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Cost-Plus Contract
Practical Law Glossary Item w-002-7053 (Approx. 2 pages)
Glossary
Cost-Plus Contract
A pricing mechanism in construction contracts in which the contractor is paid both:
- The actual cost of performing the physical work.
- A fee for the contractor's overhead and profit.
Cost-plus contract is also known as cost-reimbursable or cost of the work plus a fee.
Parties to a cost-plus contract negotiate and carefully define:
- Allowable costs reimbursable to the contractor.
- Exclusions from the reimbursable costs.
- How the fee is calculated.
For more information on cost-plus contracts, see Practice Notes, Construction Pricing: Understanding Pricing Structures: Cost of the Work Plus a Fee and Guaranteed Maximum Price Contracts: Drafting Strategies: Cost of the Work.