A cost-plus contract is a type of agreement where a contractor is reimbursed for their allowable expenses, plus an additional amount for profit. This means that the client pays for the actual costs incurred during the project, such as materials and labor, along with a predetermined fee or percentage as profit. This arrangement is often used in construction and government projects. These contracts are beneficial when project costs are uncertain, as they provide flexibility for both parties. However, they can lead to higher overall costs for the client if not managed properly, since there is less incentive for the contractor to minimize expenses.