COST REIMBURSEMENT CONTRACTS

[LD3096]

what is the best way to understand cost reimbursement (cpff) structure

[Vern Edwards]

I'm not sure what you mean by "structure," but read Cost-Reimbursement Contracting, 4th ed. (2014) by Cibinic & Nash; 1,464 pages. It's available at amazon.com. Prepare yourself for sticker shock. You might find it in a large public library or a law library.

You could read the coverage in FAR Part 16 and the contract clauses, but that won't give you a coherent picture.

A google search will turn up some stuff at various websites. Mostly brief descriptions.

[LD3096]

thank you .

[joel hoffman]

You can purchase a used fourth edition for under $100 or a used 3rd edition for under $50.  Here is a link to used textbooks 4th edition. https://www.gettextbooks.com/isbn/9780808034094/

[Vern Edwards]

I would go with the inexpensive third edition. The newer editions reflect new case law. The updates will mean little to a beginner.

[LD3096]

thank you guys so much

you really are great !

[FARWizard.com]

A cost-plus-fixed-fee (CPFF) contract is a type of cost-reimbursement contract in which the buyer agrees to pay the seller's costs for a project, plus a fixed fee. This type of contract is commonly used in the construction and defense industries. In a CPFF contract, the seller is reimbursed for all of their allowable costs, plus a predetermined fixed fee. The fixed fee is generally a percentage of the total cost of the project and is intended to cover the seller's overhead expenses and profit. This type of contract allows the seller to recover their costs, even if the project goes over budget or takes longer than expected. However, the seller is not allowed to earn excessive profits, as the fixed fee is predetermined and agreed upon by the buyer and seller before the project begins.

 

[Vern Edwards]

1 hour ago, FARWizard.com said:

The fixed fee is generally a percentage of the total cost of the project and is intended to cover the seller's overhead expenses and profit.

That's a bad sentence. The part about profit being a percentage of cost could cause confusion. And "overhead" is an allowable cost. It is not recovered in the fee.

The sentence that says the contract allows recovery of costs "even if the project goes over budget" could also cause confusion as could the statement about "excessive profits."