The project is then invoiced to the customer based on the actual costs incurred plus the agreed margin.
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.
Frequently, an incentive is included for the supplier to give a realistic price and to minimize the costs during the project.
Typically, the mechanism for such an incentive is that the supplier gets a bonus or penalty calculated as a percentage of the difference between the real cost of the project and an estimate provided up front.
Open-book contracts in third-party logistics services were popularised by John Anthony Harvey CBE, head of Tibbett & Britten Group plc, between 1984 and 2004.