What is Fpif?

A fixed price incentive fee (FPIF) contract is a fixed price contract combined with an incentive fee. The seller will receive a bonus for finishing early or surpassing other metrics agreed upon in advance, such as quality. Incentives can be win-win for buyer and seller.

What is the difference between CPIF and CPAF?

Cost Plus Award Fee (CPAF) – This contract shares the risk a little more with the seller. Cost Plus Incentive Fee (CPIF) – This contract shares the most risk between buyer and seller of the cost-reimbursable contracts.

How does a CPIF contract work?

The cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs.

How is CPIF incentive fee calculated?

The basic elements of a CPIF contract are: Target Cost: the estimated total contract costs….For example, assume a CPIF with:

1. Target Cost = 1,000.
2. Target Fee = 100.
3. Benefit/Cost Sharing Ratio for cost overruns = 80\% Client / 20\% Contractor.
4. Benefit/Cost Sharing Ratio for cost underruns = 60\% Client / 40\% Contractor.

How do Fpif contracts work?

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.

Is often used for staff augmentation?

Time and Material Contracts T&M contracts are often used for staff augmentation, acquisition of experts and any outside support, when a precise statement of work cannot be quickly prescribed.

Do CPIF contracts have a ceiling price?

*FPIF has a price ceiling while CPIF doesn’t have a ceiling associated w/ cost. *FPIF normally involves progress pmts while CPIF is based on reimbursing the ktr for total costs incurred, after consideration of the incentive arrangements that meet the tests of regulatory cost principles.

Which type of contract has the highest risk for the seller?

The greatest risk to the seller is the firm fixed price contract. Often, buyer and seller will negotiate aspects of both types so that the risk is spread between both the seller and the buyer.

What is PTA PMP?

Point of Total Assumption (PTA) Although not included in the PMI online lexicon nor as a term within the PMP® certification exam, project managers should know the PTA is the cost point at which the seller has agreed to cover all cost overruns.