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According to the PMBOK (7th edition) by the Project Management Institute (PMI), Fixed Price Economic Price Adjustment Contract (FPEPA) is a "fixed-price contract, but with a special provision allowing for predefined final adjustments to the contract price due to changed conditions, such as inflation changes, or cost increases (or decrease) for special commodities".
Direct costs may also include the costs of project planning, investigation, studies, and design; land or right of way acquisition, and other non-construction costs. Usually, a subtotal of total direct costs is provided in the estimate. Provisions are made for Indirect costs in addition to the direct costs.
The construction manager and the owner agree on the overall cost of the construction project and the owner is responsible for paying that amount whether the construction project exceeds or falls below the agreed price of payment. [4] Cost plus fee: This contract provides payment for the contractor including the total cost of the project as well ...
The Final Price of the contract is expressed as follows: Final Price = Actual Cost + Final Fee. Note that if Contractor Share = 1, the contract is a Fixed Price Contract; if Contractor Share = 0, the contract is a cost plus fixed fee (CPFF) contract. [4] For example, assume a CPIF with: Target Cost = 1,000; Target Fee = 100
Construction bidding is the process of submitting a proposal to undertake, or manage the undertaking of a construction project. The process starts with a cost estimate from blueprints and material take offs .
A Allocation of costs is the transfer of costs from one cost item to one or more other cost items. Allowance - a value in an estimate to cover the cost of known but not yet fully defined work. As-sold estimate - the estimate which matches the agreed items and price for the project scope. B Basis of estimate (BOE) - a document which describes the scope basis, pricing basis, methods ...
A cost plus contract states that a client agrees to reimburse a construction company for building expenses such as labor, materials, and other costs, plus additional payment usually stated as a percentage of the contract's full price. This type of construction contract is an alternative to lump sum agreements. It allows flexibility and ...
Revenues and gross profit are recognized each period based on the construction progress, in other words, the percentage of completion. Construction costs plus gross profit earned to date are accumulated in an asset account (construction in process, also called construction in progress), and progress billings are accumulated in a liability account (billing on construction in process).