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Cost plus a fixed-fee (CPFF) contracts pay costs plus a pre-determined fee that was agreed upon at the time of contract formation. Cost-plus-incentive fee ( CPIF ) contracts have a larger fee awarded for contracts which meet or exceed certain performance goals, for example being on schedule and any cost savings.
This contract type may be contrasted with a cost-plus contract, which is intended to cover the costs incurred by the contractor plus an additional amount for profit, and with time-and-materials contracts and labor-hour contracts. [1] Fixed-price contracts are one of the main options available when contracting for supplies to governments.
Cost-plus-award-fee contract: Provides for a fee consisting of (a) a base amount (which may be zero) and (b) an award amount, based upon a judgmental evaluation by the government, sufficient to ...
The Final Price of the contract is expressed as follows: Final Price = Actual Cost + Final Fee. Note that if Contractor Share = 1, the contract is a Fixed Price Contract; if Contractor Share = 0, the contract is a cost plus fixed fee (CPFF) contract. [4] For example, assume a CPIF with: Target Cost = 1,000; Target Fee = 100; Benefit/Cost ...
In cost plus fixed fee, the owner pays the contractor an agreed amount over and above the documented cost of work. [10] This is a negotiated type of contract where actual and direct costs are paid for and additional fee is given for overhead and profit is normally negotiated among parties.
A fixed-price contract is a contract where the contract payment does not depend on the amount of resources or time expended by the contractor, as opposed to cost-plus contracts. Fixed-price contracts are often used for military and government contractors to put the risk on the side of the vendor and control costs.
Costs that are not fixed are called variable costs. These are the costs that change based on how much of something a company produces. The cost of materials to produce goods is a variable cost.
Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a "markup") to the product's unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return.