Oregon Construction Contractors (CCB) Practice Test

Which contract method reimburses the contractor for actual costs plus a markup fee?

1. Fixed-price method

2. Cost-plus method

3. Hourly rate method

4. Standard method

The correct answer is: Cost-plus method

The cost-plus method is a contract type that allows the contractor to receive reimbursement for the actual costs incurred during the project along with an additional markup for profit and overhead. This markup can be a fixed fee or a percentage of the costs, depending on what is negotiated in the contract. This method encourages transparency and can be beneficial in projects where the scope is not fully defined at the outset, allowing for flexibility as the work progresses. In contrast, the fixed-price method establishes a set price for the project, which does not change unless there are agreed-upon modifications. This does not accommodate fluctuations in actual project costs after the contract is signed. The hourly rate method compensates the contractor based on the number of hours worked, rather than reimbursing for actual costs plus a profit margin. The term “standard method” is vague and does not refer to a widely recognized contracting practice, making it less relevant in this context. Overall, the cost-plus method is specifically designed to ensure that contractors are covered for unforeseen expenses while still allowing for profit through the markup, which is why it is the correct answer.