{"id":6482,"date":"2026-10-22T05:30:16","date_gmt":"2026-10-22T12:30:16","guid":{"rendered":"https:\/\/buildern.com\/resources\/?p=6482"},"modified":"2026-10-22T07:17:19","modified_gmt":"2026-10-22T14:17:19","slug":"cost-plus-contract","status":"publish","type":"post","link":"https:\/\/buildern.com\/resources\/blog\/cost-plus-contract\/","title":{"rendered":"Cost-Plus Contracts Explained: A Guide for Custom Home Builders"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">A cost-plus contract pays you back what the build actually costs, plus an agreed fee for running it. For custom home builders, it&#8217;s often the cleanest way to price a project when the plans aren&#8217;t final, the client is still choosing finishes, or the site holds surprises nobody can price yet.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The trade-off is that cost-plus only works if your books are open and accurate. Clients can see every invoice, every hour and every markup. That transparency is what earns their trust, and it&#8217;s also where most cost-plus disputes start.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This guide covers how cost-plus contracts work on a custom home, the main fee structures, a worked example, how to set your fee and what to put in the contract so the job runs smoothly.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is a cost-plus contract?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A cost-plus contract is an agreement where the client reimburses the builder for the actual cost of the work (labor, materials, subcontractors and equipment) and pays a separate fee on top. The fee covers the builder&#8217;s overhead and profit. It&#8217;s set either as a percentage of costs or as a fixed amount.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In a fixed-price (lump-sum) contract, you quote one number and carry the risk if costs rise. In a cost-plus contract, the client carries most of the cost risk, and you agree to show them exactly where the money goes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You&#8217;ll also see it called:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Cost of the work plus a fee.<\/strong> This is the wording the American Institute of Architects uses in its standard forms.<\/li>\n\n\n\n<li><strong>Cost-plus pricing<\/strong> or <strong>cost-plus billing.<\/strong> These describe the invoicing side.<\/li>\n\n\n\n<li><strong>Open-book contract.<\/strong> This highlights the transparency requirement.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>When custom home builders use it<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Cost-plus fits best when the final scope can&#8217;t be priced with confidence on day one. Common cases:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Design-build projects where construction starts before every drawing is finished<\/li>\n\n\n\n<li>High-end homes with many client selections and allowances still open<\/li>\n\n\n\n<li>Difficult sites: slopes, unknown soils, rock, remote access<\/li>\n\n\n\n<li>Clients who expect to change things as they see the house take shape<\/li>\n\n\n\n<li>Volatile material prices, where a lump sum would need a large contingency<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">If the plans are complete and the client mainly wants a firm number, a fixed-price contract is usually the better fit. Our <a href=\"https:\/\/buildern.com\/resources\/blog\/financial-management\/cost-plus-fixed-price\/\">cost plus vs fixed price guide<\/a> compares the two side by side.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How a cost-plus contract works on a custom home<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A cost-plus project still starts with an estimate. The difference is that the estimate is a target, not a price. Here&#8217;s the usual sequence:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Build a detailed estimate.<\/strong> Price the home line by line from the current drawings and specs, with allowances for anything not yet selected. Clients will judge you against this number, so make it realistic.<\/li>\n\n\n\n<li><strong>Agree on what counts as cost.<\/strong> The contract defines which expenses are reimbursable and which come out of your fee. This is the most important part of the agreement (more on it below).<\/li>\n\n\n\n<li><strong>Agree on the fee.<\/strong> Choose a percentage, a fixed fee or a hybrid, and decide whether there&#8217;s a price cap.