What is the definition of a cost-plus contract?
Cost-plus contracts, also known as cost-reimbursement contracts, are proposals made between businesses for certain projects or jobs. Businesses frequently use cost-plus contracts in bidding situations to generate new contracts for services or goods.FeaturesThe basic features in a cost-plus contract consist of the costs expensed by a company to complete the contract, plus a fixed profit amount. The profit amount can be negotiated between the contract parties.FunctionCost-plus contracts allow businesses to seek out several suppliers and achieve the best value for large projects. Companies may also break down projects into smaller jobs, utilizing several suppliers through cost-plus contracts.TypesWhile most cost-plus contracts include a set profit amount, some contracts offer incentives or awards. These contracts include bonuses for completing work ahead of schedule or exceeding minimum standards.Time LimitBecause most cost-plus contracts include material costs for projects, time limits a
