How Cost-Plus Contracts Help with Uncertainty
Cost-Plus contracts are ideal for projects where the scope and final costs are difficult to estimate. The contractor is paid for the actual expenses incurred, plus an agreed-upon profit margin. However, this type of contract requires careful monitoring of costs to ensure that the project remains within budget, as there is no fixed price.Best Practices for Managing Cost-Plus Contracts
Contractors should maintain detailed records of all costs and provide regular updates to the Client. It’s often beneficial to agree on a maximum cost limit to prevent the project from exceeding the client’s budget. Transparency in cost reporting is essential to maintain trust between the contractor and client.Related Terms: Time and Materials (T&M) Contract, Guaranteed Maximum Price (GMP) Contract