Pros and Cons of Cost-Plus vs. Fixed Price Contracts
1 hour 5 minutes
Gain an understanding of project delivery methods, their implications and the current legal landscape.
Supply chain issues, steel and aluminum tariffs, and fuel inflation are changing the construction industry. Contractors and Owners/Developers are having frank discussions about how to handle these issues. There are a variety of approaches – including formulas for time extensions and price increases for supply change issues, adjustments to “or equal” requirements, new flexibility on FFE, particularly as to color schemes for tile, paint, flooring, fuel surcharge allowances, use of allowances for materials and equipment, and pressures to shift to modified cost plus and flexible fixed price arrangements. This program will discuss the basic differences between these two approaches, types of contracts, and the pros and cons of each form of agreement. Equally important, this program will point out how these types of contracts and the underlying risks for each are being considered and evaluated in the present market conditions.
• You will be able to explain the reasons for selecting fixed price or cost plus.
• You will be able to identify risk issues both financial and as to the physical work based on a specific project and/or associated contract.
• You will be able to recognize the features of a contract to distinguish between fixed price and cost plus.
• You will be able to review a contract to evaluate the relevant considerations for either a cost plus or a fixed price.