Fixed Contract, Cost Plus and Time & Material, Essay Example

Fixed Contract

A fixed term contract is an employment contract where there is a defined start and end date. It normally states the exact date on which the contract ends and subsequently terminates. The important factor is that you have legally agreed to complete the contract to time, scope and cost by a fixed date.  The risk occurs if you go over this and have not completed the contract requirements.  This may leave you open to potential penalties or being sued for breach of contract.  In most cases remedial action is possible but it may cause you to lose profit on the job because of recompense to the employer.

Cost Plus

This normally is associated with construction or building contracts. Under this type of contractual agreement the owner pays the builder an actual cost plus a mark-up for gross profit. As such the builder has no risks applicable to the build or construction of the building. The objective being that the owner does not want to hand out a blank cheque. Risk is based upon negligent estimates and as such the owner may have recourse against the builder. This is often the result of design changes made by the builder.

Time and Materials

This is the standard form of contract favoured by business consultants. They get to charge for their time or hours worked at an agreed hourly rate. In addition they add their expenses or costs for overheads incurred and material costs.  This can sometimes go under the heading of disbursements.  You should always get a break-down of these figures as they can be unfairly inflated to increase the profit margin.  You also have to watch for hourly rate increases that were not part of the original contract agreement.