August 9, 2023

Why is Cost Plus important for your construction business?

How to use cost-plus contracts to set your business financial success
Stay financially healthy in the rapidly evolving construction industry by utilising Nexvia's range of features that make cost-plus contracts seamless and easy so your business can take fewer financial risks and stay in the black.

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Reduce financial risks + stay in the black with Cost-Plus contracts

In the rapidly evolving construction industry, staying financially healthy has become trickier than ever. Escalating construction costs, volatile materials prices, disrupted supply chains and labour shortages have all made it difficult to stay profitable. In light of this uncertainty, it’s never been more important for interior fitout businesses to explore ways to take fewer financial risks and stay in the black. 

These unpredictable conditions have led to cost-plus contracts becoming increasingly prevalent. While these types of contracts demand transparency, detailed project documentation and sophisticated cost management, construction management software like Nexvia can set you up for success. By understanding the potential advantages of cost-plus, you can gain valuable insight into how and why this type of contract might be useful and whether it’s right for your project.

Risks of using traditional fixed contracts

One of the biggest issues with traditional contracts is the risk of unexpected cost overruns. The fixed, inflexible, nature of traditional contracts makes it difficult to accommodate any changes within the originally agreed budget. Whether the culprit is inaccurate cost estimates or unforeseen scope changes, the fall out from these miscalculations can lead to financial strain and reduced profitability. 

As builders you bear the brunt of the risk – including material costs, labour expenses, and project delays – so risk management becomes more important and more complex. A single set-back in any of these areas can significantly affect project timelines, profitability and even client relationships. With all this at stake, it’s no wonder alternative contract agreements such as cost-plus – that can offer more flexibility and help mitigate some of these risks – have become more popular.

Mitigate risk through transparent + efficient cost management with Nexvia

Cost-plus contracts work by reimbursing the actual costs incurred by the contractor, along with an agreed-upon fee or percentage to cover the builders overheads and profits. This means you’ll need to provide detailed project and cost breakdowns, making transparency and efficient cost management vital. Construction management software, like Nexvia, makes this easy to accomplish. 

Nexvia’s range of features, including real-time cost tracking, budget management, change order management, document control, and reporting and analytics capabilities, work together to promote transparency, streamline cost management and ensure accurate tracking. These tools not only help build trust between both parties but also ensure the project runs smoothly.

Cost Tracking

Analyse cost trends and accurately track all project-related costs so you can make adjustments in real-time to avoid delays.

Financial Control

Automate your processes and update your project budgets on site to create an accurate snapshot of your project’s finances. Give your team real-time visibility of your finances to empower decision-making and reduce risk.

Dashboards + reporting

View real-time project dashboards, and generate detailed financial reports, to see how specific decisions impact your bottom line.

Nexvia has all the tools you need to deliver effective cost-plus contracts

The successful execution of a cost-plus contract requires a system that delivers transparency, efficient cost management and seamless collaboration between all parties. Nexvia’s key features make this possible.

 

  1. Real-Time Budget Tracking: Easily monitor project expenses in real-time, track costs against the budget and take immediate action to manage costs effectively
  2. Accurate Estimation Capabilities: Create precise and detailed cost projections, ensuring estimated costs align with actual expenses, for accurate billing and cost consistency
  3. Comprehensive Project Management: Streamline projects by automating and scheduling tasks, allocating resources efficiently, monitoring progress and collaborating with stakeholders on one platform
  4. Document Management: Centralise project-related documents, promoting transparency and accountability by providing easy access to contracts, change orders and invoices
  5. Collaboration and Communication: Facilitate seamless collaboration among project teams, clients and subcontractors to enable effective coordination, information sharing, issue resolution and better decision-making
  6. Reporting and Analytics: Gain valuable insights into project performance, costs and profitability through reporting and analytics capabilities to empower data-driven decision-making for optimised cost management

Track manage and share information seamlessly and efficiently

Effective cost-plus contracts rely on trust and detail. By providing a secure and transparent platform to track, manage and share information, Nexvia’s construction management software tools can ensure you do so seamlessly and efficiently. 

 

  1. Increased transparency with clients: Nexvia improves transparency by providing clients with real-time access to project data, including cost breakdowns, progress updates and documentation. This transparency builds trust, enhances client relationships and ensures open communication throughout the project
  2. Better cost control: Nexvia enables precise budget tracking, allowing project managers to monitor costs in real-time, identify potential cost overruns and take proactive measures to control expenses. This level of cost control reduces unwanted surprises and ensures projects stay within budget
  3. Risk mitigation: Nexvia empowers project managers to easily identify potential areas of concern. The software’s comprehensive project management features, such as task scheduling, resource allocation and progress monitoring, mean project managers can spot risks early and take proactive steps to avoid costly delays and disruption
  4. Improved Profitability: By providing accurate cost estimation, real-time budget tracking, and efficient cost control, Nexvia helps project managers optimise their resources, minimise cost overruns and make informed decisions that positively impact the project’s bottom line.

Let's explore the use of a cost-plus contract in a hypothetical interior fit-out project.

A large retail group approaches XYZ Interior Fit Out – a company they often partner with – to convert an unused warehouse into a designer retail store. As XYZ Interior Fit Out uses Nexvia they are happy to sign a cost-plus contract. The successful implementation of the software means they know they can provide the transparency and detail required to execute this type of agreement successfully. 

Using Nexvia, XYZ Interior Fit Out generates a detailed estimate for the client, supported by a schedule of values based on formerly obtained subcontractor quotes. As per the contract, whenever costs deviate from the original estimate – for example materials or labour – the difference is covered by the client. In the case of change orders, both parties sign-off and agree to amend the original contract. No disputes arise because the client has had real-time access to project updates, cost breakdowns and progress reports via Nexvia’s client portal. The transparent and collaborative approach fostered by Nexvia means both parties are always on the same page regarding task allocation, resource coordination, timelines and budgets. 

Nexvia’s cost controls and project management tools have ensured the project is profitable and completed on time. Happy with the project’s seamless execution, the client makes the final payments to XYZ Interior Fit Out, and looks forward to continuing the partnership.

Unita Case Study on how to Maximise Your Construction Budget with Nexvia's Cutting-Edge Construction Budget Tracking Software

Harness Nexvia's technology-driven solutions

For interior fitout companies looking to navigate the challenges of rising construction costs and market fluctuations, cost-plus agreements present a viable option. However, it’s crucial to understand that successful execution relies on good faith and robust construction management software capable of ensuring transparency and effective cost control.

Nexvia’s construction management software provides a comprehensive solution to address these challenges, empowering businesses with improved transparency, cost control and risk mitigation capabilities. By harnessing Nexvia’s technology-driven solutions, interior fitout companies can confidently undertake cost-plus contracts, delivering successful projects while fostering trust with clients for long-term gains.

To experience the full benefits of Nexvia, don’t hesitate to get in touch with our sales team or request a demo today.

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