For
cost-plus contracts, the government pays all cost overruns and the contractor is virtually unaffected.
(43) For an economic analysis of
cost-plus contracts see B.
Cost-plus contracts also can strain accounting systems that were designed for private commercial investors.
Further choices are required between various types of contracts ranging between firmprice, incentive, and
cost-plus contracts. Ultimately, the allocation of Mod contracts will determine the size of the UK defence industrial base and raises key policy choices about buying British (or European) or importing defence equipment and about whether the UK needs a domestic defence industry.
Under
cost-plus contracts, a principal pays ail project costs plus a fee to the agent; the agent receives a fixed fee under fixed-price contracts.
In fact, the contract--known as a "
cost-plus contract"--gave Northrop an incentive to overcharge, since the company was paid for its expenses and then given a percentage bonus.
Other factors which may favor these industry offers are fixed-price rather than
cost-plus contract terms, and an anticipated unwillingness by the US Army to guarantee installed system performance.
Either we bid on a lump sum contract based on completed plans and specifications or a
cost-plus contract with or without a guaranteed maximum price (GMP), also based, in all likelihood, on completed plans and specifications.
This taxpayer's compensation arrangement with the relos resembles a
cost-plus contract, which is frequently used in manufacturing or construction.
In a
cost-plus contract, a share ratio based on the contract cost and the contractor's fee (profit) is negotiated so that the contractor has a predetermined responsibility for the performance costs, which will directly affect the fee (profit) (U.S.