Cost-Plus Billing
A pricing model where clients are billed for actual labor costs (tracked time × labor rates) plus a markup percentage or fixed fee to cover overhead and profit, requiring accurate time tracking and transparent cost documentation to justify billings and maintain client trust.
Last updated: 2026-03-20 19:58
Overview
Cost-Plus Billing charges clients based on actual costs incurred plus an agreed-upon margin, making accurate time tracking essential for both billing and profitability.
Common Structures
Cost Plus Fixed Fee (CPFF):
- Reimburse all costs
- Add fixed dollar amount
- Example: Costs + $50,000
Cost Plus Percentage (CPP):
- Reimburse all costs
- Add percentage markup
- Example: Costs × 1.15 (15% markup)
Cost Plus Incentive Fee (CPIF):
- Base fee + performance bonus
- Rewards efficiency
- Common in government contracts
Time Tracking Requirements
Accuracy Essential
- Daily time entry
- Proper project allocation
- Contemporaneous documentation
- Audit trail maintenance
Cost Justification
- Fully loaded rates documented
- Overhead calculations transparent
- Expenses properly allocated
- Regular reporting to client
Pricing
N/A - This is a billing methodology.
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