4 ms·
Yes, the theory of cost-plus contracts is good. It is a way of saying "this is a new piece of technology with ill defined requirements and we need help developi
by dr_orpheus 4y ago
Yes, the theory of cost-plus contracts is good. It is a way of saying "this is a new piece of technology with ill defined requirements and we need help developing it along the way." Theoretically, it allows for changes and adaptations in developments of technology. This is all in theory though and what proponents of cost-plus would say. It does suffer from some of the issues you have mentioned above. I think there is a time and a place for cost-plus but there is definitely move towards more fixed price contracts in civil and defense.
Becoming somewhat more common now is a hybrid approach of cost-plus/fixed. Contracts for development phases up to a certain milestone are set up as a cost plus contract and then production comes under a fixed price contract.
- tomatotomato37 4y agoI wonder if some of the risks of cost-plus could be mitigated by associating it with industry average running costs rather than a per-project basis. So contractors would get a yearly payment with as long as they are making progress on a project, but any changes to the project are 1-to-1 with additional costs so there would be no benefit to either aggressive cost cutting or sandbagging expenses. Maybe also make it so profit would be rewarded at project completion in proportion to the running costs of however long the project took to prevent pointlessly lagging or rushing projects. Of course there would also have to be bullshit like opportunity cost compensation and shit because these companies are so profit-driven as to crash a project meant for the public good if it means more profit from interest on a 0.5% bank account
- klodolph 4y agoCost-plus is supposed to be primarily for research and development, where the costs are highly variable to begin with.