When creating variations/change orders for Cost Plus jobs, there are a few important differences compared to Fixed Price or Contract Price jobs.
This article covers just the main differences in variations/change orders as opposed to contract/fixed price jobs, so if you're new to variations/change orders we suggest heading to this page first:
The main differences relate to:
How accepted change orders flow through to client invoicing
How change orders are worded when working with project budgets instead of fixed contract amounts
Have a look at this video here for a quick overview, or see the full detail below.
How Change Orders Flow Through to Invoicing
For Cost Plus jobs, accepting a change order does not immediately create an invoice amount.
The process works as follows:
A change order is created with an estimated budget amount.
The client accepts the change order.
The approved amount updates the project budget.
Actual costs are recorded through:
Purchase Orders
Work Orders
The client is invoiced based on the actual costs entered.
This means the client is billed based on the real costs incurred, rather than the estimated amount shown on the original change order.
Change Order Wording for Cost Plus Jobs
Because Cost Plus jobs do not have a fixed contract price, the wording shown on change order documents is slightly different.
For Fixed Price or Contract Price jobs, change orders include a section referring to a change to contract price. This section is not included for Cost Plus jobs because there is no fixed contract amount being adjusted. Instead, the change order relates to the project budget. Document wording is updated to reflect this.
Any questions, as always, reach out and let us know.