What is meant by cost-sharing in contracts?

Cost-sharing in contracts refers to a collaborative approach where the expenses associated with a project or agreement are divided between the contracting parties. This arrangement is designed to share the financial burden of specific costs, thereby incentivizing collaboration and equitable participation by all involved parties. By distributing costs, each party can manage their financial risk while also benefiting from the resources and expertise that others may contribute.

This method is especially relevant in public-private partnerships or collaborative research agreements, where multiple stakeholders have a vested interest in the project's success. When costs are shared, it often fosters a sense of joint commitment and encourages all parties to work towards achieving the project's objectives effectively.

The other options present different concepts that do not accurately describe cost-sharing. For example, the idea of one party absorbing all costs signifies a unilateral approach rather than the mutual financial responsibility inherent in cost-sharing. Calculating project profits and budget reduction strategies also do not capture the essence of cost-sharing, which is fundamentally about the distribution of costs rather than profits or budget minimization.