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Navigating Cost-Plus Contracts: Understanding Profit Pockets and Negotiation Strategies

Feb 10, 2021

Cover_Manual_Navigating Cost Plus Contracts 464x600The latest update to our Contractors Operations Manual, Navigating Cost-Plus Contracts: Understanding Profit Pockets and Negotiation Strategies, provides a guide to recognizing and understanding what a cost-plus contract is and how it differentiates from other contracts.

Several variations are commonly used in cost-plus contracts, including cost-plus percentage of cost, cost-plus fixed fee, cost-plus incentive fee, and guaranteed maximum price contracts. For contractors, the cost-plus contract provides the advantage of a guaranteed profit on its allowable costs.

Contents include:

  1. Profit Pockets
    • Profit Pocket – General Conditions
    • Profit Pocket – Staff Rates
    • Profit Pocket – Contractors
    • Profit Pocket – Capitalized vs. Operating Expenses
    • Profit Pocket – Preconstruction Services
    • Profit Pocket – Senior Management Involvement .
    • Profit Pocket – Audit Safeguards
    • Profit Pocket – Contract Conversion.

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  2. Negotiations
  • Identifying Underlying Concerns
  • Nailing the Interview
  • Preserving the Client Relationship During Negotiations
  • Responding to Win-Lose Negotiators
  • Creating Section Allies
  • Tactics to Deal with Inexperienced Negotiators
  • Closing the Negotiation Session – Packaging the Issues
  • Enlarging The Pie And Getting More
  • Concessions and Knowing When to Concede
  • How to Recognize a Walk-Away Situation
  • Establishing the Budget or Fee Envelope
  • The Negotiation Sequences

To learn more, read the latest Contractors Operations Manual, Contractors Operations Manual, Navigating Cost-Plus Contracts: Understanding Profit Pockets and Negotiation Strategies.

For more information about cost-plus contractors or the Contractors Operations Manual, contact Mike McCullion, Director of Market Sectors and Safety, at mmccullion@smacna.org.