cost-plus contract

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Sure! Let’s break down the term "cost-plus contract" in a simple way.

Definition

A cost-plus contract is a type of agreement used mainly in construction and project management. In this contract, the contractor (the person or company doing the work) is paid for all their costs to complete a project, plus an additional amount that is a percentage of those costs as their profit.

Example

Imagine a builder is hired to build a house. The cost of materials and labor to build the house is $100,000. In a cost-plus contract, if the agreement states that the builder will also get 20% of the costs as profit, the builder would earn $20,000 (20% of $100,000) on top of the $100,000. So, the total payment would be $120,000.

Usage Instructions

• When to use: You can use "cost-plus contract" when discussing agreements in construction, engineering, or any project where the total costs need to be covered, plus extra for profit.
• How to use in a sentence: "The company decided to use a cost-plus contract to ensure they wouldn't lose money on the project."

Advanced Usage

In more advanced contexts, a cost-plus contract may also include specific terms regarding overhead costs or limits on the percentage of profit. It may also be contrasted with fixed-price contracts, where the contractor agrees to complete the work for a set price regardless of the actual costs incurred.

Word Variants

• Cost-plus pricing: This refers to a pricing strategy where a company sets the price of a product based on the cost of production plus a markup for profit.
• Cost-reimbursement contract: This is a broader term that includes cost-plus contracts but may also refer to other types of agreements where costs are reimbursed.

Different Meanings

In general conversation, "cost" refers to the amount of money required to buy something, while "plus" means in addition to. So, "cost-plus" in a non-contractual context could simply suggest adding something to a base cost.

Synonyms

• Cost-reimbursable contract
• Cost-plus fee contract

Idioms and Phrasal Verbs

While there aren’t specific idioms or phrasal verbs directly related to "cost-plus contract," you might hear phrases like: - "Break even" - This means not losing money or making a profit, which can relate to how contracts are structured. - "On the plus side" - This phrase is often used to indicate a positive aspect of a situation, which could relate to the profit aspect of cost-plus contracts.

Summary

A cost-plus contract is a method of payment for work done, ensuring that all costs are covered and the contractor also receives a profit.

Academic

Noun

1. a contract in which the contractor is paid his total cost plus a stated percentage of profit