# Cost plus incentive fee contract template

Thus, the \$8,000 will be adjusted upwards to \$9,000 (the minimum amount). The Seller will also get the costs paid. Therefore, the Final Reimbursed Price = Actual cost + Final Incentive Fee =\$120,000 + \$9,000 = \$129,000 Therefore, the answer for this PMP question would be Choice D = \$129,000. There are two types of incentive fee contracts in the PMBOK guide: Cost Plus Incentive Fee (CPIF) and Fixed Price Incentive Fee (FPIF) contracts. When there is an incentive fee, the seller will be awarded a bonus if they meet specific performance criteria (usually cost related). A cost-plus fixed fee contract is a specific type of contract wherein the contractor is paid for the normal expenses for a project, plus an additional fixed fee for their services. These allow the contractor to collect a profit on the project, and they encourage economic production in various industries. Incentive contracts (FPIS, FPIF and CPIF) will contain a formula for adjusting the profit or fee based upon actual costs. For example a 70/30 share ratio for a cost overrun situation indicates the government cost share will be \$0.70 and the contractor’s share will be \$0.30. If the contractor finishes performance at a total cost of \$750,000, as the graph below indicates, the contractor would still be due \$90,000 in fee. While this is still based on 9% of estimated contract cost at initial award, it now would translate to 12% of FINAL contract cost. (1) A cost-plus-fixed-fee contract is suitable for use when the conditions of 16.301-2 are present and, for example - (i) The contract is for the performance of research or preliminary exploration or study, and the level of effort required is unknown; or (ii) The contract is for development and test, and using a cost-plus- incentive-fee

## Incentive contracts (FPIS, FPIF and CPIF) will contain a formula for adjusting the profit or fee based upon actual costs. For example a 70/30 share ratio for a cost overrun situation indicates the government cost share will be \$0.70 and the contractor’s share will be \$0.30.

Three common types: cost plus fixed fee (CPFF), cost plus incentive fee (CPIF), Examples. CPFF: The contract states that the builder will be reimbursed for the  29 Mar 2019 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  The described Cost Plus Incentive Fee contract type provides a mechanism for allocating project cost risk to the owner, being the party best placed to bear the  budgeting policies that affect them, and specific examples and exceptions to Under a Cost Plus Incentive Fee (CPIF) contract, a target price is negotiated,  A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for but it provides the contractor only a minimum incentive to control costs. This form of contract normally requires the contractor to complete and deliver the

### 6 May 2018 Cost plus fixed fee contracts are generally used when a contractor is paid for Cost Plus Incentive Fee (CPIF): These types of contracts award a larger For example, if they meet or exceed performance standards, they may

9 Sep 2008 In a Cost-Plus-Incentive Fee contract, the fee paid to the contractor is An aircraft development contract, for example, may pay award fees if the