Which payment structure covers the cost plus a margin for overhead?

The payment structure that covers costs plus a margin for overhead is the Cost Plus Percentage Contract. In this setup, the contractor is reimbursed for their actual costs incurred in the project, including labor, materials, and overhead. Additionally, the contractor is paid a specified percentage of those costs as a profit margin. This structure incentivizes the contractor to keep costs low, as their profit increases with lower expenses, but it also allows for greater flexibility in project scope and unforeseen changes since the contractor is compensated for actual expenditures.

Other payment structures like the Cost Plus Lump Sum Fee Contract involve a similar reimbursement of costs but with a predetermined lump sum fee instead of a percentage, which does not inherently allow for a margin calculated on actual costs. The Unit Price Contract sets prices per unit of work completed, which does not directly tie to overall cost-plus overhead calculations. Lastly, the Guaranteed Maximum Price Contract establishes a ceiling on costs, and while it may include profit, it is distinctly different from the cost-plus approach since it limits the total payment regardless of incurred costs.