Which of the following best describes a cost-plus-fixed-fee contract?

A cost-plus-fixed-fee contract is characterized by the reimbursement of allowable costs incurred by the contractor in addition to a fixed fee that is agreed upon at the outset. This means that the contractor is reimbursed for their expenses related to the project, including materials and labor, and they also receive a predetermined fee for their services, which does not fluctuate regardless of the actual costs incurred. This type of contract provides an incentive for the contractor to manage costs effectively, as they benefit from any cost savings against the total project budget, but their fee remains constant.

This structure contrasts with a fixed total price contract, where the entire project cost is set in advance and does not vary. Additionally, it differs from time and materials contracts, which are based on the actual time worked and materials used, and do not include a fixed fee component. Lastly, stating it’s a contract for a specific scope of work only does not capture the essence of a cost-plus-fixed-fee contract, as it actually allows for reimbursement of a broader set of costs incurred beyond just a narrowly defined scope.