Under a cost-plus contract, the owner pays the actual cost of the work plus a fee. The fee may be a percentage of cost (cost-plus-percentage), a fixed dollar amount (cost-plus-fixed-fee), or include incentives. Add a cap and it becomes a GMP. The contract defines exactly which costs are reimbursable: labor, burden, materials, subs, equipment, and often general conditions, but usually not home-office overhead.
Why it matters
The contractor carries less price risk, but much more documentation burden. Every dollar billed needs backup: timesheets, invoices, receipts, rental tickets. Owners and their auditors will ask for it, sometimes years later.
Worked example
Illustrative: a month’s reimbursable cost is $2.10M. At a 10% fee, the contractor bills $2.31M. If $40,000 of that cost turns out to be non-reimbursable home-office expense, the owner disallows $44,000 (the cost plus the fee on it).
Common mistakes
- Coding non-reimbursable costs to the job.
- Weak backup, like invoices without proof of delivery or timesheets without approvals.
- Not reading the fee basis carefully (is fee charged on subs? on general conditions?).
How os.construction handles it
We’re building job costs that keep their source documents and approval history attached, so an owner’s audit request is a filter, not a file-cabinet hunt. It’s in development with founding contractors.