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 ?
Assuming our model's firm is undertaking a cost-plus contract, its value should only be affected by a change in quantity ordered.
As a result, there was a greater use of firm-price, fixed-price, and target-incentive contracts, with cost-plus contracts used only where unavoidable.
When [Alpha] [is greater than] 1, the contract again becomes a sort of cost-plus contract. Note that only when a is between zero and one does the contract enable contracting parties to share risk.
President Obama's first budget follows through on his campaign pledges to overhaul federal contracting, including an ongoing review of sole source and cost-plus contracts.
The IRS recently issued taxpayer-favorable guidance, ruling that an accrual-method taxpayer recognizes income from the reimbursement of allowable costs under cost-plus contracts when the amounts are billed and due, not when the taxpayer incurs the reimbursable costs.
Another common complaint about cost-plus contracts is that they turn homeowners into clock-watchers.
After assembling four GPS III satellites under cost-plus contracts, Lockheed is projecting that the next four will be fixed-price, Valerio said in an interview at Lockheed's Arlington, Va., offices.
Bush declared war on Iraq, invoked the president's authority to make wartime decisions and fired the lady in the procurement office for objecting to no-bid cost-plus contracts.
The authors employ an economic theory framework to discuss how cost-plus contracts typically used during this phase have inadvertently reinforced the sources of contractor and government optimism bias.
In a position paper during his campaign, President Obama also called for limits on cost-plus contracts. "These contracts are vulnerable to waste because they provide no incentive to control costs," the paper said.
Cost-plus contracts allow the government and contractor to share risk by giving the government the option to continue funding a weapon program above a contractor's initial estimate.
419A(c)(2) authorizes "a reserve funded over the working lives of the covered employees and actuarially determined on a level basis...as necessary for (A) post-retirement medical benefits to be provided to covered employees..."; contributions up to this limit are immediately deductible (and often allowable as costs in rate-making or under cost-plus contracts).