What is the primary risk profile for the owner when utilizing a Cost Plus (Time & Materials) payment model?
Answer
Higher, because the final total cost of the project is unknown at contract signing.
The owner faces a higher risk level in a Cost Plus arrangement because they are obligated to reimburse the contractor for all actual costs incurred, meaning the final price is uncertain when the agreement is made.
#Videos
Understand Construction Contracts In Minutes - YouTube
Related Questions
What primary role does a construction contract serve for an entire project?Why are verbal construction agreements generally avoided despite technically forming a contract?What essential information must the Scope Definition clearly define?In the context of payment terms, what does retainage represent?Which two specific completion dates must the Project Timeline section of the contract establish?Why is establishing the Change Order Process early considered essential for effective contract management?What is a typical tiered approach for Dispute Resolution outlined in most construction agreements?What is the function of Drawings and Specifications within the overall contract documents package?In a Lump Sum (Fixed Price) contract, who bears the majority of the financial risk for unforeseen site conditions?What is the primary risk profile for the owner when utilizing a Cost Plus (Time & Materials) payment model?What practical administrative tool is suggested to immediately authorize verbal instructions that alter the work scope?