Cost Plus Construction Agreement for Hong Kong

Cost Plus Construction Agreement Template for Hong Kong

A comprehensive construction agreement governed by Hong Kong law that establishes a cost-plus pricing mechanism where the contractor is compensated for actual costs incurred plus an agreed fee or percentage markup. This agreement type is particularly suited for complex projects where exact costs are difficult to determine upfront or where flexibility is needed in the scope of works. The document details the calculation and verification of costs, contractor's fee structure, payment procedures, and project management requirements while ensuring compliance with Hong Kong construction regulations and industry standards.

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What is a Cost Plus Construction Agreement?

The Cost Plus Construction Agreement is designed for construction projects in Hong Kong where traditional fixed-price contracts may not be suitable due to project complexity, uncertainty in scope, or need for flexibility. This agreement structure is particularly valuable for projects with uncertain scope, emergency works, or where fast-tracking is required. It establishes a transparent mechanism for cost recovery plus a pre-agreed fee or percentage markup, while incorporating necessary safeguards for cost verification and project control. The document complies with Hong Kong construction law and practice, including Buildings Ordinance requirements and Construction Industry Council guidelines. It includes comprehensive provisions for cost definition, documentation requirements, payment procedures, variations handling, and dispute resolution mechanisms specific to the Hong Kong construction industry.

What sections should be included in a Cost Plus Construction Agreement?

1. Parties: Identification of the employer and contractor, including full legal names and addresses

2. Background: Context of the agreement, project overview, and basis for using cost-plus structure

3. Definitions and Interpretation: Definitions of key terms including 'Cost', 'Fee', 'Works', etc. and interpretation rules

4. Scope of Works: Detailed description of the construction works to be performed

5. Contract Price Structure: Definition of cost-plus mechanism, including allowable costs and fee calculation

6. Payment Terms: Payment procedures, timing, documentation requirements, and verification process

7. Contractor's Obligations: Key responsibilities including workmanship, compliance with laws, and record-keeping

8. Employer's Obligations: Access to site, permits, approvals, and other employer responsibilities

9. Time for Completion: Project timeline, milestones, and completion requirements

10. Variations: Process for handling changes to scope, costs, or timeline

11. Quality and Inspection: Quality standards, inspection rights, and remediation procedures

12. Health and Safety: Safety requirements and compliance with Hong Kong regulations

13. Insurance and Indemnity: Required insurance coverage and indemnification provisions

14. Force Majeure: Handling of unforeseen events and their impact on the project

15. Termination: Grounds and procedures for contract termination

16. Dispute Resolution: Process for resolving disputes, including Hong Kong arbitration provisions

17. General Provisions: Standard contract clauses including notices, governing law, and entire agreement

What sections are optional to include in a Cost Plus Construction Agreement?

1. Performance Security: Requirements for bonds or guarantees, used for larger projects

2. Environmental Protection: Specific environmental requirements, needed for projects with significant environmental impact

3. Intellectual Property: IP rights provisions, needed when design or innovative methods are involved

4. Subcontracting: Rules for engaging subcontractors, needed when subcontracting is permitted

5. Liquidated Damages: Pre-agreed damages for delay, optional in cost-plus contracts

6. Technology and BIM Requirements: Digital technology requirements, needed for projects using BIM or other specific technologies

7. Archaeological Findings: Procedures for handling discoveries, needed for sites with potential archaeological significance

8. Community Relations: Requirements for managing community impact, needed for projects in sensitive areas

What schedules should be included in a Cost Plus Construction Agreement?

1. Schedule 1 - Works Description: Detailed technical specifications and scope of works

2. Schedule 2 - Site Details: Site information, access points, and existing conditions

3. Schedule 3 - Cost Components: Detailed breakdown of allowable costs and excluded costs

4. Schedule 4 - Fee Calculation: Formula and methodology for calculating the contractor's fee

5. Schedule 5 - Key Personnel: List of key personnel from both parties and their roles

6. Schedule 6 - Program: Detailed project timeline and milestones

7. Schedule 7 - Required Insurance: Specific insurance requirements and coverage levels

8. Schedule 8 - Forms and Templates: Standard forms for payment applications, variations, etc.

9. Schedule 9 - Quality Standards: Specific quality requirements and standards to be met

10. Appendix A - Drawings: Project drawings and specifications

11. Appendix B - Permits and Approvals: Copies of relevant permits and regulatory approvals

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Hong Kong

Publisher

Genie AI

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Construction

Real Estate Development

Infrastructure

Industrial

Commercial Property

Residential Development

Healthcare Facilities

Education Facilities

Hospitality

Public Works

Mining

Energy

Relevant Teams

Legal

Construction

Commercial

Procurement

Finance

Operations

Project Management

Risk Management

Technical

Development

Contracts Administration

Relevant Roles

Construction Director

Project Manager

Commercial Manager

Contract Manager

Quantity Surveyor

Cost Manager

Construction Manager

Legal Counsel

Procurement Manager

Risk Manager

Chief Financial Officer

Operations Director

Technical Director

Development Manager

Site Manager

Finance Director

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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