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The Buck Stops Here, by Corinne Maddox, CCM, CFM

For some types of construction contracts, the owner's scrutiny of invoices and subcontracts is very important. On Cost-Plus contracts, the General Contractor (GC) passes through actual costs to the owner, adding a previously agreed upon amount for their fees (and sometimes for general conditions). The owner assumes the risk for most project costs; therefore, if actual costs exceed the GC's preliminary pricing, the owner pays the difference. General conditions items (supervisory labor, cleaning, printing, site offices, vehicles, etc.) vary from project to project, and are not necessarily included in designated fees. These items must be clarified. Since there is little incentive for the GC to limit costs that are reimbursed, owners should review and clarify all miscellaneous costs and subcontractor scope, bids, contracts and invoices as if they were direct contracts. It is also important that contracts with the GC allow the owner to review actual bids, executed contracts and subcontractor invoices. It is not uncommon for less scrupulous GCs to include extra scope in bids (such as dumpsters, cleaning and supervision) and take it out after the owner's approval without passing the credit on. Another ploy is to double bill for items that are normally included in GC fees (such as home office costs and superintendent labor). Other areas that require an owner's scrutiny include "time & material" change order billing, GC's contingency, allowances, bid alternates, substitutions and unit pricing. The buck stops with the owner's project manager.

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