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A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract.
A cost plus contract means that the price of construction is the costs plus an additional fee, normally designated as profit. The fixed costs include the cost of the materials and labor along with indirect costs known as overhead. It is simply an agreement to pay costs plus profit, all as defined in the contract.
A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract.
Contract Price = {Actual quantity of the Goods accepted by the Government} x {Rate/Unit Price quoted in paragraph 1(a) above}.
A cost-plus contract is an agreement that specifies the client will pay the contractor for construction expenses detailed in the contract, plus an additional percentage to provide the contractor with a profit.
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Unlike a fixed-cost construction contract, a cost-plus construction agreement is a contract in which the owner pays the contractor the actual costs of the materials and labor plus an additional negotiated fee or percentage over that amount.
A fixed-price contract may allow for adjustment where a firm fixed-price contract does not. The administrative burden is minimal with a fixed-price contract, but with a firm fixed-price contract, the contractor accepts the greatest risk if costs unexpectedly rise.
Cost plus is about as simple as it sounds. Retailers set shelf pricing for every item in the store at their cost the item, transportation and warehousing costs and labor to get it on the shelf and simply charge consumers 10% of their total basket at checkout.
Cost Plus Contract Disadvantages For the buyer, the major disadvantage of this type of contract is the risk for paying much more than expected on materials. The contractor also has less incentive to be efficient since they will profit either way.
There are three basic types of pricing arrangements in construction contracts: (1) stipulated sum (also known as fixed price or lump sum), (2) cost plus (with or without a guaranteed maximum or not-to-exceed price), and (3) unit price.

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