Cost Plus Construction
Contracts
Objective:
To determine if overcharges have been made on the project and if so to obtain refunds
or credits from the contractor. Specific risks are presented at the beginning of each
section. Also presented at the beginning of each section is suggested contract language
that could help lessen the risk of loss.
Contractor charges usually fall into the following categories:
• Labor & Benefits
• Materials
• Subcontractor Costs
2
Step Audit Procedure
General Procedures
Obtain a copy of the contract between the
contractor and your company. Review it and
develop an understanding as to what costs are
reimbursable and what costs are not. Determine
that the contract was properly approved and
executed (did the person signing the contract have
the authority to do so?) .
Obtain an understanding of the contractors project
cost accounting system and determine if
it
appears adequate to properly capture costs.
Reconcile contractor’s payment requests to the
project cost accounting system.
Labor & Benefits
Charges for non-reimbursable personnel.
Unless otherwise provided in the contract, charges
for contractor labor should be limited to the
contractor's field personnel. Charges for home
office personnel should not be reimbursable costs
and should be covered by the contractor's fee.
Suggested Contract Language:
"Charges to Cost of the Work reimbursable will be
limited to actual costs of Contractor's salaried
construction personnel stationed in the field. The
Owner and Contractor agree that the following
positions represent the maximum authorized field
office staff salaried positions which will be
considered reimbursable under the terms of this
contract unless subsequently changed
for
reasons approved by