What kind of payment structure does a cost-plus contract involve?

A cost-plus contract involves a payment structure where the contractor is reimbursed for all project-related expenses, and in addition, receives a markup on those costs. This markup can take the form of a percentage of the costs incurred or a fixed fee added to the actual expenses. This approach allows for flexibility as it accommodates changes in the scope of work and unforeseen expenses, as the contractor is compensated for expenses incurred as well as a profit margin. The alignment of interests in this scenario can result in a cooperative relationship between the client and the contractor, as it encourages the contractor to efficiently manage costs while ensuring that the client can make modifications without penalizing the contractor financially.