Cost-Plus Arrangements Definition

A cost-plus arrangement is a pricing agreement between a buyer and seller in which the buyer agrees to pay all of the seller’s costs plus an agreed-upon fee. This type of arrangement is often used when the buyer and seller are not sure what the final cost of the project will be, or when the project is too complex to estimate costs accurately in advance.

Under a cost-plus arrangement, the seller typically agrees to provide the buyer with regular reports on costs incurred. The total fee payable by the buyer is calculated by adding the agreed-upon fee to the total costs incurred by the seller.

Cost-plus arrangements can be used for both one-time purchases and for ongoing projects that span a period of time. They are common in construction contracts, but can be used for other types of projects as well.