2 and 3. Superintendence and Experience. A contractor under a "cost plus a fixed sum" contract may have had a good deal of experience in the particular line of work to be done, and yet this experience may have nothing to do with the work unless he have more incentive to economic performance than ordinarily obtains under such a form of contract. His own experience in the particular line involved may be of very little value to the owner. If his superintendent is inefficient, as sometimes happens, apparently the only redress that the owner has is to cancel the contract and allow the contractor to sue him for profits, which is a remedy that is sometimes worse than the disease. When the contractor has a great deal of work to do, he cannot put much of his time in supervising any one piece of it; and when he has not much to do, he generally spends most of his time looking for new propo sitions.
Other Forms of "Cost Plus" Contract. Sometimes, instead of the cost plus a fixed sum contract, there is the cost plus percentage con tract, in which the contractor receives 10 or 15 per cent of the actual cost of the work for his compensation and profit. Here, the more the work costs, the more the contractor gets as profit, and there is a positive premium upon in efficient work. The percentage basis—where the amount of work to be done was indefinite, and when, because of uncertainty in regard to the facts connected with the work, it was not desired to make up elaborate specifications—was used to a considerable extent ten or fifteen years ago. To-day it is giving place to the cost-plus a-fixed-sum form.
It has been said that the lump sum contract is a license to support lawyers, and that when the owner changes his mind, and the architect changes his plans, "extra work" comes into play to the advantage of the contractor and to the det riment of the owner; and it has been argued that the only disadvantage that has been discovered in the "cost plus a fixed sum" contract is that the owner cannot possibly get his work com pleted for less than cost as he might do under the lump sum contract if the contractor made a mis take in his estimate and did not get the benefit of the assistance of "extra work." Some few years ago, a list was made of the stock arguments in favor of the cost plus a fixed sum contract from the standpoint of the owner and the contractor. These we give below: 1. Owner's and contractor's interest are made identical.—This is not so.
2. Owner knows in advance amount of con tractor's profit.—This is true when the owner can be assured of the contractor's honesty; but it is questionable whether the fact of the owner knowing in advance how much the contractor is going to make is of any economic value to the owner. It is interesting information, but not
much else.
3. Owner's interests demand: (a) Shortest time for completion.
(b) Lowest possible cost.
(c) Best possible workmanship.
It is true that the owner's interests demand results a, b, and c; but, as has been pointed out above, while the contractor's interests may be forwarded by these things, all of them except the first affect principally his reputation and his professional pride. He is not supposed to have professional pride; and his reputation will not suffer, even if the cost is considerably more than the lowest possible, since it is almost impossible for the owner to find out what the lowest possible cost is going to be, or what the cost would have been if he had had the work done by some other contractor, unless he has obtained bids for it from other contractors and has had the "cost plus" contractor do the work without any altera tions in the plans or specifications.
4. Owner relieved of menace of extra work. —This is a thoroughly good argument in favor of the cost plus contract. It is true that esti mates as to the cost of extra work generally ap pear unreasonable to the owner; but it is also true that extra work done in a hurry and with out having been properly incorporated in the original plans is generally a good. deal more costly than the same amount of work when pro perly planned in the beginning. While some contractors demand exorbitant pay for doing extra work on a contract, many of them ask amounts which seem exorbitant to the owner, because in reality the extra work disturbs the contractor's general layout and co-ordination of his work, and adds more than his proportion to the cost of the entire job.
5. Owner has benefit of all cash discounts for materials.—The claim that the owner has the benefit of all cash discounts for materials is rath er fictitious, because under a low bid from a re sponsible contractor the owner really gets this profit anyway.
6. Owner knows what all materials will cost before they are purchased.—The proposition that the owner knows what all materials will cost before they are purchased is somewhat similar to claim No. 2 (above) ; it is interesting informa tion, but not of any particular value to the owner financially. All the owner ought to care for is that the materials shall be purchased for the lowest possible price consistent with quality, and he is assured of this under the old-fashioned con tract, so that this hardly seems to be a distinct advantage.