PTA

Submitted by oakleys03 on Wed, 07/17/2013 - 14:50

Hi there, i have a question regarding PTA.


 


i used the formula for the PTA but apparently i still couldn't arrive to their answer.


can someone help me out here and explain how they derived the answer.


The question is.


 


In a project, a cost incentive contract has been awarded to a contractor with the following parameters: What is the point of total assumption (PTA, breakpoint) of the project?


 


Target cost:$1,000,000


Target contractor fee:$100,000


Cost benefit sharing ratio:80%/20%


Price ceiling:$1,200,000


 


Answers


A -$1,000,000


B -$1,100,000


C -$1,125,000


D -$1,200,000


answer is (C)

Forums: 
General Discussion
  • Log in to post comments
  • 853 reads

dreamer

Wed, 07/17/2013 - 15:36

The calculation for PTA is

((Ceiling Price - Target Price)/Buyer's Share) + Target Cost

From the above

Ceiling Price = 1,200,000

Target Price = Target Cost + Fee = 1,000,000 + 100,000 = 1,100,000

Buyer's Share = 80% = 0.8

Target Cost = 1,000,000

Which comes out to

((1,200,000 - 1,100,000)/0.8) + 1,000,000 = 1,125,000

The video below help me understand PTA better. Try it out.

https://www.youtube.com/watch?v=d1b5ISOOdyU

oakleys03

Wed, 07/17/2013 - 17:39

I must of multipled the buyer's share percentage instead of dividing by it.