It will be seen at once that this contract presents some particular advantages in certain localities and on certain classes of work, from the standpoint of all parties. On the other hand, it has certain peculiarities that do not immedi ately appear. Taking the same basis of analysis that we did in the consideration of the lump sum contract, we find that under the cost plus com pensation form the owner furnishes the follow ing items: 1. Money.
2. Insurance. 4 3. Plans and specifications.
4. Sketches and instructions.
5. Plant.
6. Labor.
7. Materials.
8. Supplies.
And the contractor furnishes: 1. Organization.
2. Superintendence.
3. Experience.
1. Money. The way in which the owner is going to make his payments is a point that has a great deal to do with the economical results of the work so far as the contractor is concerned. If the owner furnishes all the money from the beginning, the contractor does not have to tie up any capital in the work at all. The method followed by one well-known contractor of large experience has much to recommend it. In this case, when the work is started, the owner turns over to the contractor a sum of money which is intended to cover the cost for the first month or six weeks. This money is then deposited in a bank in a special account, against which the contractor is authorized to draw checks. Each check drawn, besides being in the usual form of banking check, contains the job number, the ac count number, and a complete list of all the items which are being paid for by that check. When the check comes back from the bank, it is filed with the papers for that particular job; and the owner can immediately, by going over the returned checks, see exactly how all the money was spent—for what accounts, in what manner, and at what times. Checks covering the pay roll can be drawn either to the individual work men or to a foreman or time-keeper, who accounts for his distribution of the men's pay.
2. Insurance. In contrast with nearly ev ery other form of contract, under the cost plus compensation system the owner furnishes the insurance. Note that the contractor guarantees absolutely nothing. In the standard form of the "cost plus" contract, the contractor is not re sponsible for the time of completion; he is not responsible for the cost exceeding a certain amount; he gets no extra money if the cost is excessive or if he saves money; and, in short, the contractor has practically the minimum of interest in how he really does his work. The
only real incentive that he has for making the work go expeditiously and economically, is his personal ambition and a desire to make or keep a good reputation for efficient work. He is on what might be called a peculiarily professional basis; and if the men strike on the work, if the men whom he has selected for directing the work nlismanage it, if lightning strikes it, or if the work is held up by injunctions or lawsuits, either through his own negligence or through the negli gence of his employees, he is not responsible, being simply the agent of the owner. The owner, on the other hand, guarantees that he will pay the bills when the contractor sends them in; that he will be responsible for all the errors and mis takes of the contractor so far as economic per formance goes; and he further stands the dam ages when accidents which are not the fault of anybody in particular occur and cause consider able delay. He practically stands in the position of guaranteeing to himself that the contractor will do his work properly, and that no external agency will put the work back. If the con tractor is slow, he is in the owner's employ, and the owner has no redress except to cancel the contract and let the contractor sue him for profits.
In order to mitigate some of this insurance that the owner has to stand, he is frequently ac corded the right in the contract to require that the contractor shall take away from the job any foreman whom the owner considers to be incom petent. The trouble with this arrangement is that if the owner does order an incompetent fore man off the work, the contractor can be dila tory about providing another good foreman; and if the owner wishes to name a foreman, a con tractor can say—and perhaps with logic—that he will not be responsible for any errors that the foreman selected by the owner makes. As he is not responsible anyway, it does not seem as if this would make much difference.