Cost-Plus Systems

At Alpine Builders, we use the cost-plus system for billing our projects.  In the cost-plus system, the client is charged only for the actual costs incurred on their specific project.  There is a builder’s fee added to the costs of labor, materials, subcontractor fees, and rental equipment used on the job.  With a cost-plus system, an estimate is created to reflect the budget and specific details of the project.  This detailed estimate shows all anticipated costs and allowances for every activity of the project.  As the building process progresses, this estimate is used for periodic budget checks to monitor the project costs.  With our construction management software and operating systems, we can track every penny used in the project so that the client has access to all available information.

Other builders may use a firm bid system to determine the project cost and billing.  In this system, a firm bid is given, which will be the exact amount charged, with the addition of change orders.  The builder’s fee in this system is determined by the profit “built into” the cost of the project.  The builder estimates the cost of the project and adds their desired profit to that cost to determine the overall cost.  To accommodate potential problems that could cut into the builder’s profit, inflated costs are often applied to construction activities.  If these problems do not occur, then the builder makes more of a profit.  It is crucially important in this system to have every building activity identified in great detail to alleviate any confusion over what features are going to be included in that price.  With change orders adding to the total cost with each additional modification, you can easily go above your “fixed” cost. 

We use the cost-plus system because we believe it is the fairest system for both the client and the builder.  The client only pays for the activities that actually occur on the project.  This system also lends itself more easily to adjusting costs and the budget throughout the process.  When every cost is clearly defined, it is easier to adjust project activities that haven’t yet occurred, thus adjusting the budget to accommodate a desired cost total.