10% to 20%
How much do contractors charge for cost-plus? The profit in a cost-plus contract is typically set as a fixed amount or a fixed percentage of the project's total costs. The percentage typically ranges from 10% to 20% of the total cost of the project.
How do you calculate cost-plus contract?
A: As an example, a cost-plus contract may establish that the total estimated cost of a building project is $10 million plus a fixed fee of $1.5 million, roughly 15% of the total cost, as the contractor's profit. So the total expense to the buyer would be approximately $11.5 million —the cost plus the fee.
How does cost plus pricing work in construction?
A cost-plus contract is a construction agreement that requires reimbursement for project costs as well as a markup that covers the contractor's overhead and profit. In other words, the name is a short-hand way of remembering what the contract covers: project costs plus contractor markup.
What is the problem with cost-plus contracts?
One of the main drawbacks of cost-plus contracts is that they provide little incentive for the seller to control or reduce the costs of the project. The seller may incur unnecessary or excessive expenses, charge higher rates, or extend the schedule to increase their profit margin.
What is the disadvantage of cost plus percentage contract?
The disadvantage to a contractor is that it doesn't cover the time needed to fix the project if something doesn't go as planned and takes more time. The disadvantage to the buyer is that it's hard to budget with this type of contract as the cost increases the more materials are needed.
What type of bonds are used for construction?
The three main types of construction bonds are bid, performance, and payment.