A cost-plus contract is a type of contract in which a contractor is paid for all of its allowed expenses, plus additional payment to allow for a profit. This type of contract is often used in construction when the budget is restricted or when there is a high probability that actual costs might be less than anticipated. In a cost-plus contract, the contractor must provide proof of all related expenses, including direct and indirect costs. The contractor is reimbursed for all expenses incurred plus a specific amount of profit, usually stated as a percentage of the contracts full value. The "plus" part of cost-plus contracts is usually in the range of 10 to 20 percent of the projects total cost. Cost-plus contracts can be contrasted with fixed-price contracts, in which the contractor is paid a negotiated amount regardless of incurred expenses. Cost-plus contracts may also be known as cost-reimbursement contracts.

Cost-plus contracts are generally used if the party drawing up the contract has budgetary restrictions or if the overall scope of the work cant be properly estimated in advance. The contract allows the contractor to collect a certain amount above the reimbursed amount, so they may be able to make a profit. Some contracts may limit the amount of reimbursement, so not every expense would be covered. Cost-plus contracts are often easier to negotiate because of the reduced risk for contractors. However, a cost-plus contract is not a blank check from a project owner to a general contractor. Generally, the contract will include a clause that requires the contractor to provide the owner a good faith estimate for the total cost of a project.

In summary, a cost-plus contract is a type of contract in which a contractor is reimbursed for all expenses incurred plus a specific amount of profit, usually stated as a percentage of the contracts full value. This type of contract is often used in construction when the budget is restricted or when there is a high probability that actual costs might be less than anticipated. Cost-plus contracts can be beneficial to both the owner and the contractor if an agreement is thoroughly worked out at the beginning.