cost plus contract

6 years ago

Need some advice with cost plus contract.

Does the builder charge for his time for managing the project And also charge builders margin on top of that And then 10% gst on top?

And is it right that he also have a foreman on the job as well.

So the builder is getting paid to manage the job mainly, then he has a foreman to manage the trades...there seems to be alot of doubling up on supervisors...

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6 years ago
last modified: 6 years ago
Hello Sam

Yes, yes and yes, regardless of whether it is a fixed price or cost plus.

The general impression of most people is that builders do the job cheaper when it is cost plus and that is why they go looking for that type of contract. That's not the case. The costs are the same, just broken up differently.

The only real difference is that on a fixed price, the builder takes the risk that he has allowed for everything whereas on cost plus you just pass on the bill.

Cost plus can be a minefield. I have seen builders invoice a client for two lots of tiles and send half off to another job....

On the other hand, I have seen clients counting pieces of wood offcuts and claiming refunds on a barrow load of sand with builders... it can get that petty.

GST is paid regardless of the contract as you know.

Supervisors are required regardless of the project as in truth, there is not enough profit in a building project to support the legislative requirements, the back end staff, the insurances and contract administration from a single building project.

The insurance companies also require a minimum profitability (ie builders margin) before they will insure a builder.

The reality is that the builder must take on multiple projects and have competent supervisors to make it work.

I suggest you work closely with your builder and understand that he has requirements as do you .... I doubt he is ripping you off.

Cheers
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