Niv Levy: Practical Overview Of Construction Contract Models
Jan 8, 2026
Construction projects bring together owners, contractors, subcontractors, suppliers, and regulators in a highly interconnected process. With so many moving parts, even small miscommunications can lead to costly disputes or budget overruns. To prevent this, stakeholders use construction contracts that not only define payment terms but also assign responsibilities, outline dispute-resolution mechanisms, and allocate risks. Without such agreements, projects risk legal uncertainty and delays that threaten successful completion.
A cost-plus contract is a construction contract in which the project owner agrees to pay the contractor the cost of labor, equipment, materials, and an additional fee that is either a percentage of the costs or a fixed amount. This model is useful when project details are uncertain, as it allows flexibility to adapt as work progresses while ensuring contractors receive fair compensation. However, without spending caps or performance incentives, costs can escalate quickly, making oversight essential.