COST PLUS TENDER or COST PLUS CONTRACT

COST PLUS TENDER

or

COST PLUS CONTRACT

5 marks question - 2015 General expenditure (without books)

Ø    Meaning: A contract in which the price payable for work done under the contract is decided on the basis of actual cost of work plus profit.

Ø  In simple, it is Actual cost plus Contractors profit.

Ø  A cost-plus contract, also termed a cost reimbursement contract, is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit

Ø  As per GFR - General Financial Rules, 2017, Cost plus contracts should ordinarily be avoided. Where such contracts become unavoidable, full justification should be recorded before entering into the contract.

Explanation: A cost plus contract means a contract in which the price payable for supplies or services under the contract is determined on the basis of actual cost of production of the supplies or services concerned plus profit either at a fixed rate per unit or at a fixed percentage on the actual cost of production.

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