Suppose ABC Construction Corp. has a contract to build a $20 million office building, and the agreement stipulates that the cost must not exceed $22 million. ABC`s profit was agreed with 15% of the total contract price of $3 million. In addition, ABC Construction may receive an incentive fee if the project is completed within nine months. A construction contract provides for a legally binding agreement, both for the owner and the owner, for the contract executed to receive the specific amount of compensation or the allocation of remuneration. There are several types of construction contracts that are used in the industry, but there are certain types of construction contracts that are preferred by construction professionals. A cost incentive royalty (CPIF) contract is a cost refund contract that provides that an initially negotiated fee will later be adjusted by a formula based on the ratio of total authorized cost to total target cost.  Cost-plus contracts are used when the scope is not clearly defined and the onus is on the owner to set certain limits on the contractor`s tally. If some of the above options are used, these incentives are used to protect the interests of the owner and avoid charging for unnecessary changes. Note that cost-plus contracts are difficult to track or harder to track and more supervision will be needed, usually not much risk to the contractor. 3. However, note that contractors are not always able to separate the costs of the contract from the costs of the other unchanged work.
In this case, some discretion is permitted, unless overhead may be associated with the work of the amendment. The contractor may be encouraged to work effectively by introducing a target cost. Here at home, the objective costs were agreed at the beginning of the project. At the end of the project, environmental costs will be compared to the costs of assistance (taking into account the agreed changes). If the actual costs are less than the target cost, the savings are distributed among the parties on a pre-agreed basis (often a percentage). If the actual costs exceed the target costs, the additional costs can also be shared.