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Cost Plus Construction Contract

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CONSTRUCTION CONTRACT

THIS CONSTRUCTION CONTRACT (“Contract”), effective as of the date of the last party to sign below, is between , having an address at ("Contractor") and , having an address at ("Owner").

For valuable consideration the parties hereby agree as follows:

1. SCOPE OF WORK: Contractor shall provide all labor and materials, and perform all work necessary for the completion of the residence, structure, or improvements as described in the drawings and specifications signed by both Owner and Contractor (“Project”) and more particularly described as

Such drawings and specifications are hereby made a part of this Contract. Drawings and specifications shall contain a scale drawing showing the shape, size, and dimensions of the construction and equipment together with a description of the work to be done, materials to be used, and the equipment to be used or installed.

2. WORK SITE: The Project shall be constructed on the property of Owner located at

and more particularly described as (hereafter "the Work Site").

Owner hereby authorizes Contractor to commence and complete the usual and customary excavation and grading on the Work Site as may be required in the judgment of the Contractor to complete the Project. Unless called for in the drawings or specifications, no landscaping, finish grading, filling or excavation is to be performed at the Work Site by the Contractor.

3. TIME OF COMPLETION: Contractor shall commence the work to be performed under this Contract on or before and shall substantially complete the work on or before .

Contractor shall not be liable for any delay due to circumstances beyond its control including strikes, casualty, acts of God, illness, injury, or general unavailability of materials.

4. PERMITS: Contractor shall apply for and obtain such permits and regulatory approvals as may be required by the local municipal/county government, the cost thereof shall be included as part of the Project price.

5. SOIL CONDITIONS: Contractor shall have no responsibility for the condition of the soils at the Work Site. Any excavation, filling or other work required by the Owner other than the usual and customary excavation and grading shall be agreed to in a Change Order for an amount in addition to the Contract Price. Contractor shall not be responsible for any damages suffered by Owner as a result of the soil conditions at the Work Site.

6. INSURANCE: Contractor shall maintain general liability, workers compensation and builder's risk insurance.

7. SURVEY AND TITLE: If the Project is near the Owner’s property boundary, Owner will point out property lines to the Contractor. If the Owner or Contractor has any doubt about the location of the property lines, Owner shall provide Contractor with boundary stakes through a licensed surveyor. In addition, Owner shall provide Contractor documentation that Owner has title to the Work Site and shall provide Contractor copies of any covenants, conditions, or restrictions that affect the Work Site.

8. CHANGES TO SCOPE OF WORK: Owner may make changes to the scope of the work, including changes to the drawings and specifications, from time to time during the construction of the Project. However, any such change or modification shall only be made by written "Change Order" signed by both parties. Such Change Orders shall become part of this Contract. Owner agrees to pay any increase in the cost of the Project as a result of a Change Order. In the event the cost of a Change Order is not known at the time a Change Order is executed, the Contractor shall estimate the cost thereof and Owner shall pay the actual cost whether or not it is in excess of the estimated cost.

9. CONTRACT PRICE:

{COST PLUS}

Owner agrees to pay Contractor the actual cost to Contractor of materials plus the sum of $ for performing the services set forth in the scope of the work. Contractor shall be paid as follows:

OR

{FIXED FEE}

Owner agrees to pay Contractor the sum of $ for performing the services set forth in the scope of the work. Contractor shall be paid as follows:

Contractor shall furnish Owner appropriate releases or waivers of lien for all work performed or materials provided at the time the next periodic payment shall be due.

10. LATE PAYMENT/DEFAULT: A failure to make payment for a period in excess of ten (10) days from the due date shall be deemed a material breach of this Contract. If payment is not made when due, Contractor may suspend work on the job until such time as all payments due have been made without breach of the Contract pending payment or resolution of any dispute. Owner agrees to pay a late charge of 1% of all payments that are more than ten (10) days late plus interest at the rate of 1% per month.

11. DESTRUCTION AND DAMAGE: If the Project is destroyed or damaged for any reason, except where such destruction or damage was caused by the sole negligence of the Contractor or its subcontractors, Owner shall pay Contractor for any additional work done by Contractor in rebuilding or restoring the Project to its condition prior to such destruction or damage. If the estimated cost of replacing work already accomplished by Contractor exceeds 20 percent of the Contract price, either the Contractor or Owner may terminate this Contract. Upon termination by either party, Contractor shall be excused from further performance under this Contract and Owner shall pay Contractor a percentage of the Contract price in proportion to the amount of work accomplished prior to the destruction or damage.

12. ASSIGNMENT: Neither party may assign this Contract, or payments due under the Contract, without the other party’s written consent. Any such assignment shall be void and of no effect.

13. INTERPRETATION:

(a) Interpretation of Documents. The Contract, drawings, and specifications are intended to supplement one another. In the event of a conflict, the specifications shall control the drawings, and the Contract shall control both. If work is displayed on the drawings but not called for in the specifications, or if the work is called for in the specifications but not displayed on the drawings, Contractor shall be required to perform the work as though it were called for and displayed in both documents.

