What type of contract requires the owner to cover all costs incurred plus an additional fee?

The correct answer is a cost-plus contract. This type of contract is designed to reimburse the contractor for all allowable or agreed-upon costs incurred during the project, in addition to providing a fee that represents the contractor's profit. This fee can be structured in various ways, such as a fixed amount or a percentage of the costs incurred.

Cost-plus contracts are often used when the scope of work is uncertain, and it is difficult to estimate the total costs upfront. By using this contract type, owners can ensure that they will cover all legitimate expenses while also providing the contractor with an incentive to keep costs efficient. This arrangement can encourage collaboration between the owner and contractor, as both parties are invested in keeping costs under control while still ensuring the completion of the project.

The other choices do not meet the specific criteria of the question regarding full cost coverage and an additional fee structure. A fixed-price contract, for example, establishes a predetermined price for the entire project, which does not change regardless of the actual costs incurred. A time and materials contract allows for payment based on the time spent and materials used but does not guarantee coverage of all costs in the same way a cost-plus contract does. Lastly, a unit price contract involves payments based on the units of work completed