Cost-Plus-Incentive-Fee contract problem ---- Need Help-----

Hi All,


I have a doubt about the Cost Plus Incentive Fee contract problem mentioned below.


A project is contracted as a Cost-Plus-Incentive-Fee (CPIF) type of contract. The project is negotiated such that if the final costs are less than expected costs, the sharing formula for cost savings is 80:20. The targeted cost is US$ 500,000 with a 10% fee. If the project comes in at US$ 450,000, what would be the cost of the total contract


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While calculating the Incentive Fee should we consider the % of Target Cost or the % of Actual cost.


i.e. 10% of US$500,000


                         OR


 10% of US$450,000


 


Please clarify my doubt.


Regards,


Nikhi


 

Fee or here Target fee is % of target cost. Rest all calculations are st forward. 

Thanks for your reply bpp9614,


Does this not mean the fee is fixed at the time of Contract signoff.


Nik

The target fee is constant. However the actual fee is target fee + seller's share based on cost saving

 

The target fee is constant. However the actual fee is target fee + seller's share based on cost saving.............. www.hotelsdeals101.com

what would be the cost of contract= 450000+10000 = 460000

Is it correct any expert opinian. please

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