Cost-Plus Contract

A cost-plus contract is an agreement between a client and a contractor where the client agrees to pay for all the contractor's expenses plus an additional amount for profit. This type of contract is used when project costs are uncertain. For example, if a construction project costs $1 million to complete, and the contract includes a 10% fee, the total payment to the contractor would be $1.1 million. This arrangement allows flexibility for changes but can lead to higher costs for the client if expenses rise unexpectedly. It is often used in government contracts and complex projects.