Question on Procurement

Submitted by RaviDatt on Sat, 06/16/2012 - 20:46

A seller entered into contract with a buyer. At the end of the project, the seller was reimbursed for the cost of the project, but received a very low fee based on certain subjective criteria that had been laid down in the contract. What type of contract is this likely to be?




  1. Add a note hereCost Plus Fixed Fee (CPFF) contract



  2. Add a note hereFixed Price Incentive Fee (FPIF) contract



  3. Add a note hereCost Plus Incentive Fee (CPIF) contract



  4. Add a note hereCost Plus Award Fee (CPAF) contract


Answer is D but I do not understand why not C?

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diba_perfect

Sat, 06/16/2012 - 21:15

It's for CPAF that the buyer decides the fee based on subjective evaluation criteria. In other words, the discretionary power to determine the amount of award lies with the buyer.

In CPIF, the incentive payout is determined by more concrete mathematical guidelines(Seller / Buyer Share Ratio etc.) and there's very little subjectivity there.

 

RaviDatt

Sat, 06/16/2012 - 22:09

Thanks it makes sense. :-)