In which contract type does the owner cover the contractor's necessary costs incurred during construction?

In a Cost-Plus Contract, the owner agrees to reimburse the contractor for all legitimate costs incurred during the construction process, in addition to paying a fee that represents the contractor's profit. This arrangement allows the contractor to cover necessary costs without financial risk in the event of unforeseen expenses. The owner is typically responsible for more variable costs, which can lead to greater flexibility in project adjustments, especially in complicated or uniquely challenging projects.

In contrast, a Fixed-Price Contract entails a set price for the project, meaning the contractor must manage costs within that budget, which may lead to less focus on quality or necessary changes that arise during construction. A Guaranteed Maximum Price Contract also establishes a ceiling on costs but typically includes incentives for the contractor to remain efficient. A Joint Venture Contract involves collaboration between two or more parties to manage a project, rather than the specific financial handling of costs and project reimbursements as seen in a Cost-Plus approach.