In cost-reimbursable contracts you pay the contractor the costs necessarily incurred in the construction plus a fee. The latter portion viz. the fee can be fixed in a number of ways which we will discuss later in this section. The main reasons for adopting this mode of contracting are:
The most important question that should be resolved for finalising cost-reimbursable contracts is to identify the following costs:
Typically these costs comprise the following elements:
Non-reimbursable costs which includes:
Costs due to negligence of the contractor, subcontractors, or anyone directly employed by the contractor. While the above list is typical, there can be some variations to the list depending on the agreement between owner and contractor. But the contract should make these costs clear in order to avoid disputes.