Cost Plus Construction Agreement

Cost Plus Construction Agreement Template for Malaysia

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Key Requirements PROMPT example:

"I need a Cost Plus Construction Agreement for a hospital renovation project in Kuala Lumpur, with a base fee of RM 500,000 plus 12% markup on actual costs, including provisions for medical facility-specific requirements and infection control during construction, targeting project completion by March 2025."

Document background

The Cost Plus Construction Agreement is particularly suited for complex construction projects in Malaysia where the scope of work cannot be fully defined at the outset, or where flexibility is required due to potential variations. This type of agreement is commonly used in renovation projects, emergency works, or complex construction projects with numerous unknown variables. The document establishes a mechanism where the contractor is reimbursed for actual costs incurred plus an agreed fee, while incorporating necessary safeguards for cost control and verification. It ensures compliance with Malaysian regulatory requirements, including CIDB regulations, CIPAA payment provisions, and local authority requirements. The agreement is structured to protect both parties' interests while maintaining flexibility in project execution, making it particularly valuable for projects where traditional lump sum pricing would be impractical or unfairly risky for the contractor.

Suggested Sections

1. Parties: Identification of the Employer and Contractor, including registration details and CIDB licenses

2. Background: Context of the agreement and brief project overview

3. Definitions and Interpretation: Key terms including 'Cost', 'Fee', 'Prime Cost', 'Reimbursable Expenses', and interpretation rules

4. Scope of Works: Detailed description of the construction works to be performed

5. Contractor's Obligations: General and specific obligations including compliance with Malaysian laws and regulations

6. Employer's Obligations: Responsibilities including site access, permits, and information provision

7. Contract Price Structure: Definition of cost-plus mechanism, including allowable costs and fee calculation

8. Payment Terms: Payment procedures, timing, and CIPAA compliance

9. Documentation and Cost Records: Requirements for maintaining and presenting cost records and supporting documents

10. Time for Completion: Project timeline, milestones, and completion requirements

11. Variations: Process for handling changes to scope and their impact on costs

12. Quality and Standards: Required quality standards and inspection procedures

13. Insurance and Securities: Required insurance coverage and performance securities

14. Termination: Grounds and procedures for contract termination

15. Dispute Resolution: Dispute resolution procedures compliant with Malaysian law

Optional Sections

1. Design Obligations: Required if contractor has design responsibilities in addition to construction

2. Value Engineering: Include when parties want to incorporate cost optimization procedures

3. Advance Payment: Include when advance payment is required for project mobilization

4. Environmental Compliance: Detailed section needed for projects with significant environmental impact

5. Local Content Requirements: Include when project must meet specific local content or bumiputera participation requirements

6. Force Majeure: Detailed provisions for force majeure events and their handling

7. Step-In Rights: Include for critical projects where employer may need to take over

8. Liquidated Damages: Include if specific completion dates are critical despite cost-plus nature

Suggested Schedules

1. Schedule 1 - Scope of Works: Detailed technical specifications and drawings

2. Schedule 2 - Project Timeline: Detailed program of works and milestone dates

3. Schedule 3 - Allowable Costs: Detailed breakdown of what constitutes reimbursable costs

4. Schedule 4 - Fee Calculation: Formula and mechanism for calculating the contractor's fee

5. Schedule 5 - Key Personnel: List of key personnel from both parties and their roles

6. Schedule 6 - Required Insurance: Details of required insurance coverage and minimum amounts

7. Schedule 7 - Forms and Procedures: Standard forms for payment applications, variations, etc.

8. Schedule 8 - Site Information: Site details, access points, and known conditions

9. Appendix A - Special Conditions: Any special conditions or requirements specific to the project

10. Appendix B - Required Permits: List of required permits and party responsible for obtaining them

Authors

Alex Denne

Head of Growth (Open Source Law) @ ��Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Construction

Real Estate Development

Infrastructure

Industrial Development

Commercial Development

Residential Development

Energy

Mining

Healthcare Infrastructure

Education Infrastructure

Transport Infrastructure

Hospitality

Relevant Teams

Legal

Commercial

Operations

Finance

Procurement

Project Management

Construction

Risk Management

Technical

Contract Administration

Business Development

Relevant Roles

Project Director

Construction Manager

Contract Manager

Commercial Manager

Project Manager

Quantity Surveyor

Cost Controller

Legal Counsel

Chief Financial Officer

Operations Director

Risk Manager

Procurement Manager

Site Manager

Technical Director

Development Manager

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