Which kind of contract typically has a variable total based on actual expenses incurred?

A cost-plus contract is structured to cover the actual costs incurred by the contractor plus an additional fee for profit. This type of agreement allows the contractor to receive reimbursement for all allowable expenses that are directly tied to the project, leading to a total cost that may fluctuate based on the actual expenditures. This can include labor, materials, and overhead, meaning the final cost is not predetermined and can vary throughout the project duration.

Time and materials contracts also reflect variable totals based on actual costs. However, they specifically bill for labor on an hourly rate alongside the cost of materials used, rather than encompassing a broad reimbursement of all costs. Although both result in variable total costs, the nature of time and materials contracts focuses more on direct labor and material supply rather than general expenses like a cost-plus contract does. Thus, the context of the question aligns more closely with understanding the wide-ranging cost coverage provided by a cost-plus approach.