Table of Contents
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 award fee?
An award fee contract provides an additional profit or fee amount that may be awarded, in whole or in part, based upon periodic evaluations of ongoing contractor performance.
What is fixed-price plus incentive?
A fixed price incentive fee (FPIF) contract combines a fixed price contract with an incentive fee. Incentives motivate the service provider to exceed the performance thresholds. From a client perspective, this contract reduces the risk that the service provider fails to meet the expectations.
What is a fixed price contract type?
A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss.
What is a disadvantage of a cost-plus fixed fee contract?
Disadvantages of cost-plus fixed-fee contracts may include: The final, overall cost may not be very clear at the beginning of negotiations. May require additional administration or oversight of the project to ensure that the contractor is factoring in the various cost factors.
Why is fixed price contract the best?
The primary advantage of fixed-price contracts is certainty in terms of accounting. Once the contract is signed, all parties understand the products or services to be delivered or performed and the amount of money that will exchange hands.
Is lump sum and fixed-price the same?
A stipulated sum contract, also called a lump sum or fixed price contract, is the most basic form of agreement between a contractor and owner. This contract should be used if the scope and schedule of the project are appropriately defined to allow the contractor to fully estimate project costs.
What is a good reason for a buyer to use a cost-plus fixed fee contract?
Some advantages of a CPFF contract can include: The final cost may be lower than in a normal contract, as the contractor usually will not “inflate” prices to cover risks. The contractor also has less incentive to control the project costs (in contrast to other types of contracts, such as a fixed-price contract)
How do cost-plus fixed fee contracts work?
A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract.
What is the advantage of a fixed fee?
A fixed price contract allows a buyer more predictability about the service or goods costs in the future, but it can come with a price. Sellers might realize they’re taking a risk by having a fixed price, so they’ll end up charging more than they would normally for a price that’s fluid.
What is cost plus award fee?
The cost plus award fee (CPAF) is a contract that allows the seller to be reimbursed for the costs of performing the work and earn an additional amount for excellent performance. The amount of this fee is determined by an evaluation according to criteria stated in the contract, and it is generally nonnegotiable.
What is a fixed price award?
Fixed price sponsored awards are awards in which an agreed upon, set price is determined for the project to be accomplished. If the cost of the project exceeds the awarded amount, the University absorbs the additional costs required to perform the work.
What is an award fee?
The purpose of an Award fee (Incentive) contract is to motivate the contractor to deliver a better product or service. They are designed to obtain specific acquisition objectives by: Establishing reasonable and attainable targets that are clearly communicated to the contractor; and.
What is a fixed price incentive fee contract?
Fixed price incentive fee (FPIF) contract. A type of contract where the buyer pays the seller a set amount (as defined by the contract), and the seller can earn an additional amount if the seller meets defined performance criteria.