Cost-Reimbursement Contract: A contract that provides for the payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling, that the contractor may not exceed (except at its own risk) without the approval of the Contracting Officer. Cost-reimbursement contracts are only suitable for use when uncertainties in contract performance prevent sufficient accuracy in cost estimates to allow for the use of a fixed-price contract.