Which type of construction contract pays the contractor a fee that is a percentage of the project's actual cost?

The option indicating "Cost Plus Percentage" is accurate because this type of construction contract is structured such that the contractor is reimbursed for all allowable costs incurred during the project, in addition to a fee calculated as a percentage of those costs. This approach incentivizes the contractor to manage costs effectively while also ensuring they are compensated for their work.

In a Cost Plus Percentage contract, the transparency of costs is crucial, as it allows both the contractor and the project owner to have visibility into the actual expenditures. The contractor's profit margin is directly tied to the project's costs; hence, as project costs increase, so does the contractor's fee. This creates a mutual interest in keeping costs reasonable as both parties aim for a successful project within budget constraints.

Other contract types such as Fixed Price or Lump Sum contracts operate on a predetermined total price, regardless of the actual costs incurred during the project. While Time and Material contracts provide payment based on the labor and materials used, they do not operate on a percentage of actual costs like Cost Plus Percentage does. Thus, the distinguishing feature of the Cost Plus Percentage contract lies in its specific structure of linking contractor fees directly to project costs.