We represented the project owner in drafting a sophisticated cost-plus construction contract for a custom single-family home in an exclusive mountain resort town, with self-funded hard construction costs projected to exceed $32 million. The project faced inherent challenges, including a compressed weather-driven construction season, demanding site conditions, stringent environmental regulations, and potential material cost fluctuations. Given these complexities, a cost-plus structure was strategically chosen and enhanced with robust cost control mechanisms to mitigate the potential for inflated ‘fixed-price’ bids that can arise when trade contractors try to hedge against the unique risks of such projects. This project demanded careful project cost controls, and the contract reflects that priority. Key to this approach is a dynamic, continually updated cost tracking document gives the owner ongoing visibility into subcontractor bids, actual costs, and potential variances against the initial Control Estimate. This real-time data empowers the owner to proactively manage expenses and make informed decisions throughout the project lifecycle, providing a level of control rarely found in cost-plus contracts. The agreement – written in the form of a heavily negotiated AIA Document A103–2017, Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee without a Guaranteed Maximum Price with its AIA Document A201-2017, General Conditions of the Contract for Construction – further strengthens cost certainty through competitive bidding, pre-approval of all significant subcontracts and purchase orders, fixed-price (or not-to-exceed) subcontracts, and clearly defined change order procedures. This combination of transparency, proactive cost management, and rigorous contract terms safeguards the owner’s investment and promotes the successful realization of their vision for this exceptional home.
