Cost Plus Award Fee Notes: Definitions & Explanations PDF | Download eBooks
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Cost Plus Award Fee Definition:
In cost plus award fee (CPAF) contract, the seller is reimbursed for all legitimate costs, but the majority of the fee is earned based on the satisfaction of certain broad subjective performance criteria.
A Guide to the Project Management Body of Knowledge by Project Management Institute
Cost Plus Award Fee Notes:
The two broad classes of contract include fixed price contracts and cost-reimbursement contracts. The type of the contract selected is based on the situation, the requirements and the agreement between the contracting parties. One of the type of cost-reimbursement contract is cost plus award fee (CPAF) contract. Cost plus award fee contract involves payment of the actual incurred costs by the buyer to the seller in addition to a fee or profit. The fee or profit is purely based on the seller's performance. A defined performance criteria is set and the seller's performance is compared with the performance criteria. If the buyer is satisfied by the seller's performance (performance is according to the criteria), a fee or profit is paid to the seller.
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