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Cost-plus contract. A cost-plus contract, also termed a cost plus contract, is a contract such that a contractor is paid for all of its allowed expenses, plus additional payment to allow for risk and incentive sharing. [1] Cost-reimbursement contracts contrast with fixed-price contract, in which the contractor is paid a negotiated amount ...
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 ...
The point of total assumption (PTA) is a point on the cost line of the profit-cost curve determined by the contract elements associated with a fixed price plus incentive-Firm Target (FPI) contract above which the seller effectively bears all the costs of a cost overrun. The seller bears all of the cost risk at PTA and beyond, due to a dollar ...
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. [1][2] An alternative pricing method is value-based pricing.
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A cost estimate is the approximation of the cost of a program, project, or operation. The cost estimate is the product of the cost estimating process. The cost estimate has a single total value and may have identifiable component values. A problem with a cost overrun can be avoided with a credible, reliable, and accurate cost estimate.
The cost breakdown analysis is a popular cost reduction strategy and a viable opportunity for businesses. [1][2][3] The price of a product or service is defined as cost plus profit, whereas cost can be broken down further into direct cost and indirect cost. [1] As a business has virtually no influence on indirect cost, a cost reduction oriented ...
[2]: 31–2 In 1966 as the value of the contract approached $1 billion, the contract was renegotiated to lower the management fee commensurate with the increased scope and award the fee percentage based upon the contractor's performance, a cost-plus-award-fee contract.