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, along with a predetermined fee or percentage. This arrangement helps ensure that the contractor is compensated for their work while also providing some flexibility in budgeting. These contracts are often used in projects where costs are difficult to estimate upfront, such as in construction or research and development. By using a cost-plus contract, both parties can focus on the quality of work rather than strictly adhering to a fixed budget.