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My organization is going to be awarding a new Cost Plus Incentive Fee contract. This is a new type of contract for the organization and there is a lot of uncertainty as to how the incentive fee works. As costs go up does the fee go up so the contractor gets the same percent that was negotiated. Also, as costs go down does the fee go down for the same reason. Any help or guidance would be appreciated.

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My organization is going to be awarding a new Cost Plus Incentive Fee contract. This is a new type of contract for the organization and there is a lot of uncertainty as to how the incentive fee works. As costs go up does the fee go up so the contractor gets the same percent that was negotiated. Also, as costs go down does the fee go down for the same reason. Any help or guidance would be appreciated.

It's actually exactly the opposite. As the actual final costs go down, the fee goes up, and if the costs go up, the fee goes down. The scenario you described would be a cost-plus-a-percentage-of-cost contract, which is illegal.

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My organization is going to be awarding a new Cost Plus Incentive Fee contract. This is a new type of contract for the organization and there is a lot of uncertainty as to how the incentive fee works. As costs go up does the fee go up so the contractor gets the same percent that was negotiated. Also, as costs go down does the fee go down for the same reason. Any help or guidance would be appreciated.

May I suggest that your organization gain an understanding of CPIF contracts before it decides to award one?

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Guest Vern Edwards
My organization is going to be awarding a new Cost Plus Incentive Fee contract. This is a new type of contract for the organization and there is a lot of uncertainty as to how the incentive fee works. As costs go up does the fee go up so the contractor gets the same percent that was negotiated. Also, as costs go down does the fee go down for the same reason. Any help or guidance would be appreciated.

Go to this link https://acc.dau.mil/CommunityBrowser.aspx?i...〈=en-US. Download the DOD/NASA Incentive Contracting Guide (1969) and read chapters I through III.

If your organization is really as ignorant about the CPIF contract type as your question suggests, it has no business whatsoever going anywhere near such a contract, much less negotiating and managing one. It is not a contract for amateurs.

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How were we supposed to know that TippHill was not a fool? Come to think of it, how do we know he wasn't? <_<

I guess you can't know for sure. However, you could go to Discussion Archives-- Contract Award Process--Contract Type-- 4-02-08 for for my post dated 1 April 2008.

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Guest Vern Edwards

I guess I could, but why would I? April 1, 2008 is ancient history. If you say that your post was an April Fool joke, I accept that. But my understanding of April Fool jokes is that they are a deception against expectation. So, for example, a colleague shows up for work at the normal time and you say, "Hey, why didn't you come to the early meeting?" The other guy goes, "What meeting?" You say, "The one where he gave out the new job assignments. Too bad you weren't there to protect yourself. You got 'volunteered' for something you're not going to like." Then, as your friend starts to scurry off to the boss's office you say, APRIL FOOL. You laugh; he smiles ruefully. See? Since I don't know you (I think), I had no expectation. So, I wasn't fooled and I didn't smile ruefully. Now, if Don Acquisition or napolik had asked a question like that, and if I had thought they were serious, then I would have been deceived against expectation and would have been an April fool.

Probably too much analysis, huh? Sorry.

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