What is a cost plus contract? Homeowner FAQ
You're going to build your new home or renovate your existing one with a builder here in Queensland. Regarding your building contract, do you know what a cost plus contract is?
A cost plus contract is defined by the QBCC Act as:
“a domestic building contract under which the amount the building contractor is to receive under the contract can not be accurately calculated when the contract is entered into, even if prime cost items and provisional sums are ignored.”
Basically a cost plus contract means that you pay for the cost of the materials and labour plus the builder’s margin. In the perfect world this would seem like a fair contract type, however the cost plus contract does not give the builder any incentive to:
minimise your costs; or
minimise the time it takes to carry out the work.
However there are some occasions where a cost plus contract may be the only option, such as an urgent repair where the work simply has be done, but the actual cause is unknown and therefore the work needed to be carried is unknown at the time the contract was entered into.