Cost contract

Cost contract

In cost-reimbursement contracts, contractor risk is minimal and Government risk is high. The Government has no guarantee it will get the specified product or service. If the product or service is not complete and the maximum cost has been reimbursed to the contractor, the Government has equally unsatisfactory choices. It can elect to not add funds to the contract and get no further work or it can add money to fund the remaining work. Given the nature of the work acquired by cost-reimbursement contracts, contractor performance often evolves in ways neither the contractor nor Government foresees at the time of award. Because of high Government risk and lack of guaranteed performance, cost-reimbursement contracts must be monitored far more closely than fixed price. The COTR, COR and Contracting Officer must ensure the contractor is providing its best efforts and is efficiently expending funds and controlling costs.


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