In cost-plus contracts, the owner agrees to pay the costs of construction, plus a fee to the contractor. They are great tools for limiting risk of nonpayment and improving profits, but they can have pitfalls. The key aspect of a cost-plus contract is maintaining a strong trust relationship with the owner.
By agreeing to pay for all costs, plus a fee, the owner takes on the financial risks and, therefore, must be able to trust that the contractor is accurately portraying project costs. The most difficult cost-plus projects arise when an owner loses trust in a contractor and begins to second-guess requests for payment, especially from cost overruns.