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

A cost contract is a type of cost-reimbursement contract that is distinguished by the absence of a fee for the contractor. Instead, it allows the contractor to be reimbursed for their allowable costs incurred while performing the contract work. This type of agreement typically occurs in scenarios where the exact costs cannot be determined at the outset, but the client is committed to covering the reasonable expenses involved in the project.

This arrangement is particularly practical in research and development contracts or when the work involves uncertain or unpredictable elements that may lead to variable costs. By providing a cost contract, the client ensures that all necessary expenses can be covered without needing to negotiate a profit margin upfront.

In contrast, other contract types either include a fee or are structured differently, thus not aligning with the specific characteristics of a cost contract. For instance, a cost-plus fixed fee contract provides a fixed fee in addition to the actual costs, which is not the case for a cost contract.