<\/li>\n\n\n\n<li><strong>Set a billing rhythm.<\/strong> Most builders invoice monthly or at each draw. Each invoice lists the costs incurred in that period, with backup, plus the fee earned on them.<\/li>\n\n\n\n<li><strong>Track every cost to the job.<\/strong> Supplier bills, subcontractor invoices, labor hours and equipment all get coded to the project and to a budget line.<\/li>\n\n\n\n<li><strong>Share the backup.<\/strong> The client (or their lender) reviews receipts, timesheets and sub invoices before paying. Many contracts give the client the right to audit your job records.<\/li>\n\n\n\n<li><strong>Compare actuals to the estimate.<\/strong> Report cost-to-date against budget at every draw, so changes and overruns show up early, not at closeout.<\/li>\n\n\n\n<li><strong>Reconcile at the end.<\/strong> Final invoice, final accounting, and any shared savings or cap adjustments.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Types of cost-plus contracts<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Most residential cost-plus contracts are a cost-plus-percentage or cost-plus-fixed-fee deal, sometimes with a guaranteed maximum price on top. The fee structure changes who carries risk and what each side is motivated to do.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Type<\/th><th>How the fee works<\/th><th>Risk on cost overruns<\/th><th>Best for<\/th><th>Watch out for<\/th><\/tr><\/thead><tbody><tr><td>Cost plus percentage<\/td><td>A % of total cost, often 10\u201325% on custom homes<\/td><td>Client<\/td><td>Early-stage designs, many open selections<\/td><td>Your fee grows as costs grow, so clients may question your incentive to save<\/td><\/tr><tr><td>Cost plus fixed fee<\/td><td>A flat dollar fee set at signing<\/td><td>Client (builder&#8217;s fee doesn&#8217;t move)<\/td><td>Defined scope with some unknowns<\/td><td>Big scope changes need a fee adjustment clause<\/td><\/tr><tr><td>Cost plus with guaranteed maximum price (GMP)<\/td><td>% or fixed fee, but total price is capped<\/td><td>Builder above the cap<\/td><td>Clients and lenders who need a ceiling<\/td><td>Needs near-complete drawings, and you price in contingency for the cap<\/td><\/tr><tr><td>Cost plus with incentive or shared savings<\/td><td>Base fee plus a bonus (or split) for finishing under target<\/td><td>Shared<\/td><td>Repeat clients, strong relationships<\/td><td>Agree clearly how the target is set and adjusted<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Cost plus percentage<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The most common form for custom homes. If costs are $800,000 and your fee is 15%, you bill $920,000. It&#8217;s simple to explain and automatically scales your fee as the client upgrades. The downside is perception: some clients worry you profit more when the house costs more.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Cost plus fixed fee<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">You agree a fee in dollars, say $110,000, regardless of final cost. This removes the incentive question, which makes it easier to sell to cautious clients. You&#8217;ll need a clause that adjusts the fee when the client adds major scope, or a 1,500 sq ft addition ends up earning you nothing extra.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Guaranteed maximum price (GMP)<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A GMP caps the total the client will pay. Costs above the cap come out of your fee or your pocket, unless they&#8217;re caused by approved change orders. Contracts often include a shared-savings clause that splits any money left under the cap. The <a href=\"https:\/\/learn.aiacontracts.com\/contract-doc-pages\/71126-a-series-ownercontractor-agreements\/\">AIA A102<\/a> form covers cost plus a fee with a GMP. The A103 form covers cost plus a fee with no GMP.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">GMP sounds safe for the client, but it only works once drawings are close to complete. Otherwise you&#8217;re pricing a lump sum under another name, with less margin.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Cost-plus contract example<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s how the numbers work on a 3,400 sq ft custom home. The builder&#8217;s estimate puts the cost of the work at $820,000, and the fee is 15%.