cost-plus-percentage contract

Dictionary of Business Terms for: cost-plus-percentage contract
cost-plus-percentage contract

an agreement on a construction project in which the contractor is provided a specified percentage profit over and above the actual costs of construction. These contracts are considered poor business practice because the contractor has little incentive to hold down costs. A cost-plus-fixed-fee contract is a better approach.

Dictionary of Real Estate Terms for: cost-plus-percentage contract
cost-plus-percentage contract

an agreement on a construction project in which the contractor is provided a specified percentage profit over and above the actual costs of construction. These contracts are considered poor business practice because the contractor has little incentive to hold down costs. A cost-plus-fixed-fee contract is a better approach.

Example: Smith Construction Company entered into a cost-pluspercentage contractto build the new high school. Smith will get 10% above the costs of construction. If the project costs $10 million, Smith will receive $11 million to complete the project.

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