What is "cost-plus contract"

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

A cost-plus contract, also termed a cost reimbursement contract, is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit. Cost-reimbursement contracts contrast with fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses.