Contracts & Legal

Cost-Reimbursement Contracts

FavoriteLoadingAdd to favorites

Cost-Reimbursement types of contracts (FAR Subpart 16.3) provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.

Website: FAR Subpart 16.3 Cost-Reimbursement Contracts

Website: DFARS 216.3 “Cost-Reimbursement Contract

Cost-plus-incentive-fee Contracts (CPIF)
A cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. Cost-plus-incentive-fee contracts are covered in Subpart 16.4, Incentive Contracts. See 16.405-1 for a more complete description and discussion of application of these contracts. See FAR Subpart 16.301-3 for limitations. [1]

Cost-plus-award-fee Contracts (CPAF)
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 performance. Cost-plus-award-fee contracts are covered in Subpart 16.4, Incentive Contracts. See 16.401(e) for a more complete description and discussion of the application of these contracts. See FAR Subpart 16.301-3 and 16.401(e)(5) for limitations. [1]

Cost-plus-fixed-fee Contracts (CPFF)
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. This contract type permits contracting for efforts that might otherwise present too great a risk to contractors, but it provides the contractor only a minimum incentive to control costs. [1]

– See Firm-Fixed Price Contract
– See Indefinite Delivery Contract
– See Incentive Contract
– See Time and Materials Contract

AcqLinks and References:

Become an AcqNotes Member to View Page Discussions