cost-plus-percentage contract Definition | Business Dictionaries from AllBusiness.com
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Business Definition for: cost-plus-percentage contract
cost-plus-percentage contract

an agreement on a construction project in which the contractor is provided a specified percentage profit over and above the actual costs of construction. These contracts are considered poor business practice because the contractor has little incentive to hold down costs. A cost-plus-fixed-fee contract is a better approach.

cost-plus-percentage contract

an agreement on a construction project in which the contractor is provided a specified percentage profit over and above the actual costs of construction. These contracts are considered poor business practice because the contractor has little incentive to hold down costs. A cost-plus-fixed-fee contract is a better approach.

Example: Smith Construction Company entered into a cost-pluspercentage contractto build the new high school. Smith will get 10% above the costs of construction. If the project costs $10 million, Smith will receive $11 million to complete the project.

Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

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