A cost-reimbursable contract is a type of agreement where a contractor is paid for their allowable expenses, plus an additional amount for profit. This means that the client covers the actual costs incurred during the project, which can include materials, labor, and overhead. These contracts are often used in projects where costs are difficult to estimate upfront. These contracts are beneficial in situations where project scope is uncertain, allowing flexibility as work progresses. However, they require careful tracking of expenses and may lead to higher overall costs for the client if not managed properly. Examples of industries that use cost-reimbursable contracts include construction and government contracting.