Cost Plus Contract Form Template for England and Wales
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What is a Cost Plus Contract Form?
The Cost Plus Contract Form is designed for use in situations where project costs cannot be accurately predicted at the outset, or where flexibility in scope is required. Common in complex construction and engineering projects under English and Welsh law, this contract type provides transparency in cost management while protecting both parties' interests. It details allowable costs, markup structures, payment mechanisms, and audit rights, ensuring compliance with UK construction legislation including the Housing Grants, Construction and Regeneration Act 1996. The document is particularly valuable for projects requiring close collaboration between parties and where traditional fixed-price contracts may not be suitable.
Frequently Asked Questions
Is a cost plus contract form legally binding in England and Wales?
Yes, a properly executed cost plus contract form is legally binding in England and Wales under contract law. It must comply with the Housing Grants, Construction and Regeneration Act 1996 and include essential elements like offer, acceptance, consideration, and clear terms for allowable costs and fee structure. Both parties must have legal capacity to enter the agreement.
Can I enforce a cost plus contract if some terms are missing?
Courts in England and Wales may enforce a cost plus contract even with missing terms if the essential elements are present and the parties' intentions are clear. However, incomplete contracts often lead to disputes over allowable costs and fee calculations. Missing payment terms or cost verification procedures can make enforcement difficult and expensive.
How does a cost plus contract differ from a fixed price contract under UK law?
Unlike fixed price contracts, cost plus contracts reimburse actual project costs plus an agreed fee or percentage markup. This shifts financial risk from the contractor to the client but provides greater cost transparency. Under England and Wales law, both must comply with the same payment and adjudication requirements, but cost plus contracts require more detailed cost tracking and verification procedures.
How long does it typically take to prepare a cost plus contract form?
A basic cost plus contract form can be drafted in 1-2 days using a template, but comprehensive agreements for complex projects may take 1-2 weeks. Time depends on negotiating cost categories, markup rates, and verification procedures. Legal review adds another 2-5 business days, especially when customizing terms for specific England and Wales regulatory requirements.
Must cost plus contracts include adjudication clauses in England and Wales?
Yes, construction contracts in England and Wales must include adjudication procedures under the Housing Grants, Construction and Regeneration Act 1996. If your cost plus contract doesn't specify adjudication terms, the Scheme for Construction Contracts applies automatically. This ensures disputes over allowable costs or fee calculations can be resolved quickly through statutory adjudication.
Can contractors charge interest on late payments under cost plus contracts?
Yes, contractors can claim statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 if payments are delayed beyond agreed terms. Cost plus contracts should specify payment periods for reimbursements and fees. If no payment terms are agreed, statutory payment periods apply, typically 30 days, with interest accruing from the due date.
Which costs can legally be excluded from reimbursement in cost plus contracts?
Cost plus contracts in England and Wales commonly exclude overhead costs already covered by the management fee, costs from contractor negligence or breach, unapproved variations, and personal expenses. The contract must clearly define allowable versus non-allowable costs to avoid disputes. Ambiguous cost definitions often lead to adjudication under construction legislation.
About the Cost Plus Contract Form
A cost plus contract is a legally binding agreement where you pay the contractor for all legitimate project costs plus an agreed fee or percentage markup. Under England and Wales law, this contract type provides transparency and flexibility for construction projects where costs cannot be accurately predicted upfront. The Housing Grants, Construction and Regeneration Act 1996 governs payment procedures and dispute resolution mechanisms in these agreements.
When do you need this document?
You need a cost plus contract when undertaking complex construction projects with uncertain scope, such as historic building renovations where hidden structural issues may emerge. This contract type is ideal for research and development projects, emergency repairs following natural disasters, or innovative construction methods where material costs fluctuate significantly. It's particularly valuable when you require maximum flexibility to modify project specifications during construction while maintaining cost transparency. Design and build projects with evolving requirements also benefit from this contractual approach.
Key legal considerations
Your contract must clearly define allowable costs to prevent disputes over reimbursable expenses. Under English and Welsh law, you should specify whether costs include materials, labour, equipment hire, subcontractor fees, and overhead expenses. The fee structure requires careful consideration - whether it's a fixed fee, percentage of costs, or sliding scale arrangement. Payment terms must comply with the Construction Act 1996, including proper notice procedures and interim payment mechanisms. You should include comprehensive record-keeping requirements and audit rights to verify cost claims. Consider incorporating provisions for cost control measures and approval procedures for significant expenditures to protect your interests.
Legal requirements in England and Wales
Under the Housing Grants, Construction and Regeneration Act 1996, your contract must include proper payment provisions with specified due dates and final payment procedures. The Late Payment of Commercial Debts (Interest) Act 1998 applies to delayed payments, allowing statutory interest charges on overdue amounts. You must comply with the Construction (Design and Management) Regulations 2015 for health and safety responsibilities, clearly allocating duties between parties. The Supply of Goods and Services Act 1982 implies terms regarding reasonable skill and care in service provision. Your contract should address adjudication procedures as required by the Construction Act, providing an alternative dispute resolution mechanism. Consider the Unfair Contract Terms Act 1977 when drafting limitation clauses to ensure enforceability under English law.
GOVERNING LAW
Applicable law
This Cost Plus Contract Form is drafted to comply with England and Wales law. Key legislation includes:
Building Regulations 2010: Standards for design and construction of buildings
Public Contracts Regulations 2015: Regulations governing public sector procurement processes
Value Added Tax Act 1994: Legislation governing VAT obligations in construction contracts
Companies Act 2006: Principal legislation governing company operations and corporate entities
Working Time Regulations 1998: Regulations governing working hours and conditions
Health and Safety at Work Act 1974: Primary legislation for workplace health and safety
Equality Act 2010: Legislation protecting against discrimination in the workplace
FIDIC Principles: International standards for consulting engineering contracts
UK GDPR: Data protection regulation governing personal data processing
Data Protection Act 2018: UK's implementation of data protection standards
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