Definition

1. Adjective:
   • Determining payment based on the actual cost of production plus an agreed-upon fee or rate of profit. This term is primarily used in contractual agreements, especially in government or large-scale procurement, to describe a pricing method where the seller's profit is calculated as a fixed amount or percentage added to the verified costs incurred.

Usage Examples

• Adjective:
  • The defense department awarded a cost-plus contract to the aerospace company.
  • In a cost-plus agreement, the contractor is reimbursed for all allowable expenses.
  • This cost-plus pricing model protects the supplier from unexpected cost overruns.

Advanced Usage

• "cost-plus-fixed-fee (CPFF)": A specific type of cost-plus contract where the profit is a predetermined fixed sum, not a percentage.
  • The project was undertaken on a cost-plus-fixed-fee basis, ensuring a stable profit for the builder.
• "cost-plus-percentage": A less common and often discouraged variant where profit is a percentage of the costs, which can incentivize higher spending.
  • Cost-plus-percentage contracts are generally avoided as they provide no incentive for cost control.

Variants and Related Words

• Cost-reimbursement contract (n): A broader category of contracts that includes cost-plus models, where the buyer agrees to reimburse the seller for legitimate costs.
• Fixed-price contract (n): An antonymous contractual model where the price is set in advance, regardless of the seller's actual costs.

Synonyms

• Cost-reimbursable: Involving repayment of incurred costs plus a fee.
• Reimbursement-based: Pertaining to payment that covers costs.

Related Phrases

• Cost-plus pricing: The strategy of setting a selling price by adding a markup to the total cost of a product or service.
  • The small manufacturer used simple cost-plus pricing for all its custom orders.
• Cost-plus award fee: A contract type combining cost reimbursement with an award fee based on performance.
  • The software development was governed by a cost-plus award fee contract.

Related Idioms

(This term is technical and does not commonly feature in idiomatic expressions.)

Adjective

1. determining payment based on the actual cost of production plus an agreed-upon fee or rate of profit
   • a cost-plus government contract