Cost-Reimbursement Contract Law and Legal Definition

A Cost-reimbursement contract refers to a contract under which reasonable costs incurred by a contractor in the performance of a contract are reimbursed in accordance with the terms of the contract. These contracts establish an estimate of the total cost for the purpose of obligating funds and establishing a ceiling that a contractor may not exceed. Cost-reimbursement contracts are suitable for use only when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.[United States v. Lockheed Martin Eng'g & Sci. Servs. Co., 491 F.3d 254, 260 (5th Cir. Tex. 2007)]