# 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

### Target cost

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

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

Nik

### yes

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

### Thanks

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### here my answer

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

Is it correct any expert opinian. please

### Thanks

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### thanks for the post and keep

thanks for the post and keep on posting for the future use.

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