certainty as to what the final cost will be. Requires additional oversight and administration to ensure that only permissible costs are paid and that the contractor is exercising adequate overall cost controls. Providers to the government will, on occasion, attempt to provide lower prices to the government by proposing a Fixed Price contract. This is done to eliminate the withholding of funds which is required under the rules governing cost plus contracting. Recent trends Between 1995 and 2001 fixed fee cost-plus contracts constituted the largest subgroup of cost-plus contracting in the U.S. defense sector. Starting during 2002 award-fee cost plus contracts became more numerous than fixed fee cost plus contracts. The distribution of annual contract values by sector category and award types indicates that cost plus contracts in the past had the largest importance in research, followed by services and products. In 2004, however, services replaced research as the dominant sector category for cost-plus contracts. For all other contract types combined the relative ranking is reversed to the original cost-plus order, meaning that products are most numerous, followed by service and research. With cost-plus contracting being designed primarily for research and development, cost plus contracts were used in many different efforts unrelated to research and development. The percentage of cost-plus contracting within a contract is expected to be correlated to the percentage share of research undertaken in any given program. However, several programs, such as the Lockheed Martin F-35 Lightning II, UGM-133 Trident II, CVN-68, and the CVN-21 deviate from this pattern by continuing to make extensive usage of cost-plus contracting despite the programs being subsequent to the research and development state. See also Cost engineering Cost-plus pricing References External links The Federal Procurement Data System The central repository for U.S. Government contract information. Defense Industrial Initiatives Group – Cost-plus Contracting Narrated Slide Show Business terms Contract law Pricing Procurement