This is straight forward, except when there are disagreements about how many units are complete. Under a unit price contract, the price for a unit of work is set ahead of time (say $100 per linear foot), and that amount is multiplied by the number of units complete. The owner or GC will likely require back-up documentation so they can verify expenses. In these contracts, the subcontractor adds a percentage or set fee to the contract cost of the project for overhead or other expenses.
Cost plus contractsĬost plus contracts work like T&M, in that they use the actual construction costs as the basis for the total contract price. On a larger project, lump sum contracts may call for progress billing to give the owner more control over the work as it progresses, and provide ongoing payments to the subcontractor doing the work.
They are very easy to prepare and usually there isn’t much back-up documentation required. On a small project, a subcontractor may bill with a simple invoice at the end of the project. This type of contract is generally used when the total costs for the project can be easily estimated. On lump sum contracts, the contract price is a set amount. It is important to keep good records of costs, as owners or general contractors may want to review them to make sure they are getting what they are paying for. Invoice amounts are a simple math equation (labor hours x labor rate + materials costs x mark-up percentage). Usually an hourly billing rate is agreed upon, and there is a set mark-up for the materials. Time and material contracts (T&M) are based on the actual hours worked and the materials purchased for the job during the time you are billing for. There are several different construction contract pricing structures. when the job is 30% complete, 60% complete, and 100% complete). Typically, payments are made on a monthly schedule, but they may also be sent at certain percentages of completion (e.g. Instead of waiting until the end of the job to bill, with progress billing it is possible to bill incrementally as the job goes along. Simply put, progress payments are based on the percentage of the work that is complete.