(b) Entire Agreement. This Contract constitutes the entire agreement of the parties. No other agreements, oral or written, pertaining to the work to be performed under this Contract exists between the parties. This Contract may only be modified only by a written agreement signed by both parties.

(c) Governing Law. This Contract shall be interpreted and governed in accordance with the laws of the State of North Carolina.

14. ATTORNEYS’ FEES AND COSTS: If any party to this Contract brings a cause of action against the other party arising from or relating to this Contract, the prevailing party in such proceeding shall be entitled to recover reasonable attorney fees and court costs.

15. PERFORMANCE:

(a) Contractor may, at its discretion, engage licensed subcontractors to perform work pursuant this Contract provided Contractor shall remain fully responsible for the proper completion of the Project.

(b) All work shall be completed in a workman-like manner and in compliance with all building codes and applicable laws. To the extent required by law, all work shall be performed by individuals duly licensed and authorized by law to perform said work.

(c) Contractor agrees to remove all debris and leave the premises in broom clean condition.

16. WARRANTY: Contractor's warranty shall be limited to defects in workmanship within the scope of work performed by Contractor and which arise and become known within one (1) year from the date hereof. All said defects arising after one (1) year and defects in material are not warranted by Contractor. Contractor hereby assigns to Owner all warranties on materials as provided by the manufacturer of such materials.

AGREED:

CONTRACTOR:

Signature

Print Name & Title

Date

License Number

Name and Address of License Holder

OWNER:

Signature

Print Name

Date

Enter text✕
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What a Cost Plus Construction Contract Is

A Cost Plus Construction Contract is a commercial construction agreement where the owner agrees to reimburse the contractor for actual project costs plus an agreed fee or percentage. The contract documents direct costs (materials, labor, subcontractors), allowable overhead, and the formula for calculating the contractor's fee, billing cadence, and audit rights. This model shifts certain cost risk to the owner while providing transparency and flexibility for scope changes, and it is commonly used when fixed-price bids are impractical or likely to cause disputes during evolving designs.

Why Choose a Cost Plus Construction Contract

When a Cost Plus Construction Contract fits, it lets owners manage unknown scope and pay actual costs plus a transparent fee, supporting quicker starts and iterative changes. The arrangement reduces contractor risk of underbidding while enabling owner oversight of expenditures.

Why Choose a Cost Plus Construction Contract

Who Typically Uses This Contract

Owners, general contractors, and construction managers commonly use Cost Plus Construction Contracts for complex or early-stage projects that need pricing flexibility and transparency.

  • Project owners seeking cost visibility during changing scopes and design development.
  • Contractors willing to bill actual expenses plus an agreed fee, often with audit rights.
  • Construction managers or consultants administering costs and verifying invoices for pay applications.

The format suits projects with unpredictable conditions, phased procurement, or when rapid mobilization is prioritized over a fixed-price guarantee.

Core Elements to Include in a Professional Contract

Core sections of a Cost Plus Construction Contract define scope, allowable costs, fee calculation, billing procedures, audit rights, change order handling, and dispute resolution terms.

Scope of Work

Precisely describe included tasks, deliverables, and excluded items; tie pricing methods to work packages; include exhibits and baseline schedules to reduce later disagreements about compensable work.

Allowable Costs

List direct costs (labor, materials, subs), indirect costs, and excluded items; set documentation standards and invoicing formats to ensure consistent reimbursement, auditability, and timing for cost recognition.

Contractor Fee

Specify fee structure (fixed fee, percentage of costs, cost-plus-award fee), calculation schedule, ceilings or guarantees, and procedures for resolving fee disputes.

Billing & Payment

Define monthly or milestone invoicing, retainage terms, backup documentation required, payment timing, interest on late payments, and procedures for withholding or disputed invoices including how to resolve discrepancies within specified days.

Change Orders

Establish written change order process, pricing methodology for changes, authorization thresholds, time impact evaluation, and how overruns or credits are handled between owner and contractor.

Audit Rights

Grant owner rights to inspect records, require supporting documentation, set retention periods for cost records, define confidentiality protections, and outline remedies for discovered overbilling including repayment and interest.

Required Contract Data Fields at a Glance

Owner Name: Full legal entity name as on license.
Contractor Name: Legal business name and license number.
Project Address: Street, city, state, ZIP code.
Contract Price: Fee method and estimated cost range.
Effective Date: MM/DD/YYYY format; start date.
Signatures: Signature, printed name, title, date.

Step-by-Step: Completing the Contract

Follow these steps to complete and execute a Cost Plus Construction Contract accurately, minimize disputes, and enable enforceable billing and audit processes.

  • 01
    Prepare Documents: Gather scope, estimates, and subcontract terms.
  • 02
    Define Costs: List allowable and excluded cost categories.
  • 03
    Set Fee: Choose fixed fee, percentage, or tiered structure.
  • 04
    Sign & Record: Obtain signatures, retain originals, and distribute copies.

How to Configure an Online Workflow

Configure an online template to automate cost capture, approvals, and signature sequencing for a Cost Plus Construction Contract.

