cost-plus-percentage contract

cost-plus-percentage contract

A compensation method for a construction project, in which the contractor is paid a specified percentage over and above construction costs.This percentage may be pure profit to the contractor,or it may be the contractor's gross compensation from which must be paid general overhead expenses such as clerical help, phone lines, and general business insurance. It is important to determine the difference, because if the contractor expects the percentage to be pure profit,then normal business operating expenses will have to be accounted for somewhere in the construction contract as expenses.