Cost Plus Construction Agreement Template for England and Wales

A Cost Plus Construction Agreement offers a flexible contracting approach where you pay the contractor for actual project costs plus an agreed fee, rather than a fixed price. This arrangement provides complete transparency over project expenses while allowing contractors fair compensation for their work and expertise.

When do you need this document?

You need this agreement when traditional fixed-price contracts are impractical or risky. Complex renovation projects where hidden structural issues may emerge, emergency repair works requiring immediate action, or cutting-edge construction using new materials all benefit from cost-plus arrangements. Research and development facilities, historic building restorations, and projects with evolving specifications also suit this contract type. When you require detailed cost visibility throughout the project lifecycle, this agreement ensures every expense is documented and justified.

Key legal considerations

The cost definition clause requires careful attention, as it determines which expenses qualify for reimbursement. Establish clear boundaries between reimbursable costs and contractor overheads to prevent disputes. The fee structure must specify whether it covers profit, general overheads, or both, and whether it applies as a percentage or fixed amount. Payment provisions should align with the contractor's cash flow needs while protecting your interests through proper cost verification procedures. Include robust record-keeping requirements and audit rights to maintain transparency. Consider liability caps and insurance requirements, as cost-plus arrangements can expose you to higher financial risks than fixed-price contracts.

Legal requirements in England and Wales

Under the Housing Grants, Construction and Regeneration Act 1996, your agreement must include clear payment terms, notice requirements, and adjudication provisions. The Construction Act 2009 amendments mandate that payment notices specify amounts due and provide mechanisms for challenging incorrect payments. You cannot exclude the right to adjudication, and any attempts to do so will be void. The Late Payment of Commercial Debts (Interest) Act 1998 applies statutory interest rates if you delay payments beyond agreed terms. Under the Contracts (Rights of Third Parties) Act 1999, consider whether subcontractors or other project stakeholders should have direct enforcement rights. Your agreement must comply with CDM Regulations 2015 regarding health and safety responsibilities, particularly if you act as the client under these regulations.