Disadvantages of a cost plus based method

1. Fixed return on investments, no incentive for the business to do better as whatever he does all the cost saving has to be passed on the the consumer and he gets to make only the limited RoE.

2. If you set itemwise limit for each thing, let say you say that the operating cost of a LNG storage facility should be xdollars. But that is given the standard storage method of storing in overhead tankers, now if someone wants to store it in a carven, though the operating costs are higher but the unloading time is greatly reduced. In a cost plus basis for such cases seperate rules have to be created.