Cost reimbursable contract
- Cost plus fixed fee (CPFF): In this contract allowable cost + fixed amount of profit
- Cost plus incentive fee (CPIF): In this contract, Allowable cost + seller earns profit if it meets defined performance criteria
- Cost plus Award fee(CP-AF) - In this contract, allowable cost + award fee representing seller profit
#Cost plus fixed fee (CPFF): In this contract allowable cost + fixed amount of profit
Eg. To Build one room all material and labor cost will get to contractor + Fixed Fee (Eg. 50,000 Is fixed amount agreed by both the parties.) , In this case if cost is material and labor cost is 70,000 + 50000 Fixed Fee = Total 1,20,000 will get paid to Contractor.
#Cost plus incentive fee (CPIF): In this contract, Allowable cost + seller earns profit if it meets defined performance criteria
Eg. To Build one room all material and labor cost will get to contractor + Incentives Fee (Eg. If for incentive Term mentioned If Cost is reduced then 20% of reduced amount cost will get paid to Contractor, Assuming Cost was 70,000 and Actual cost come as 50,000 then 20% of 20000 which is 4000 will get as incentive , mean Contract will get 50,000 + 4000 = 54000) , on top of that whatever fixed fees mentioned he will get that also.
#Cost plus Award fee(CP-AF) - In this contract, allowable cost + award fee representing seller profit
Cost-plus-Award fee (CPAF) contracts pay a fee based upon the contractor's work performance. In some contracts, the fee is determined subjectively by an awards fee board whereas in others the fee is based upon objective performance metrics. An aircraft development contract, for example, may pay award fees if the contractor achieves certain speed, range, or payload capacity goals
The amount of award fee earned shall be commensurate with the contractor’s overall cost, schedule, and technical performance as measured against contract requirements in accordance with the criteria stated in the award-fee plan. Award fee shall not be earned if the contractor’s overall cost, schedule, and technical performance is below satisfactory. The basis for all award-fee determinations shall be documented in the contract file to include, at a minimum, a determination that overall cost, schedule and technical performance is or is not at a satisfactory level
Contracting officers may supplement the adjectival rating description. The method used to determine the adjectival rating must be documented in the award-fee plan; (Please refer Image. table for criteria)
Regards
Kshitij Yelkar
keywords : Cost , Cost reimbursable contract , PMP , Project Management
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