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>A monthly draw<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In month 3, the builder invoices the costs incurred that month, with receipts and timesheets attached:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Line item<\/th><th>Cost<\/th><\/tr><\/thead><tbody><tr><td>Framing subcontractor<\/td><td>$48,500<\/td><\/tr><tr><td>Lumber and sheathing<\/td><td>$31,200<\/td><\/tr><tr><td>Window package deposit<\/td><td>$18,000<\/td><\/tr><tr><td>Site supervisor, 160 hrs \u00d7 $55\/hr<\/td><td>$8,800<\/td><\/tr><tr><td>Telehandler rental<\/td><td>$3,400<\/td><\/tr><tr><td>Dumpster and portable toilet<\/td><td>$1,100<\/td><\/tr><tr><td><strong>Cost of the work this period<\/strong><\/td><td><strong>$111,000<\/strong><\/td><\/tr><tr><td>Builder&#8217;s fee (15%)<\/td><td>$16,650<\/td><\/tr><tr><td><strong>Amount due<\/strong><\/td><td><strong>$127,650<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>How the fee type changes the final bill<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Now say the project ends at $900,000 in actual costs. The client approved $50,000 in upgrades through change orders, and the excavator hit rock that added $30,000.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th><\/th><th>Cost plus 15%<\/th><th>Cost plus fixed fee<\/th><th>Cost plus fixed fee with GMP<\/th><\/tr><\/thead><tbody><tr><td>Fee terms<\/td><td>15% of cost<\/td><td>$123,000 (15% of the estimate)<\/td><td>$123,000, total capped at $960,000<\/td><\/tr><tr><td>Cap after $50,000 in approved change orders<\/td><td>None<\/td><td>None<\/td><td>$1,010,000<\/td><\/tr><tr><td>Cost of the work<\/td><td>$900,000<\/td><td>$900,000<\/td><td>$900,000<\/td><\/tr><tr><td>Client pays<\/td><td>$1,035,000<\/td><td>$1,023,000<\/td><td>$1,010,000<\/td><\/tr><tr><td>Builder&#8217;s fee actually earned<\/td><td>$135,000<\/td><td>$123,000<\/td><td>$110,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Under the percentage deal, the rock and the upgrades raised the builder&#8217;s fee by $12,000. Under the fixed fee, the client saved that $12,000. Under the GMP, the builder absorbed the $13,000 that went over the cap. That&#8217;s why GMP contracts depend on how well unknowns like soil conditions are excluded or priced in up front.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reimbursable costs vs. what your fee covers<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Most cost-plus disputes come from one question: was that a cost of the work, or was it supposed to come out of the fee? Settle it in writing before you break ground.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The usual split looks like this. Your contract can move items between columns, as long as it says so clearly.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Usually reimbursable (cost of the work)<\/th><th>Usually covered by the fee (overhead and profit)<\/th><\/tr><\/thead><tbody><tr><td>Materials and supplies delivered to the job<\/td><td>Office rent, utilities and admin staff<\/td><\/tr><tr><td>Subcontractor invoices<\/td><td>Owner and estimator salaries<\/td><\/tr><tr><td>Field labor at agreed rates, with burden<\/td><td>Company vehicles not dedicated to the job<\/td><\/tr><tr><td>Site supervisor time, if stated in the contract<\/td><td>Accounting, software and general insurance<\/td><\/tr><tr><td>Equipment rental and small tools bought for the job<\/td><td>Marketing and sales costs<\/td><\/tr><tr><td>Permits, inspections and utility fees<\/td><td>Profit<\/td><\/tr><tr><td>Temporary facilities: power, toilets, fencing, dumpsters<\/td><td>Costs to fix your own defective work<\/td><\/tr><tr><td>Builder&#8217;s risk insurance and job-specific bonds<\/td><td>Fines or penalties caused by the builder<\/td><\/tr><tr><td>Cleanup and debris hauling<\/td><td><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The gray areas to settle up front:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Project manager and superintendent time.<\/strong> Is it billed by the hour as a job cost, or included in the fee? Either works, but say which.<\/li>\n\n\n\n<li><strong>Labor burden.<\/strong> If you bill your crews at a loaded rate (wages plus payroll taxes, workers&#8217; comp and benefits), list the rate or the burden percentage.<\/li>\n\n\n\n<li><strong>Your own equipment.<\/strong> Set a rate schedule for company-owned machines, so you aren&#8217;t billing retail rental rates for equipment you already own.<\/li>\n\n\n\n<li><strong>Rework.<\/strong> Decide who pays when something has to be redone, and whether it depends on whose mistake it was.