Cost-Reimbursement Contracts

Cost-reimbursement contracts are agreements where a buyer agrees to pay a seller for all allowable costs incurred while delivering a service or product, along with an additional amount for profit. This type of contract is often used in projects where costs are uncertain. The seller provides detailed records of expenses, and the buyer reimburses them based on these costs. This arrangement protects the seller from financial risk but requires transparency and accountability to prevent excessive spending. It’s commonly used in government contracts and research projects where exact costs are difficult to predict upfront.