What are the differences between cost reimbursement and fixed-price contracts?

Cost reimbursement and fixed-price contracts are two common types of government contracts. Cost reimbursement contracts are agreements between a government agency and a contractor in which the contractor is reimbursed for all costs associated with the project, including materials, labor, and travel expenses. Generally, the contractor is liable for any costs that exceed the amount paid. Fixed-price contracts, on the other hand, are a type of contract in which the contractor and the government agency agree on a predetermined price for the project, regardless of what the actual cost of completing the project is. This type of contract is usually used when the scope of the project can be accurately determined in advance. The main difference between cost reimbursement and fixed-price contracts is that one is based on the costs that are incurred and the other is based on an agreed price. Cost reimbursement contracts are often more expensive for the government agency and are more suitable for projects with a lot of uncertainty. Fixed-price contracts, on the other hand, are more suitable for projects with a known scope and are less costly for the agency. In California, the courts typically favor fixed-price contracts because they provide the government with more cost certainty.

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What are the differences between cost reimbursement and fixed-price contracts?

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