Cost plus percentage gives a very clear incentive to raise costs
Compare the original winning bid for the STS with the actual costs; I think they rose more than tenfold (and the per-flight cost rose more than that), IIRC.
And had the competing team won, the Challenger disaster never would have happened, because the solid-rocket boosters would have been manufactured as units and transported to the Cape by barge rather than having to be broken into small enough components to fit on rail cars.
Case in point: SpaceX challenging the launch industry's cost-plus culture with publicly-posted fixed prices [1].
[1] http://www.spacex.com/about/capabilities