Cost-plus contract
A cost-plus contract bills the client for actual job costs plus an agreed fee or percentage, rather than a fixed price.
Cost-plus shifts cost risk to the owner and rewards transparency, but it demands airtight job-cost tracking — every cost has to be documented and attributed correctly to bill it. Contrast with fixed-price (lump-sum) and time-and-materials.
Related terms
- Fixed-price (lump-sum) contract — A fixed-price contract sets one total price for the defined scope; the contractor keeps the upside if costs come in low and eats overruns if they don't.
- Time and materials (T&M) — A time-and-materials contract bills for actual labor hours at set rates plus materials, often with a markup, rather than a fixed price.
- Job costing — Job costing is tracking the actual costs of a specific job — materials, labor, subs, and other expenses — against what you estimated, so you know the real profit on that job.