Cost-plus contract


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Cost-plus contract

A contract in which the selling price is based on the total cost of production plus a fixed percentage or fixed amount.

Cost-Plus Contract

An agreement between a buyer and seller in which the seller agrees to make or produce a good for the buyer. The selling price is the cost to the seller of making or producing the good in addition to some fixed fee or percentage of the cost. See also: Cost-plus pricing.
References in periodicals archive ?
However, since the government does not have perfect information and cannot avoid contractors' moral hazard, economists reject using cost-plus contracts for competitive source selections (McAfee & McMillan, 1986, p.
Cost-plus contracts also can strain accounting systems that were designed for private commercial investors.
Under cost-plus contracts, a principal pays ail project costs plus a fee to the agent; the agent receives a fixed fee under fixed-price contracts.
Consider further the situation where the manufacturer sustains a section 1231 gain or loss on the sale of equipment used in fulfilling the contract, and the cost-plus contract provides that such gain or loss is to be taken into account in determining the net amount due.
This decision should encourage more whistle-blowers to come forward who know and have documentation to prove that the bids for cost-plus contracts were knowingly underbid.
Based on the factual similarities of the taxpayer's situation to that in Decision, the National Office commented that the examining agent's position depended on the cost portion of the cost-plus contract being divisible from the rest of the contract and cited Rev.
If billings are a function of costs incurred (such as in a cost-plus contract or a contract using costs incurred to measure the percentage of completion), the feasibility of using an early accounting cutoff should be considered.
5) In addition, the contractor had to capitalize any costs which it identified as attributable to the contract, pursuant to a cost-plus contract or a contract for which costs were certified under federal statute of regulations.
Under the terms of the cost-plus contract, awarded by the DOD s Missile Defense Agency, the Tucson-based Raytheon Missile Systems Co.
If you have only proved out component technologies and have significant integration work remaining, a cost-plus contract is worth considering.
General Dynamics C4 Systems declared that it has secured a cost-plus contract worth $475 million for research and development of the Army s Warfighter Information Network-Tactical Increment 3.
The Company changed, effective with the last partnership of 2005, which started drilling in first quarter 2006, from a footage-based contract to a cost-plus contract.