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Cost Plus Contract AdvantagesHigher quality since the contractor has incentive to use the best labor and materials.Less chance of having the project overbid.Often less expensive than a fixed-price contract since contractors don't need to charge a higher price to cover the risk of a higher materials cost than expected.
Cost-plus contracts are the opposite of fixed-cost projects. Cost-plus contracts refer to a contract in which a fee over the cost is provided. In a cost-plus contract, a sum payable to the contractor is not fixed; rather, it is the total cost of the contract calculated at the end of the contract.
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 contract's full price.
This contract works best if the actual cost of the project is assumed to be below the projected cost. This type of contract focuses more on the quality of the project than on the overall cost of the project. If the budget for construction is low, this contract will fit. Simply put, it is a budget-friendly contract.
A cost plus contract is an arrangement under which a contractor is reimbursement for all costs incurred on a project, plus a profit that is typically calculated as a percentage of the costs incurred.