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Cost Plus Incentive Fee

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Definition Edit

A Cost Plus Incentive Fee (CPIF) contract is:

[a] cost reimbursement-type contract with provision for a fee, which is adjusted by formula in accordance with the relationship that total allowable costs bear to target costs. The provision for increase or decrease in the fee, depending upon allowable costs of contract performance, is designed as an incentive to the contractor to increase the efficiency of performance.[1]

Overview Edit

The formula for a cost-plus-incentive-fee contract focuses upon "the relationship of total allowable costs to total target cost"[2] and includes the target cost, the target fee, the minimum fee, and the maximum fee as components.[3]

References Edit

  1. Defense Acquisition University, Glossary, at B-34 (13th ed. Nov. 2009) (full-text).
  2. 48 C.F.R. §16.405-1(a).
  3. Id.

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