Video

  • 27 minutes

Fixed Price vs. Cost-Plus Contracts

 
In every contract negotiation, regardless of the type of contract, risk allocation is talked about. In a fixed price contract, generally the most popular contract types in the construction industry, the contractor receives a fixed price for the entire job. In a cost-plus contract, the contractor receives reimbursements for the costs, plus a fee on top of the costs which may consist of a fixed lump sum or a percentage of the cost. The potential for profit on a fixed price contract could be upwards of 30% however with a cost-plus contract the profits generally run between 2-5%. The difference in the fee potential is a reflection of the risk differential. The large percentage spread shows how vitally important it is to heighten attention to risk allocation issues in contracts and negotiations.

Our speaker, Carol A. Sigmond, reviews incentives and risks on both fixed price and cost-plus contracts; as well as when to use a fixed price contract or a cost-plus contract. She also discusses mitigating risk in these two types of contracts.

Carol A. Sigmond is a Partner in the New York office of Cohen Seglias Pallas Greenhall & Furman PC.. She concentrates her practice on construction industry matters including contract preparation, mediation, litigation, suretyship, bid protests, appeals and arbitration. Ms. Sigmond has extensive experience in litigation of construction disputes for public works and buildings in both the public and private sectors. She is an experienced mediator and is on the New York County Supreme Court Commercial Division Roster of Volunteer Mediators and the American Arbitration Association’s Roster of Construction Industry Arbitrators.
Runtime: 26 minutes

Faculty

Carol A. Sigmond

Carol A. Sigmond

Greenspoon Marder LLP