CPD – Risks of Managing Cost Plus Contracts

CPD – Risks of Managing Cost Plus Contracts

In a ‘post-pandemic’ world of inflation and cost escalation challenges, our members are reporting builders are increasingly hesitant to sign traditional fixed price contracts and are instead looking to Cost Plus formats, to mitigate cost escalation risks.

Cost Plus contracts have traditionally been used for projects with many ‘unknowns’; complex existing or latent conditions, heritage concerns and those which contain elements which are unable to be resolved or documented prior to construction. Fixed price/lump sum contracts suit work that can be specifically defined, is able to be accurately documented and as a result, competitively tendered.

In the face of increasing numbers of building companies becoming insolvent, building industry groups such as the HIA and Master Builders are urging members not to wear the real (or perceived) risk of price increases under fixed price contracts. On face value this is understandable, for them to make a crust in the current ‘profitless boom’ and ensure the ongoing sustainability of their business.

As responsible architects, how do we best manage these challenges and the inherent uncertainty of Cost Plus Contracts? How do we best protect our client’s interests while maintaining a good working relationship with the builder to ensure successful project delivery?

This CPD aims to provide insight into the topic from a broad range of industry experts; a lawyer who will provide critical contract expertise, Insurance Brokers from AustBrokers Countrywide (who manage the ArchiTeam Group Insurance facility), to add a risk management perspective, and an architect and builder to share their experience of successfully delivering a project under a Cost Plus Contract.

Speakers:

• Damien Simonetti, lawyer, KCL Law (Construction law lawyer)
• Greg Hansen, Director, Austbrokers Countrywide (Insurance brokers for ArchiTeam Group Insurance facility)
• Rachel McGlashan, Detail 9 Architects (Architect)
• Rod Devlin, Devlin Mees Builders (Builder)
• Warwick Mihaly, Mihaly Slocombe Architects (Architect)

AACA Units of Competency:

Practice Management & Professional Conduct 
This unit of competency encompasses a holistic understanding of the organisation of the profession, practice and business of architecture, with the objective of providing value through sustainable, timely and effective professional services in accordance with the ethical and legal obligations of an architect to clients, colleagues, employees and to broader communities.
Performance Criteria: PC9, PC13

DESIGN DELIVERY AND CONSTRUCTION PHASE SERVICES 
This unit of competency encompasses the provision of services to support the process of project execution through construction. This may occur through a variety of building procurement methods and construction contracts. The form of construction contract may establish different expectations and obligations upon the architect and may include contract administration services. Typically, all contract types include the timely and cost-effective management of design delivery, review and inspection processes.
Performance Criteria: PC51, PC52, PC53, PC57, PC58

Learning Outcomes:

• Understand the difference between Cost Plus and Lump Sum Contracts, their intended purposes, advantages, and limitations.
• Understand the risk to clients by using a Cost Plus Contract.
• Learn about different strategies to protect your client’s interests whilst recognising the risk to builders of Lump Sum Contracts within the current market environment.

$42.00 – $53.00