Open Book Contract

In an open-book contract, the buyer and seller of work/services agree on: a) which costs are remunerable; and b) the margin that the supplier can add to these costs. The project is then invoiced to the customer based on the actual costs incurred plus the agreed margin. It is essentially the same as what is known (especially in the U.S.) as a “cost+” contract. This contract form is popular to ensure that a competitive price is obtained, for instance where tender competitions are impractical. It is also useful if the work is difficult to specify precisely up front, or if the buyer is not willing to pay for the risk-premium that sellers typically add when giving fixed prices (as in a Fixed-Price Turnkey Contract). Frequently, an incentive is included for the supplier to give a realistic price and to minimize the costs during the project.