An agreement that calls for a contractor to be paid actual costs for labor and materials plus a fixed fee for the contractor's overhead and profit is called a?

A cost-plus contract is structured so that the contractor is reimbursed for actual costs incurred on the project, including labor and materials. In addition to these costs, the contractor receives a predetermined fixed fee, which covers overhead and profit. This arrangement allows contractors to be compensated for their expenses while also ensuring they have a set profit margin regardless of the total costs incurred.

This type of contract is particularly useful in projects where it is difficult to estimate the total costs accurately upfront, such as in renovation or experimental projects. It offers flexibility to address unforeseen expenses that may arise during the project's execution while providing the contractor with financial security in the form of a guaranteed profit.

In contrast, fixed-price contracts and unit pricing contracts involve specific payment amounts that do not adjust based on actual costs, limiting the contractor's compensation to agreed-upon figures. A time and materials contract, while somewhat similar as it involves paying for labor and materials plus a markup, does not typically include a fixed fee component for profit and overhead, making it distinct from a cost-plus arrangement.