An engineer in the field of contracting and home finishing occasionally employs cost-plus pricing for his services which entails setting his labor fee as a designated percentage of the cost of the materials, usually no less than 15%. His clients select the types and prices of the materials based on those available in supply stores. Alternatively, the clients may either buy the materials themselves, accompany the engineer during the purchase, or delegate the purchase to the engineer. What is the ruling on this transaction?

The cost-plus model, also known as cost-plus profit, is a common type of contract used in construction and finishing services. According to experts, it comes in various forms all based on the same principle, wherein the client or property owner covers the full cost of the purchased materials as documented in the receipts, with an extra profit allocated to the engineer or contractor. This profit may take the form of:

1. The cost plus a fixed fee.
2. The cost plus a percentage of the total receipts.
3. The cost plus a percentage of the receipts, with an incentive for completing the project in a shorter timeframe.

In the scenario described in the question, the homeowner and the finishing engineer agree that the labor fee will constitute 15% of the cost of materials. The type, quality, and market price of the materials are clearly defined and accepted by both parties at the time of the contract. This arrangement falls under the category of ijarah (renting things or hiring people’s services) contracts, where the engineer performs a service in exchange for a specified fee. In Islamic jurisprudence, ijara refers to a contract involving a specific, deliverable benefit for a known compensation (Al-Shirbini, Khatib, Mughni al-Muhtaj, vol. 3, p. 438).

In the above scenario, the engineer is considered an ajeer mushtarak (a person who accepts work from more than one individual), because they engage with multiple clients simultaneously, taking benefits and compensation across different projects. This contrasts with ajeer khass who contracts work with a single individual to provide services exclusively to them (Ibn Abdeen, Radd al-Muhtar, vol. 6, p. 64).

The scholars of Islamic jurisprudence have reached a consensus on the permissibility of this type of ijarah, which serves the interest of both parties. However, the nature of the work must be clearly defined, and the payment is determined in a manner devoid of ambiguity, thereby safeguarding against potential disputes. This is mentioned in various classical texts such as Bidayat al-Mubtadi, al-Sharh al-Saghir, Tuhfat al-Muhtaj, and Sharh Mukhtasar al-Kharqi.

As noted above, the engineer’s fee is based on the agreed-upon percentage of the total cost of the purchased materials, which the client chooses at the time of the contract, including the type and price of the materials. By choosing the materials, the client sets the engineer's fee for each aspect of the project. For instance, if the client chooses a specific material at a certain price, the engineer will receive 15% of its cost. This arrangement makes the fee clear and removes any ambiguity.

The ruling

Based on the above, engaging in cost-plus pricing, as outlined in the question, is permissible. However, it is important to maintain honesty, avoid material and cost manipulation, and comply with applicable laws and regulations.

And Allah the Almighty knows best