Saturday, 20 January 2018

Cost Plus Fixed Fee Contract

Cost Plus fixed fee contract is desirable when the scope and nature of the work can atleast be broadly defined. The amount of fee is determined as a plump sum from a consideration of the scope of work, its approximate cost, nature of work, estimated time of construction, manpower and equipment requirements etc. In order to negotiate such a type of contract, it is essential that the scope and some general details of the work are defined. The contractor in this type of contract is selected on the basis of merit rather than the fee alone. In case of cost plus percentage contract, the contractor has a tendency to increase his profit by increasing the cost of work. But this drawback is overcome in cost plus fixed fee contract because here the contractor’s fee is fixed and does not fluctuate with actual
cost of work. Once this fee is fixed, the contractor cannot increase the cost of work.

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