Cost Plus Contractor Agreement Template for England and Wales

A Cost Plus Contractor Agreement is a construction contract where you pay your contractor's actual project costs plus an agreed fee or markup. Unlike fixed-price contracts, this arrangement provides transparency into project expenses while sharing cost risks between you and your contractor. Under England and Wales law, these agreements must comply with the Housing Grants, Construction and Regeneration Act 1996 and related construction legislation.

When do you need this document?

You'll need a Cost Plus Contractor Agreement when project costs cannot be accurately predetermined or when scope flexibility is essential. This contract type is ideal for complex refurbishments where hidden issues may emerge, emergency repair works requiring immediate action, or innovative construction projects using untested methods. It's also valuable when you want full visibility into project expenses and prefer sharing cost risks rather than paying potential contingency premiums built into fixed-price contracts. Many clients choose this arrangement for high-end residential projects or commercial developments where design changes are likely during construction.

Key legal considerations

Your agreement must clearly define allowable costs, including labour, materials, equipment, and overhead expenses, while excluding items like contractor profit margins beyond the agreed fee. Payment terms should specify documentation requirements, with contractors typically providing detailed cost breakdowns and supporting receipts. Include robust audit rights allowing you to verify expenses and inspect contractor records. Change management procedures are crucial, requiring written approval for scope variations and associated cost implications. Consider including cost caps or target budgets with shared savings mechanisms to incentivise efficiency. The agreement should address risk allocation, particularly for cost overruns, delays, and quality issues, while ensuring contractor obligations remain clearly defined despite the cost-plus structure.

Legal requirements in England and Wales

Under the Construction Act 2009, your agreement must include compliant payment provisions specifying payment periods, notice requirements, and due dates for payments. You cannot include pay-when-paid clauses except in limited insolvency situations. The contract must provide statutory adjudication rights for dispute resolution, allowing either party to refer disputes to adjudication at any time. Include provisions for interim payments and payment notices as required by construction legislation. Your agreement should comply with the Late Payment of Commercial Debts Act 1998 regarding interest on overdue payments. If using standard form contracts like JCT or NEC, ensure any amendments maintain compliance with construction legislation. Consider CDM Regulations 2015 requirements if the project involves construction design work, and ensure appropriate insurance provisions meet industry standards and legal requirements.