Is the following statement true or false? “Cost-reimbursement types of contracts allow for payment of allowable costs.”

The statement that “Cost-reimbursement types of contracts allow for payment of allowable costs” is indeed true. Cost-reimbursement contracts are designed to reimburse the contractor for all allowable costs incurred during the performance of the contract, up to a specified limit. These allowable costs generally include expenses such as labor, materials, and overhead that are necessary to fulfill the contract requirements.

The framework of cost-reimbursement contracts is particularly beneficial when the incurred costs are uncertain at the outset of the project, allowing for operational flexibility while ensuring that the contractor gets compensated for legitimate expenses. This arrangement helps manage the risk for contractors, as it provides assurance that they will be reimbursed for their expenditures, provided they align with the terms of the contract.

In contrast, other types of contracts, such as fixed-price contracts, do not operate on the same basis; they typically set a specific price for the goods or services without reimbursement for costs incurred, which distinguishes them clearly from cost-reimbursement agreements.