Which type of contract allows for adjustments based on incurred costs and profits?

A Cost-Plus Contract is designed specifically to accommodate adjustments based on actual incurred costs and profits. In this type of contract, the contractor is reimbursed for their allowable expenses incurred during the project, which can include materials, labor, and overhead. Additionally, the contract outlines a predetermined fee or percentage of the costs that the contractor earns as profit, providing flexibility in financial management throughout the project's duration.

This structure allows both parties to manage uncertainties better, as the final price is not fixed upfront but rather depends on the actual costs incurred. Such contracts are often used in projects where the scope or duration is uncertain, providing a fair approach for compensating the contractor for their work and materials used.

Other types of contracts, like Fixed Contracts, establish a set price regardless of the actual costs, while Unit Price Contracts set payment based on specific quantities of work completed. Time and Material Contracts primarily focus on labor and materials at set rates, but they don't provide the same level of adjustments for overall project costs and profits as seen in Cost-Plus Contracts.