ACTUAL COST PLUS A FEE WITH A NOT TO EXCEED                                                    GUARANTEE How It Works: The project cost is estimated based on everything mentioned on the plans and/or specifications.  Typically several categories are given an allowance value.  This estimate is typically guaranteed NOT TO EXCEED by more than 2% the total estimated cost of all non-allowance items in total.  The contractor receives a straight fee, which is reflected in the cost breakdown.  This fee would be reduced by any amount in excess of a 2% overrun of all non-allowance items in total.  The owner typically pays all costs directly.  The contractor is responsible for directing the work as if he were paying the bills directly and has the right to choose the non-allowance item subcontractors. Pros and Cons:   - The contractor typically selects the non-allowance subcontractors;   - The contractor assumes limited cost risk on non-allowance items;   - The client assumes limited cost risk on non-allowance items;   - The client selects all non-allowance subcontractors;   - The client pays all costs directly and any savings belongs to the client;   - Changes are easily made to any construction item;   - This is extremely flexible and allows the client to change the project significantly;   - This allows the client a much greater hands on position;   - This requires measurably more effort from the client.

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