Field Configuration
Cost Item Fields Line-item, quantity, unit cost
Fee Field Formula field for percentage or fixed fee
Approval Workflow Sequential approvals with reminders
Signature Order Contractor then owner then PM

Where to Send and How Documents Flow

Typical routing for a Cost Plus Construction Contract includes internal review, contractor submission, owner approval, and retained copies for audit and records.

  • Internal Review: Legal, procurement, and project teams review terms and budgets.
  • Contractor Submission: Contractor submits invoices and backup documentation monthly.
  • Owner Approval: Owner audits costs, approves payment, or requests clarifications.
  • Record Retention: Store signed contract, invoices, and audit records securely.

Distribution Methods and eSigning Considerations

Use secure eSignature platforms, email, project management tools, or RON notarization where required to distribute and execute the contract electronically.

  • Supported Formats: PDF, DOCX, and fillable forms.
  • Integrations: Salesforce, Procore, NetSuite, and Microsoft 365.
  • Authentication: Email links, SMS codes, and multi-factor options.

Timelines, Deadlines, and Payment Expectations

Key deadlines for a Cost Plus Construction Contract relate to invoicing cadence, payment terms, change order responses, audit periods, and insurance certificate renewals.

Invoice Submission Deadline:

Monthly by the 15th with full backup documentation.

Owner Payment Terms:

Net 30 after approved invoice unless stated otherwise.

Change Order Response Time:

Owner must respond within 10 business days.

Audit Request Period:

Owner may request audits within 12 months of invoice.

Insurance Renewal:

Provide updated certificates at least 30 days before expiry.

Key Project Milestones under a Cost Plus Model

Typical project milestones under a Cost Plus Construction Contract track approvals, mobilization, progress billing, and final closeout with tied documentation requirements.

01

Preconstruction Approval

Finalize scope, baseline schedule, and initial estimated cost.

02

Mobilization

Contractor starts work after permits and insurance are verified.

03

Progress Billing

Monthly draws submitted with backup; retainage withheld per contract.

04

Final Closeout

Complete punchlist, reconcile costs, and issue final payment.

eSignature Pricing and Feature Comparison for Contract Execution

Compare common eSignature pricing and feature criteria to inform platform selection for executing Cost Plus Construction Contracts and managing high-volume signature workflows.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day trial Varies Varies Varies Varies
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Use-Case Examples for Cost Plus Contracts

Real-world examples show how Cost Plus Construction Contracts work in varied project settings and their documentation requirements.

Owner-led Renovation

A municipal owner used a Cost Plus Construction Contract for a phased renovation to accelerate critical facility upgrades while design continued.

  • Allowed rapid mobilization and change orders.
  • The contract required monthly detailed invoices, third-party audit rights, and a fixed percentage fee; clear change order thresholds and payment timelines minimized disputes and complied with procurement rules.

Private Development

A private developer engaged a construction manager under a cost-plus arrangement to handle uncertain subsurface conditions and to enable staggered bidding across trades.

  • Controlled unforeseen condition costs and avoided fixed-price risk.
  • The agreement included detailed daily logs, material receipts, and subcontractor invoices; it also established a maximum fee cap and dispute escalation to arbitration, reducing litigation risk while permitting necessary scope changes.

Best Practices for Accurate and Efficient Contracts

Practical measures improve clarity, reduce disputes, and make Cost Plus Construction Contracts more manageable during execution and closeout.

Document Everything
Keep contemporaneous records of time, materials, equipment usage, and subcontractor invoices. Use daily logs, photographs, and digital backups. Requiring standardized invoice formats and backup attachments reduces audit disputes and shortens verification time during owner reviews.
Set Clear Fee Rules
Define the contractor fee precisely, including base, tiers, caps, and incentive calculations. Clarify which costs the fee applies to and whether overhead is included. Establish example calculations in schedule to avoid differing interpretations.
Use Audit Trails and Access Controls
Maintain auditable electronic records with signed receipts, timestamps, and version history. Limit editing privileges, require supporting documentation for each cost entry, and outline consequences for missing or altered records.
Agree Change Order Timelines
Prescribe timelines for submission, owner review, and approval of change orders. Include temporary authorization measures for urgent work and a valuation method so emergency costs are addressed without later contention.

Common Preparation Mistakes to Avoid

  • Failing to define allowable and disallowed costs clearly, leading to disputes when invoiced expenses are challenged and causing delayed payments and audit contention.
  • Using vague change order procedures or oral authorizations that create scope ambiguity and make it difficult to price and approve modifications promptly.
  • Not maintaining contemporaneous backup documentation for labor and materials, which undermines auditability and can trigger contract penalties or withholding.
  • Neglecting to set fee caps, incentive metrics, or dispute resolution processes increases cost uncertainty and prolongs project closeout and payment reconciliation.

Penalties and Risks of an Incorrect Contract

Late Payments: Interest charges and withholding.
Incorrect Billing: Repayment and audit findings.
Missing Signatures: Contract unenforceable risk.
Unclear Scope: Cost overruns and claims.
Noncompliance: Insurance or lien exposure.
Tax Withholding: Backup withholding triggers.

Frequently Asked Questions about Cost Plus Construction Contracts

Answers to common questions about drafting, executing, and managing Cost Plus Construction Contracts, focusing on enforceability, signatures, and cost documentation.


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