kostenplus

Kostenplus, or cost-plus, is a pricing method in which the seller is reimbursed for allowable costs incurred in delivering a product or service and receives an additional fee or markup as profit. The approach aims to ensure that the supplier recovers actual costs while maintaining an incentive to control expenses and meet performance requirements.

In practice, costs are categorized into direct costs (such as materials and labor) and indirect costs or overhead. The final price is the sum of these costs plus a negotiated fee or markup. Several contract variants are common. Cost-plus fixed fee (CPFF) pays a fixed fee in addition to reimbursed costs. Cost-plus incentive fee (CPIF) links the fee to performance against cost targets or schedule milestones. Cost-plus percentage of costs (CPPC) pays a fee proportional to costs, though this variant is used less due to potential inflation of volumes. Some agreements also include target costs and sharing rules for any savings or overruns.

Advantages of kostenplus pricing include practicality when requirements are uncertain or highly technical, reduced risk for the supplier, and easier cost recovery in complex projects. Disadvantages include weaker price discipline, potential for cost inflation, and the need for rigorous accounting, auditing, and oversight to prevent waste or abuse. The method is frequently used in construction, defense, large engineering projects, and research and development, particularly in public procurement or environments with evolving scopes. Clear contract terms and transparent cost reporting are essential to manage incentives and ensure fair reimbursement.