What are some examples of cost-plus pricing in construction?

What are some examples of cost-plus pricing in construction?

Cost-plus pricing in construction involves charging the client for the actual costs incurred plus a markup. For example, a contractor might charge for materials and labor costs, plus a 15% fee.

Can you give me a specific project example?

Sure! In a residential building project, if the total costs for materials and labor amount to $200,000, the contractor might add a 10% markup, resulting in a total charge of $220,000.

What are the advantages of this pricing method?

The advantages include transparency in costs, flexibility in project scope, and reduced risk for contractors, as they are reimbursed for actual expenses.

Are there any disadvantages?

Yes, disadvantages include potential cost overruns, less incentive for efficiency, and the possibility of disputes over what constitutes allowable costs.