CPIF has least risk for seller, since all his cost will be reimbursed, plus he gets IF.

FPIF has more risk for seller, since the cost may go beyond the stated Fixed price. IF may not cover for losses in all cases.

Hi,

As Mr.Pawar said, it would be good to see it with an example, atleast from calculation perspective.

From perspective of contracts itself, the major difference in FP and CR is:

• In FP contractor agree to deliver in full on the negotiated price which is pre-determined. That is why scope should be clear in this case.


• In CR contractor agrees to provide its best effort to complete the required contract and actual cost incurred to the extent of the work done is reimbursed. This accomdates uncertainity in scope.

While the Incentive part in both these contracts more or less serve the same purpose - that is to Control the costs. Incentives as we know are based on performance mostly on cost, schedule and performance incentives. In any contract there may be more than one incetive included.

In FPIF: As Mr.Pawar puts if Incentive is used to control costs, then what is fixed? Incentive clause is put so that there are no high profit margins the seller puts in the FIxed Price part. If there is no incentive clause put, the buyer might end up paying more, as seller would have put high profit margins, which otherwise would be less when paid with incentives. Also in FPIF, the buyer will not know actual costs.

PTA for FPIF? Since the buyer do not know the actual costs and have no control over it.

In CPIF since buyer agrees to reimburse all the incurred costs, there is no PTA, but fee has a range of maximum and minimum fee.

I am just setting a context here, may be basis for further discussion with example from Mr.Pawar.

Regards,

Anand KL, PMP