In a cost-reimbursable contract, what does the buyer do?

In a cost-reimbursable contract, the buyer pays the supplier based on actual costs incurred. This means that the supplier is reimbursed for the legitimate costs that arise while performing their obligations under the contract, which can include expenses for labor, materials, and overhead, providing a measure of flexibility and reducing the supplier's financial risk. This type of arrangement is particularly useful in projects where the scope is uncertain or difficult to define from the outset, allowing for adjustments as the project evolves.

This answer highlights the dynamic nature of cost-reimbursable contracts, making them an appealing choice for complex projects where costs may fluctuate. It contrasts with fixed-price contracts, where the buyer does not adjust payment based on actual costs, and thus contains more risk for the supplier. Such arrangements are designed to foster collaboration and innovation, as the supplier can focus on delivering the best results without being overly concerned with cutting corners to stay within a fixed budget.