# Cost plus contract - fees



## fredmace (Apr 22, 2007)

What is the usual percentage charged by general contractors on a cost plus contract (commercial)?


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## thom (Nov 3, 2006)

I don't think there is a usual but, years ago I remodeled a bunch of restaurants for a national chain. The jobs were fixed price bids but there were always add ons. The bid had to include an hourly labor rate. They allowed 20% markup on top of that rate and 20% markup on materials, other subs, etc. This was back in the early to mid 80's when the market was much more competitive than it is today.


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## fredmace (Apr 22, 2007)

I have a CGC license but I never worked on a cost plus contract. I used to build for a fixed price. Now came the opportunity to build commercial for a client but I don't want to bid and go wrong. My suggestion for him was to go under a cost plus contract. Searching the internet I found numbers from 10% to 30%. I asked him for 10% since I don't have right now any administrative cost to cover. The client thinks this is too much. I'm guessing whether there is anybody else out there willing to work for less. Considering all the liabilities and the job itself I feel that 10% is really a low rate. Anybody there experienced on these kind of contracts?


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## BuiltByMAC (Mar 11, 2006)

Can YOU make money on 10%? That's the question, not what others are charging. There will ALWAYS be someone willing to work for less. There are also contractors ALWAYS going out of business because they're broke. You don't want to take any jobs that could put you out of business.

If this is a large contract, do more research on the job. Bidding too low on a large job could have you working hard and going broke.

Mac


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## Driftwood (Feb 15, 2004)

*Learn to smile and walk away*

It will not go well with this person,in My opinion.
I was taught, You should be getting 1 out of 5 jobs estimated. More than that You're too low. There's good $$ out there,spend You're energy finding good projects that pay well. Good luck


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## fredmace (Apr 22, 2007)

It seems to me that you all think the 10% on cost is too low. Considering all the liabilities involved in our job, that's what I think as well. However, that percentage is the most popular number I found when searching. There's no much reference in deed, hence the question. I'm wondering what would be the fee charged by well established general contractor companies. Anyone out there knows something about?


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## afley7 (Jan 31, 2008)

*10%*

Usually when I hear about a 10 percent on cost fee it is when a person wants a house built for them. I see it alot with custom homes. Often times large construction companies that do multi-million dollar projects like building malls, operate with profit margins which are as low as 2-3 percent. Since there is such a large volume of work there is still lots money to be made. You should check the total volume of work you have, estimate how much cost and time it will take to complete the project. Than take a look at how much you stand to make over how long, and make you decisions. 5 percent on a million bucks is not too bad. Maybe you can do two or three a year.


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## Kgmz (Feb 9, 2007)

First I will ask, 10% of what?

And how long is the project, a week or 10 months?


Now I will ask do you know how a "Cost Plus Contract" works?


You say you don't want to go Fixed Price contract and bid wrong. Did you know you will still have to bid the job and figure costs with a Cost Plus Contract, and show them the costs/allowances. Do you think most people will go into this blind and not know if it is going to cost them $10 or 10 million.


I will attach a Cost Plus Percentage contract, but there are other documents that go along with this. Such as general conditions, construction documents, specifications, allowances, finish schedules, construction draw schedule, etc.

Also check my post here regarding cost plus.
http://www.contractortalk.com/showthread.php?t=32888


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