Certified Professional Contract Manager (CPCM) 2026 – 400 Free Practice Questions to Pass the Exam

A cost-reimbursement contract is characterized by the payment of allowable costs in accordance with the terms outlined in the contract. In this type of contract, the contractor is reimbursed for their allowable incurred costs, which can include direct costs like labor and materials, as well as indirect costs depending on the agreement. This structure allows for flexibility since the contractor may face uncertain conditions that can affect costs, making it an ideal choice for projects where expenses are difficult to estimate in advance.

In contrast, fixed price payments would characterize a different type of agreement, generally ensuring a set amount is paid regardless of the actual costs incurred. Payment based on project milestones is another structure often associated with fixed-price or performance-based contracts, not cost-reimbursement ones. Lastly, a one-time payment is also not characteristic of cost-reimbursement contracts, as they involve multiple potential reimbursements throughout the life of the project based on incurred costs rather than a single payment.