<\/li>\n\n\n\n<li><strong>Discounts and rebates.<\/strong> Most contracts pass supplier discounts through to the client. Say whether early-payment discounts count too.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How to set your cost-plus fee<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cost-plus fees on custom homes typically run 10\u201325% of the cost of the work (<a href=\"https:\/\/www.landmarkservices.com\/blog\/blog1\/fixed-price-and-cost-plus-fee-which-is-better\">Landmark Services<\/a>, <a href=\"https:\/\/www.costtobuildhouse.com\/how-much-does-a-general-contractor-charge\">CostToBuildHouse<\/a>). Larger homes and larger builders tend to sit lower in that range. Smaller projects and boutique builders sit higher. Don&#8217;t pick a number because competitors use it. Work it out from your own costs:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Add up your annual overhead.<\/strong> Include everything the fee must cover: office, admin and management salaries, insurance, vehicles, software and marketing. Say it&#8217;s $300,000.<\/li>\n\n\n\n<li><strong>Estimate your annual volume.<\/strong> Total cost of the work you expect to bill in a year. Say $3,000,000.<\/li>\n\n\n\n<li><strong>Work out your overhead rate.<\/strong> $300,000 \u00f7 $3,000,000 = 10%. That&#8217;s your break-even fee.<\/li>\n\n\n\n<li><strong>Add your target profit.<\/strong> If you want profit equal to 8% of cost, your fee is 18%.<\/li>\n\n\n\n<li><strong>Adjust for what&#8217;s billed as a job cost.<\/strong> If supervision and project management are reimbursable, your fee can be lower than if they come out of the fee.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Two more things to decide:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Is the fee the same on everything?<\/strong> Some builders charge a lower fee on big pass-through items like appliances or client-supplied fixtures, or a minimum fee if the client buys materials directly.<\/li>\n\n\n\n<li><strong>When is the fee billed?<\/strong> Most builders bill it with each draw, proportional to costs incurred. Billing it all up front is rare and makes clients nervous.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Pros and cons of cost-plus contracts<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cost-plus protects your margin but costs you more admin. Here&#8217;s how it looks from each side of the table.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>For the builder<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Pros<\/th><th>Cons<\/th><\/tr><\/thead><tbody><tr><td>Your fee is protected when costs rise or the site surprises you<\/td><td>Heavy documentation: every receipt, timesheet and sub invoice<\/td><\/tr><tr><td>No need to pad the bid with large contingencies<\/td><td>Clients can question any line item<\/td><\/tr><tr><td>Easier to start before plans are 100% final<\/td><td>Cash flow depends on fast, accurate draw invoices<\/td><\/tr><tr><td>Upgrades and changes don&#8217;t eat your margin<\/td><td>Less upside: you can&#8217;t earn more by buying well, unless there&#8217;s a savings split<\/td><\/tr><tr><td>Builds trust with clients who want to see the numbers<\/td><td>Weak cost tracking shows up quickly and hurts your reputation<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>For the client<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Pros<\/th><th>Cons<\/th><\/tr><\/thead><tbody><tr><td>Full visibility into what the house really costs<\/td><td>No firm final price, unless there&#8217;s a GMP<\/td><\/tr><tr><td>No hidden contingency built into the price<\/td><td>Budget can creep with selections and changes<\/td><\/tr><tr><td>Freedom to change selections as the build progresses<\/td><td>More invoices to review<\/td><\/tr><tr><td>Savings on materials go to them, not the builder<\/td><td>Requires trust in the builder&#8217;s cost control<\/td><\/tr><tr><td>Often a lower total than a heavily padded lump sum<\/td><td>Some lenders want more paperwork for cost-plus draws<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What to put in a cost-plus contract<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A good cost-plus contract answers every money question before it comes up. Use a standard form as your starting point, such as the AIA A102\/A103 or the short-form A105 for smaller residential projects, or your state builders&#8217; association template. Then have a construction attorney review it for your state. Make sure it covers:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Definition of the cost of the work.