# Cost plus



## Ninjaframer (May 28, 2011)

Does anyone have a sample of a cost plus contract they would be willing to share?
I'm bidding on a com. Project and have never written a cost plus proposal.


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## CrpntrFrk (Oct 25, 2008)

Look in here. Lots of forms.
http://www.contractortalk.com/f65/give-form-take-form-3935/


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## Caswell (May 29, 2009)

*com*

I have done COM work on an air force base by COM do you mean Change of Occupancy?


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## BrandConst (May 9, 2011)

Sweet! I would post one but I don't do cost plus. Best of luck!


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## Ninjaframer (May 28, 2011)

I looked in some of the old threads and didn't see anything. it's a 450,000 bid on a commercial building. I've never written a cost plus contract or proposal so any help would be appreciated!


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## BrandConst (May 9, 2011)

Caswell said:


> I have done COM work on an air force base by COM do you mean Change of Occupancy?


Where did you get COM work out of cost plus?


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## ExtremePride (Oct 27, 2010)

He's talking about Commerical work


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## griz (Nov 26, 2009)

Cost plus in commercial work is very rare. Usually reserved for very high end offices. restaurants etc.

Cost plus is not for everybody. If you are inexperienced in bidding cost plus can get expensive.


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## Ninjaframer (May 28, 2011)

My thinking was if I got the job on a cost plus basis I would get three bids for anything I planned to sub out, I'd use the lowest bid or do the work in house using the lowest bid price, this building is for a very good friend and I don't mind giving a good deal. Plus it guarantees a profit on the total job.


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## griz (Nov 26, 2009)

Ninjaframer said:


> ... Plus it guarantees a profit on the total job...


How do you figure that when you're trying to be the low bidder.


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## Ninjaframer (May 28, 2011)

If it's direct costs plus profit how could it not?


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## griz (Nov 26, 2009)

If you can't beat the low bidder & make money.

Maybe I'm missing something here.:whistling


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## Ninjaframer (May 28, 2011)

Maybe I'm wrong? Is cost plus not the best way to insure the lowest possible price while guaranteeing a profit?


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## griz (Nov 26, 2009)

No it's not. Especially on a production job.

If you can't beat the low bid by straight up $$ how will cost plus be cheaper and give you a profit?

You are still trying to provide the lowest cost build, right?


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## griz (Nov 26, 2009)

Hey Ninja, If you think I am busting your balls, you are correct.

Just trying to get you to think what you are trying to do.


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## Ninjaframer (May 28, 2011)

Of course, I thought cost plus got rid of over estimating and mark up on subcontractors, contingency and so on.
Direct costs, no mark up + profit % how is this bad?


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## Ninjaframer (May 28, 2011)

griz said:


> Hey Ninja, If you think I am busting your balls, you are correct.
> 
> Just trying to get you to think what you are trying to do.


It's all good, if I was 100% on this I wouldn't be asking questions.


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## griz (Nov 26, 2009)

Ninjaframer said:


> Of course, I thought cost plus got rid of over estimating and mark up on subcontractors, contingency and so on.
> Direct costs, no mark up + profit % how is this bad?


It's not bad. Don't forget overhead.

Cost plus work is not for everyone.

It's not all the gravy one might think it is.

It is usually reserved for difficult work when unforeseen conditions may arise... or for high end custom work with a constantly changing SOW. 

Good Luck.


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## Heritage (Mar 20, 2007)

What Griz said.

I'll add this: As a guy that does mostly Cost Plus, I'll explain the dynamic.

BENEFITS TO THE CLIENT:

-Transparency. Probably the #1 reason clients choose cost-plus. They can see every $1 spent on the job. With lump sum/Fixed price...you obviously don't get that. This translates to more paper work on your end. I open a segregated bank account for each job as well.

-Changes are easier. This ties into transparency. When they see where the money is going, they often choose to add/take away from certain portions of the job. For example, we went under budget on the framing...now they can use that money to the get those "nicer" finishes they really wanted. Or vice-versa.

-More control of the SOW. This ties into "changes are easier".

-They pay the ACTUAL price of construction. Contingency, though still in the budget, does not become the contractor's liability/prize.

-Are able to start a "Un-biddable" project, or while pre-construction is still on the way.

BENEFITS TO THE CONTRACTOR:

-Less liability on cost/profit. A stipulated percentage as profit.

-Able to start an "Un-biddable" project. A LOT of projects that clients approach us with are truly "Un-biddable". 50% or more of the details are absent from drawings. As a liability factor, you may not want to entangle yourself in that deal, with a lump sum. When you get into bigger jobs...usually commercial, you will see that sometimes information is left out strategically. As the estimator, conversely, you sometimes see the potential for huge markups on change orders that are not apparent to most people at the preliminary stage. Cost plus eliminates this dynamic of the contractor coming in low, banking on taking the client to the cleaners on the change orders and the converse aspect of the client trying to break the contractor on "Unforseen" conditions.



There is a myth, amongst advocates of Lump sum that cost-plus contractors are lazy/don't know how to estimate. When the truth is that cost-plus contractors tend to be the ones that work on the "best" projects. Quality, control and fairness are the governing criteria in this type of relationship whereas in Lump sum...it's usually "price".

Cost plus clients don't want "price" to be the governing criteria, because wherein Lump Sum...the contractor's main goal will be to minimize costs (materials, subs, labour) in order to maximize profits. In Cost plus...the opposite is true. The higher the COST of the project...the greater the profit for the contractor. No need to cut corners or go with the lowest bidders.

In order to reign in the contractor however, most cost plus contracts are more like cost plus INCENTIVE or cost plus GUARANTEED MAXIMUM types of contracts. You can look into that, but typically it's a formula where the contractor wouldn't profit by driving the cost of the project higher from the original budget.

But then there's always collusion :whistling


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## Ninjaframer (May 28, 2011)

It sounds like your the man I've been waiting to talk to, I like the idea of cost plus with a guarantee. Like I said were all friends biding on this, I'm just looking for an edge.


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## jhammer7 (Nov 19, 2009)

I got my original cost plus contractors from the national home builders.

J


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## Constructr (Jan 17, 2011)

Heritage said:


> What Griz said.
> 
> I'll add this: As a guy that does mostly Cost Plus, I'll explain the dynamic.
> 
> ...


Very well put, Heritage! :thumbsup:


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