What is an example of a cost-reimbursement contract?
A CPF or CPPC contract is a cost-reimbursement contract where the buyer pays the seller the cost incurred plus a percentage of the cost. An example of a cost-plus fee contract is where the cost of work and materials is reimbursed plus 10% of costs as a fee as profit to the seller.
What are the different types of cost reimbursable contracts?
Cost-reimbursement contracts come in several different forms, which you can see below.
- Cost Contracts.
- Cost-Sharing Contracts.
- Cost-Plus-Fixed-Fee (CPFF) Contracts.
- Cost-Plus-Incentive-Fee (CPIF) Contracts.
- Cost-Plus-Award-Fee (CPAF) Contracts.
- Cost Plus Percentage of Cost (CPPC) Contracts.
What is involved in a cost plus incentive fee contract?
The cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs.
How does a cost-plus-incentive-fee contract differ?
*For CPIF, there’s a minimum and maximum fee that can be earned while FPIF has no max profit that can be earned for an underrun.
What are the differences between cost-plus-incentive-fee and cost-plus fixed fee contract?
A cost-plus-incentive-fee contract is a cost-reimbursement contract that incentivizes the contractor to bring in the project under budget. A cost-plus-fixed-fee contract reimburses costs and pays the contractor a fee that is negotiated prior to signing the contract.
How is cost-plus-incentive-fee contract calculated?
The basic elements of a CPIF contract are: Target Cost: the estimated total contract costs….For example, assume a CPIF with:
- Target Cost = 1,000.
- Target Fee = 100.
- Benefit/Cost Sharing Ratio for cost overruns = 80% Client / 20% Contractor.
- Benefit/Cost Sharing Ratio for cost underruns = 60% Client / 40% Contractor.
What is a cost-plus award fee contract?
A cost-plus-award-fee contract is a cost-reimbursement contract that provides for a fee consisting of (a)a base amount (which may be zero) fixed at inception of the contract and (b)an award amount, based upon a judgmental evaluation by the Government, sufficient to provide motivation for excellence in contract …
What is a cost-plus-incentive-fee contract?
The cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. This contract type specifies a target cost, a target fee, minimum and maximum fees, and a fee adjustment formula.
What is a cost-reimbursable contract?
A cost-reimbursable contract, also known as cost-plus, is an agreement where the buyer pays the seller for their actual costs, plus a fee representing the seller’s profit.
What is the difference between minimum and maximum incentive fee?
Minimum incentive fee is applied if total actual costs are higher than the total target cost. Maximum incentive fee is applied if total actual costs are lower than the total target cost. In a cost plus fixed fee contract, the fee that was agreed upon during contract negotiations remains the same.
What is cost-plus fee (CPF)?
Cost-Plus Fee (CPF) or Cost-Plus Percentage of Cost (CPPC) A CPF or CPPC contract is a cost-reimbursement contract where the buyer pays the seller the cost incurred plus a percentage of the cost. An example of a cost-plus fee contract is where the cost of work and materials is reimbursed plus 10% of costs as a fee as profit to the seller.