Cost Plus Incentive Fee Notes: Definitions & Explanations PDF | Download eBooks
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Cost Plus Incentive Fee Definition:
In cost plus incentive fee (CPIF) contract, the seller is reimbursed for all allowable costs for performing the contract work and receives a predetermined incentive fee based on achieving certain performance objectives as set forth in the contract.
A Guide to the Project Management Body of Knowledge by Project Management Institute
Cost Plus Incentive Fee Notes:
A contract is a legal document listing all the terms and conditions agreed between two parties. There are two broad classes of contracts which affect the procurement planning and management process; fixed price contracts and cost-reimbursement contracts. One of the type of cost-reimbursement contract is cost plus incentive fee (CPIF) contract. Cost plus incentive fee contract involves paying the actual incurred costs to the seller along with an incentive fee. The incentive fee is predetermined by the buyer and agreed upon by the seller and is based on achieving a desired performance level. Sometimes, the actual costs exceed the estimated costs. In this case, the buyer and the seller split the extra costs using a formula which pre-negotiated.
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