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What is meant by cost-plus?

A cost-plus contract is an agreement to reimburse a company for expenses incurred plus a specific amount of profit, usually stated as a percentage of the contracts full price.

What is the difference between cost-plus and fixed fees?

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.

What does cost-plus 10% mean?

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.

What is a cost-plus contract what are its disadvantages?

Cost plus percentage contract means that as the project costs increase, the fee also increases. This is not typically used because the contractor has no incentive to control costs. In fact, federal government agencies are prohibited from using this type of contract.

What is cost-plus fixed-price 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.

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