17
Oct

Types of Contract Agreements between owner and builder

Types of Contract Agreements between owner and builder


Stipulated Sum (fixed price)

  • Cap on price and fee
  • Limited financial risk to owner
  • Contractor takes majority of financial risk
  • Contractor does not share project financial information with owner
  • Cost savings and cost overruns accrue to contractor
  • All changes from plans should be document by change order
  • Ambiguous and/or poor drawings may leave the owner vulnerable to numerous extras and change orders

 

Cost plus a fixed fee

  • No cap on price, yet there is a cap on the contractor’s fee.
  • Owner’s share of financial risk limited to hard costs (labor and material) only
  • All cost savings and cost overruns accrue to owner
  • Contractor shares all project information with owner
  • All changes from plans should be documented by change order

 

Cost plus a fee (Time and materials)

  • No cap on price and contractor’s fee
  • Owner has all the financial risk
  • All cost savings and overruns accrue to owner
  • Contractor shares all project financial information with the owner
  • All changes from plans should be documented by change order

 

Cost plus with a “not to exceed” or “max” figure

  • Cap on price
  • Cap on fee
  • Limited financial risk to owner and contractor
  • Cost savings may either accrue to owner or be split with contractor as an incentive
  • Cost overruns accrue to contractor
  • contractor shares project financial information with owner
  • All changes from plans should be documented by change order