Manage your construction projects with transparency using this cost-plus construction contract template, which outlines fees, expenses, and payment terms.
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This article explores the ins and outs of what a cost plus construction contract is, when you might use one, and how to manage these agreements efficiently using contract management tools like Juro.
A cost plus construction contract is an agreement where the client agrees to cover the actual costs of the project plus an additional fee to the contractor. This fee may be a fixed percentage of the costs, a fixed amount, or a combination of the two. This type of contract is commonly used in construction projects where the scope of work is not well-defined from the outset.
Cost plus construction contracts reimburse all project costs plus a fixed fee or percentage for profit, offering flexibility for projects with uncertain scopes.
They are different to time and material contracts, which also provide adaptability for undefined scopes but instead pay contractors based on actual labour hours and material costs. By contrast, lump sum construction contracts set a predetermined total cost regardless of actual expenses incurred.
The main purpose of a cost plus construction contract is to provide flexibility in project execution. These contracts are ideal for projects with uncertain scopes or for projects that require extensive customisation. By covering actual costs plus a fee, clients can make sure that contractors have the necessary resources to complete the work to the required standard without cutting corners.
Cost plus construction contracts are typically managed by:
Cost plus construction contracts are used in several scenarios:
A comprehensive cost plus construction contract template should include the following elements:
Parties involved. Names and addresses of the client and contractor.
Scope of work. Detailed description of the work to be performed.
Cost definitions. Explanation of what costs will be covered (labour, materials, equipment, etc.).
Fee structure. How the contractor’s fee will be calculated (percentage of costs, fixed fee, etc.).
Payment terms. Schedule and method of payments.
Schedule. Project start and end dates, including milestones.
Change orders. Procedures for handling changes to the scope of work.
Liability and indemnification. Responsibility for damages or delays.
Insurance requirements. Types and amounts of insurance the contractor must carry.
Termination clause. Conditions under which the contract can be terminated by either party.
Dispute resolution. Methods for resolving disputes, such as arbitration or mediation.
Confidentiality and data protection. How confidential information and personal data will be handled.
Managing cost plus construction contract templates involves several steps:
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Managing construction contracts can be challenging due to several reasons:
Fortunately, managing cost plus construction contracts can be streamlined with Juro’s platform. Here’s how Juro can help:
Juro empowers your team to self-serve on simple contracts. This frees up your legal team to focus on more complex issues, improving overall productivity. With Juro, non-legal teams can generate, review, and approve construction contracts using templates customised to your specific needs.
Juro speeds up the entire contract lifecycle. You can automate contract drafting, negotiation and approvals, reducing the time it takes to agree on terms. Juro’s contract AI tools help identify key contract terms and risks – making negotiations faster and more efficient.
Store your construction contracts in Juro’s data-rich contract repository. With all contracts in one place, you gain unparalleled insight into contract risks and obligations. Juro’s search and reporting features allow you to quickly find and review contracts, ensuring compliance and managing renewals effectively.
Cost plus construction contracts offer flexibility for complex and customized projects but managing them can be challenging. A well-drafted template is essential for clarity and compliance. Using Juro for managing these contracts simplifies the process, reduces risks and enhances efficiency, enabling your business to scale effectively.
For more information on how Juro can transform your contract management process, check out this guide to Construction Contract Management Software.
Juro’s AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.
A cost plus construction contract template is a ready-made agreement that a client and contractor can adapt for each project where the final cost isn’t known at the start. It records which costs the client will reimburse and how the contractor’s fee is worked out.
Usually, yes. Because the price isn’t fixed, the client has little to fall back on if a bill looks too high unless the contract defines which costs count and what records the contractor must keep. A short written agreement also makes it easier to settle disputes over extra work before the job ends.
If the scope is clear and unlikely to change, a fixed-price arrangement such as a lump sum contract usually gives the client more certainty about the final bill. Cost plus suits projects where the contractor can’t price the work fairly upfront, such as renovations of older buildings or jobs with unknown ground conditions.
Whatever the contract says, so the definition needs to be specific. Most cost plus contracts cover the labor and materials used on the job, while costs like the contractor’s head office overheads or fixing its own defective work are often excluded. Listing what is in and out avoids the most common arguments over invoices.
Many clients ask for a guaranteed maximum price, which caps the total they will pay unless the scope changes through an agreed change order. It’s also worth asking for the right to audit the contractor’s records and to approve large purchases or subcontracts in advance. Contractors often ask for a share of any savings below the cap in return, which gives both sides a reason to keep costs down.
It’s a sound starting point, but you’ll need to tailor the cost definitions and fee to each project and check any local rules on construction contracts and payments. For specific legal advice on your contract templates, consult an attorney.
Build the template in Juro once and generate each project’s contract from it, with project managers filling in the scope and the fee. When your position on a term like the price cap changes, you update that one template and every new contract follows. Signed contracts sit in one searchable place, so you can check fee percentages and completion dates across all your projects.
Yes. Operator, the AI drafting feature in Juro, can draft a new cost plus template from your existing construction contracts, picking up your drafting style and the positions you usually take on fees and cost caps. You get a first draft that reflects your risk appetite, and your legal team approves it before anyone uses it.
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