A cost-plus contract includes all the costs incurred for labour, subcontractors, materials and other direct costs, in addition to an amount that covers the contractor’s management and administration time. This amount can be a set price or a percentage of the costs, depending on what has been agreed with the client in the contract. To avoid unpleasant surprises, a guaranteed maximum price clause can be included in the contract: In that case, the contractor is responsible for any cost over and above the set price.
This type of contract is often used for large projects whose scale and schedule do not make it possible to accurately or promptly estimate its exact costs.