A Cost Plus Contract is a type of agreement where a contractor is paid for all construction-related expenses plus an additional payment for profit. This contract is beneficial in projects where the scope is not well-defined, but it can lead to cost overruns if not properly managed.

Cost Plus Contract

Type of agreement

Contractor

Construction-related expenses

Additional payment

Profit

Projects

Scope refers to the boundaries or extent of a subject, project, or discussion, defining what is included and excluded. Understanding scope is crucial for effective planning, execution, and evaluation, as it helps manage expectations and resources efficiently.

Scope

Cost overruns occur when the actual cost of a project exceeds the original budget estimates, often due to unforeseen circumstances, poor planning, or scope changes. They can significantly impact project viability, stakeholder trust, and financial performance, necessitating effective risk management and cost control measures.

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