<\/strong> A detailed list of reimbursable costs and a matching list of non-reimbursable ones.<\/li>\n\n\n\n<li><strong>Fee.<\/strong> Percentage or fixed amount, what it applies to, and when it&#8217;s billed.<\/li>\n\n\n\n<li><strong>Labor rates.<\/strong> Hourly rates by role, or how burden is calculated.<\/li>\n\n\n\n<li><strong>Estimate or budget.<\/strong> Attach it, and state that it&#8217;s an estimate, not a guaranteed price.<\/li>\n\n\n\n<li><strong>GMP terms, if any.<\/strong> The cap, what raises it (approved change orders), what&#8217;s excluded, and how savings are split.<\/li>\n\n\n\n<li><strong>Allowances.<\/strong> Amounts for open selections and what happens when a client goes over or under.<\/li>\n\n\n\n<li><strong>Change orders.<\/strong> How changes are requested, priced and approved in writing, and how they affect the fee or cap. A <a href=\"https:\/\/buildern.com\/resources\/blog\/construction-change-orders\/\">change order template<\/a> helps keep this consistent.<\/li>\n\n\n\n<li><strong>Billing and payment.<\/strong> Draw schedule, backup required with each invoice, payment terms, and retainage if any.<\/li>\n\n\n\n<li><strong>Audit rights.<\/strong> How long the client can review your job records, and how.<\/li>\n\n\n\n<li><strong>Budget reporting.<\/strong> How often you&#8217;ll report cost-to-date against the estimate, and the threshold for flagging an overrun.<\/li>\n\n\n\n<li><strong>Rework and warranty.<\/strong> Who pays to correct defective work during construction and after.<\/li>\n\n\n\n<li><strong>Discounts and rebates.<\/strong> Whether they&#8217;re passed through to the client.<\/li>\n\n\n\n<li><strong>Termination.<\/strong> What&#8217;s owed if either side ends the contract early.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How to run cost-plus jobs without disputes<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">On a cost-plus job, your bookkeeping is part of the product. The builders who do it well tend to follow the same habits.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Code every cost on the day it happens.<\/strong> A receipt that sits in a truck for three weeks becomes a line nobody can explain at draw time. Assign each bill and timesheet to a job and a budget line as it comes in.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Send invoices clients can follow.<\/strong> Group costs by phase or budget line, attach the backup, and show the fee as its own line. A client who can read the invoice in five minutes pays faster.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Report budget vs. actual at every draw.<\/strong> Show original estimate, approved changes, cost-to-date and projected final cost. Clients get upset by surprises, not by overruns they saw coming two months earlier.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Put every change in writing before work starts.<\/strong> On cost-plus, it&#8217;s tempting to skip change orders because &#8220;they&#8217;ll pay for it anyway.&#8221; Don&#8217;t. A signed change order is your proof that the client approved the extra cost, and it adjusts the fee or GMP.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Manage allowances in the open.<\/strong> Show the client where each selection stands against its allowance as they choose. Allowance overages are the most common source of budget creep on custom homes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Give the client a window into the job.<\/strong> A client portal where they can see invoices, selections, change orders and progress photos cuts down on calls and on doubt.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Run cost-plus projects in Buildern<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Cost-plus contracts only work when cost tracking keeps up with the job. Buildern keeps the costs, the fee and the client&#8217;s view in one place:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/buildern.com\/features\/invoices\"><strong>Cost-plus invoicing<\/strong><\/a><strong>.<\/strong> Turn bills and timesheets into cost-plus invoices with your markup applied, alongside fixed-price jobs.<\/li>\n\n\n\n<li><strong>Bills and job costing.<\/strong> Log supplier and subcontractor bills against the project budget as they arrive, and see budget vs. actual at any point.