XL EagleCost-Plus (Cost-Reimbursement Contract)
Cost-Plus stands for Cost-Reimbursement Contract. A cost-plus, or cost-reimbursement, contract pays the contractor its allowable costs, up to a set ceiling, plus a fee. The fee is the profit. Allowable means the cost follows federal cost rules and is reasonable for the work.
These contracts are used when nobody can price the work up front, like research or complex development. The contractor needs an accounting system that tracks costs by job and separates out unallowable costs. A version that pays a percentage of cost is banned in federal contracting.
Why it matters to a small contractor
Cost-plus work usually needs a government-adequate accounting system and audits, which is a big lift for a small shop. As a subcontractor under a cost-plus prime, you may still be asked for detailed cost backup.
Example
A research job is estimated at $400,000 in costs with a $28,000 fixed fee. The contractor spends $380,000 in allowable costs and is paid $408,000 total.
Cost-Plus: common questions
Why is cost-plus-percentage-of-cost not allowed?
Because it rewards spending more. The more the contractor spends, the more it earns. Federal law prohibits that design.
Do I need special accounting for cost-plus?
Usually yes. The government checks that your system can track costs by contract and keep unallowable costs out before awarding most cost-type contracts.
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