Which contract type is common with not-for-profit entities and focuses on reimbursing only allowable costs?

The focus of the correct answer lies in the nature of contracts used by not-for-profit entities, particularly regarding cost reimbursement. A cost with no fee contract specifically allows an organization to be reimbursed solely for allowable costs incurred during the execution of a project without any additional profit margin or fee. This approach focuses on ensuring that all expenses covered are necessary and directly related to the funded program, aligning with the principles of accountability and transparency often emphasized by not-for-profit organizations.

In not-for-profit sectors, funding is typically constrained, and resources must be utilized effectively to fulfill their missions. By using a cost with no fee contract, not-for-profits are able to maintain strict oversight over expenditures without artificially inflating costs with profit margins, thus ensuring that more resources are directed towards their programs and services.

Distinct from this, other contract types like a cost-plus incentive fee contract and a cost-plus fixed fee contract include provisions for additional payments beyond the actual costs, which might not align with the operating principles of many not-for-profit entities. Fixed price contracts, on the other hand, establish a set price for deliverables, which could be feasible in certain situations but doesn't directly align with the common reimbursement focus for actual costs incurred that not-for-profits prefer.