<\/li>\n\n\n\n<li><strong>Change orders and allowances.<\/strong> Get client approval on changes and track each selection against its allowance.<\/li>\n\n\n\n<li><strong>Client portal.<\/strong> Clients see invoices with clear cost breakdowns, approve changes and follow progress without calling you.<\/li>\n\n\n\n<li><strong>Payment tracking.<\/strong> Follow invoice status, partial payments and retainage from one dashboard, and sync with your accounting software.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/app.buildern.com\/signup\">Try Buildern free<\/a> and send your next cost-plus draw in minutes.<\/p>\n\n\n\n<section class=\"wp-block-buildern-article-banner article-banner article-banner--general\"><div class=\"article-banner__general-layout\"><div class=\"article-banner__icons\"><img class=\"article-banner__icon\" src=\"https:\/\/buildern.com\/resources\/wp-content\/uploads\/2026\/10\/export.svg\" alt=\"\" aria-hidden=\"true\" loading=\"lazy\" decoding=\"async\"\/><img class=\"article-banner__icon\" src=\"https:\/\/buildern.com\/resources\/wp-content\/uploads\/2026\/10\/Group-155090.svg\" alt=\"\" aria-hidden=\"true\" loading=\"lazy\" decoding=\"async\"\/><\/div><div class=\"article-banner__content\"><img class=\"article-banner__logo\" src=\"https:\/\/buildern.com\/resources\/wp-content\/uploads\/2026\/10\/Buildern-Logo-Colored-100.svg\" alt=\"Buildern\" loading=\"lazy\" decoding=\"async\"\/><h3 class=\"article-banner__heading\">Construction Management Software<\/h3><p class=\"article-banner__description\">The all-in-one platform for managing construction projects from start to finish.<\/p><ul class=\"article-banner__checklist\"><li class=\"article-banner__checklist-item\"><span class=\"article-banner__check\" aria-hidden=\"true\"><\/span><span class=\"article-banner__checklist-label\">Project management<\/span><\/li><li class=\"article-banner__checklist-item\"><span class=\"article-banner__check\" aria-hidden=\"true\"><\/span><span class=\"article-banner__checklist-label\">Budget tracking<\/span><\/li><li class=\"article-banner__checklist-item\"><span class=\"article-banner__check\" aria-hidden=\"true\"><\/span><span class=\"article-banner__checklist-label\">Estimates &amp; proposals<\/span><\/li><li class=\"article-banner__checklist-item\"><span class=\"article-banner__check\" aria-hidden=\"true\"><\/span><span class=\"article-banner__checklist-label\">Client communication<\/span><\/li><\/ul><a class=\"article-banner__button\" href=\"https:\/\/buildern.com\/schedule-demo\">Book a Free Demo<\/a><p class=\"article-banner__footnote\">No credit card required<\/p><\/div><\/div><\/section>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<section class=\"wp-block-buildern-article-faq article-faq\" data-article-faq=\"\"><h2 class=\"article-faq__title\">Frequently Asked Questions<\/h2><div class=\"article-faq__items\">\n<details class=\"wp-block-buildern-article-faq-item article-faq__item\"><summary class=\"article-faq__question\"><h4 class=\"article-faq__question-title\"><strong>What is a cost-plus contract in simple terms?<\/strong><\/h4><span class=\"article-faq__chevron\" aria-hidden=\"true\"><svg width=\"12\" height=\"8\" viewBox=\"0 0 12 8\" fill=\"none\" focusable=\"false\" aria-hidden=\"true\"><path d=\"M1 1.5L6 6.5L11 1.5\" stroke=\"currentColor\" stroke-width=\"1.5\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><\/path><\/svg><\/span><\/summary><div class=\"article-faq__answer\">\n<p class=\"wp-block-paragraph\">The client pays what the project actually costs, plus a fee to the builder for overhead and profit. The builder shows the client receipts and records for every cost.<\/p>\n<\/div><\/details>\n\n\n\n<details class=\"wp-block-buildern-article-faq-item article-faq__item\"><summary class=\"article-faq__question\"><h4 class=\"article-faq__question-title\"><strong>What is a typical cost-plus percentage for a custom home builder?<\/strong><\/h4><span class=\"article-faq__chevron\" aria-hidden=\"true\"><svg width=\"12\" height=\"8\" viewBox=\"0 0 12 8\" fill=\"none\" focusable=\"false\" aria-hidden=\"true\"><path d=\"M1 1.5L6 6.5L11 1.5\" stroke=\"currentColor\" stroke-width=\"1.5\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><\/path><\/svg><\/span><\/summary><div class=\"article-faq__answer\">\n<p class=\"wp-block-paragraph\">Most custom home builders charge 10\u201325% of the cost of the work. The right number depends on your overhead, your annual volume and whether supervision is billed as a job cost or covered by the fee.