A cost-plus contract, also termed a cost plus contract, is a contract such that a contractor is paid for all of its allowed expenses, plus additional payment to allow for a profit. Cost-reimbursement contracts contrast with fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses. History Frank B. Gilbreth, one of the early developers of industrial engineering, used "cost-plus-a-fixed sum" contracts for his building contracting business. He described this method in an article in Industrial Magazine in 1907, comparing it to fixed price and guaranteed maximum price methods. Cost-plus contracts were first used by the government in the United States during the World Wars to encourage wartime production by American businesses. According to Martin Kenney, they "allowed what were then small technology firms like Hewlett-Packard and Fairchild Semiconductor to charge the Department of Defense for the price of research and development that none could pay on its own. This enabled the firms to create technology products that eventually created entire new markets and economic sectors". Types There are four general types of cost-reimbursement contracts, all of which pay every allowable, allocatable, and reasonable cost incurred by the contractor, plus a fee or profit which differs by contract type. Cost plus fixed-fee (CPFF) contracts pay costs plus a pre-determined fee that was agreed upon at the time of contract formation. Cost-plus-incentive fee (CPIF) contracts have a larger fee awarded for contracts which meet or exceed certain performance goals, for example being on schedule and any cost savings. Cost-plus-award fee (CPAF) contracts pay a fee based upon the contractor's product. An aircraft development contract, for example, may pay award fees if the contractor's product achieves certain speed, range, or payload capacity goals. For some contracts, the award fee is determined subjectively by an awards fee board whereas for others the fee is based upon objective performance metrics. Cost plus percentage of cost contracts pay a fee that increases as the contractor's cost increases. Because this contract type provides a disincentive for the contractor to control costs it is rarely used by government, although it is prevalent in private industry. The U.S. Federal Acquisition Regulations specifically prohibit the use of this type for U.S. Federal Government contracting and in federal sub-contracts except firm fixed price ones (FAR Part 16.102). The US Comptroller General has also found that where the additional element is not expressed as a percentage