Cost Plus Fee Agreement
Direct costs, which clearly flow from a single project, could include that if compiling a quote for a contract proves difficult, a cost-plus contract can help. As fees are reimbursed when the market arrives, a contractor does not have to worry that an inaccurate or erroneous estimate will ruin their margin in a market – it is already integrated! Cost Plus contracts were first used by the U.S. government during the World Wars to encourage war production by large U.S. corporations. According to Martin Kenney, « They then allowed small technology companies like Hewlett-Packard and Fairchild Semiconductor to charge the Department of Defense for the price of research and development that no one could pay alone. This allowed companies to develop technological products that eventually created new markets and economic sectors.