<\/p>\n<\/div><\/details>\n\n\n\n<details class=\"wp-block-buildern-article-faq-item article-faq__item\"><summary class=\"article-faq__question\"><h4 class=\"article-faq__question-title\"><strong>Is cost-plus or fixed price better for custom homes?<\/strong><\/h4><span class=\"article-faq__chevron\" aria-hidden=\"true\"><svg width=\"12\" height=\"8\" viewBox=\"0 0 12 8\" fill=\"none\" focusable=\"false\" aria-hidden=\"true\"><path d=\"M1 1.5L6 6.5L11 1.5\" stroke=\"currentColor\" stroke-width=\"1.5\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><\/path><\/svg><\/span><\/summary><div class=\"article-faq__answer\">\n<p class=\"wp-block-paragraph\">Cost-plus suits projects with incomplete plans, many open selections or uncertain site conditions. Fixed price suits projects with complete drawings and clients who want a firm number. See our <a href=\"https:\/\/buildern.com\/resources\/blog\/financial-management\/cost-plus-fixed-price\/\">cost plus vs fixed price comparison<\/a> for more.<\/p>\n<\/div><\/details>\n\n\n\n<details class=\"wp-block-buildern-article-faq-item article-faq__item\"><summary class=\"article-faq__question\"><h4 class=\"article-faq__question-title\"><strong>Who pays for mistakes in a cost-plus contract?<\/strong><\/h4><span class=\"article-faq__chevron\" aria-hidden=\"true\"><svg width=\"12\" height=\"8\" viewBox=\"0 0 12 8\" fill=\"none\" focusable=\"false\" aria-hidden=\"true\"><path d=\"M1 1.5L6 6.5L11 1.5\" stroke=\"currentColor\" stroke-width=\"1.5\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><\/path><\/svg><\/span><\/summary><div class=\"article-faq__answer\">\n<p class=\"wp-block-paragraph\">It depends on the contract. Most cost-plus contracts make the builder pay to fix their own defective work or their subcontractors&#8217; work, rather than billing it as a cost. Spell this out in the rework clause.<\/p>\n<\/div><\/details>\n\n\n\n<details class=\"wp-block-buildern-article-faq-item article-faq__item\"><summary class=\"article-faq__question\"><h4 class=\"article-faq__question-title\"><strong>Does a cost-plus contract have a maximum price?<\/strong><\/h4><span class=\"article-faq__chevron\" aria-hidden=\"true\"><svg width=\"12\" height=\"8\" viewBox=\"0 0 12 8\" fill=\"none\" focusable=\"false\" aria-hidden=\"true\"><path d=\"M1 1.5L6 6.5L11 1.5\" stroke=\"currentColor\" stroke-width=\"1.5\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><\/path><\/svg><\/span><\/summary><div class=\"article-faq__answer\">\n<p class=\"wp-block-paragraph\">Not by default. If the client needs a ceiling, add a guaranteed maximum price (GMP). The builder then absorbs costs above the cap, except for approved change orders.<\/p>\n<\/div><\/details>\n\n\n\n<details class=\"wp-block-buildern-article-faq-item article-faq__item\"><summary class=\"article-faq__question\"><h4 class=\"article-faq__question-title\"><strong>Can a builder mark up subcontractor invoices on a cost-plus job?<\/strong><\/h4><span class=\"article-faq__chevron\" aria-hidden=\"true\"><svg width=\"12\" height=\"8\" viewBox=\"0 0 12 8\" fill=\"none\" focusable=\"false\" aria-hidden=\"true\"><path d=\"M1 1.5L6 6.5L11 1.5\" stroke=\"currentColor\" stroke-width=\"1.5\" stroke-linecap=\"round\" stroke-linejoin=\"round\"><\/path><\/svg><\/span><\/summary><div class=\"article-faq__answer\">\n<p class=\"wp-block-paragraph\">Only as the contract allows. Usually the builder&#8217;s fee applies to all costs, including subcontractor invoices, and there&#8217;s no separate markup. Charging both a markup and the fee on the same invoice is a common cause of disputes.<\/p>\n<\/div><\/details>\n<\/div><\/section>\n","protected":false},"excerpt":{"rendered":"<p>A cost-plus contract pays you back what the build actually costs, plus an agreed fee for running it. For custom home builders, it&#8217;s often the cleanest way to price a project when the plans aren&#8217;t final, the client is still choosing finishes, or the site holds surprises nobody can price yet. The trade-off is that [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":6484,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[2,142],"tags":[],"class_list":["post-6482","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-financial-management"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Cost-Plus Contracts Explained: A Guide for Custom Home Builders<\/title>\n<meta name=\"description\" content=\"How cost-plus 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