percentage Agreement is one where the builder charges a markup on the costs incurred in the execution of the contract. In addition to hard construction costs, project costs may include the cost of site supervision, insurance, and setup. On a cost plus 20% agreement, for example, the client would be charged $1.20 for every dollar the builder spends.

The advantage of this contract is that the client will have knowledge of all expenses incurred and benefit from any savings realized throughout the process.  The disadvantages are that if costs increase due to plan errors or omissions, inflation or inaccurate estimates the client not only pays the extra, the builder benefits from the cost overruns. There also is less incentive for the builder to control costs as the builder is getting paid 20% on every dollar spent.

As compared to a Fixed Price Agreement, in a Cost Plus Percentage Agreement, clients are generally more involved and have the opportunity to review bills paid on a monthly basis.

What we offer:

A hybrid of a Cost Plus Percentage Agreement and Fixed Price Agreement.  We call this our Cost Plus Fixed Compensation Agreement. In this scenario we establish a working construction estimate and fix our compensation based on our expected management time, overhead, and performance. Our compensation does not vary except through written change orders. This scenario allows us and our homeowners to work together to control the costs and provides the proper incentives to do so.  We do not raise our compensation based on potential risk and we do not have incentives to increase the costs associated with the home.

Vs. Fixed Price Agreement